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Claude F. Scott, Esq. Pam Cole, Esq. (CA Bar No. 208286) Renata B. Hesse, Esq. Phillip R. Malone, Esq. U.S. DEPARTMENT OF JUSTICE, ANTITRUST DIVISION 450 Golden Gate Avenue, Rm. 10-0101 San Francisco, CA 94102-3478 (415) 436-6660 (415) 436-6683 (Fax) Attorneys for Plaintiff the United States of America
Also filed on behalf of 10 Plaintiff States (See signature block)
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
TABLE OF CONTENTS
1.1.2 Oracle provides organizations with database technology, enterprise software applications and related consulting services, in the United States and abroad. Oracle's Answer, at Allegation 7; Joint Stipulations of Fact, at ¶ 2; Ellison, 6/30/04, 4244:18-4245:1. 1.1.3 In 2003, Oracle earned over $9 billion in revenues, including over $2 billion of revenues related to enterprise software applications. Oracle's Answer, at Allegation 7. 1.1.4 Oracle sells human resource management software ("HRM") and financial management software ("FMS") solutions throughout the United States and around the world. Oracle's Answer, at Response to Allegation 26; Joint Stipulations of Fact, at ¶ 16; Ellison, 6/30/04, 4244:18-4245:1.
1.1.4.2 As of December 2002, Oracle had over 5000 customers live on its E- Business Suite, Release Hi. P2208, at ORUT-EDOC-00244117. 1.1.4.3 Oracle's Release Hi and its E-Business Suite are the same products. P3038, Godwin dep., 1/20/04, 52:22-53:09. 1.2 Oracle Sells High Function HRM and FMS Software. Iansiti, 6/17/04, 2025:02-13; See 2.2. infra.
1.2.1.2 High function software is scalable. See 2.2. infra. 1.2.1.3 High function software is configurable. See 2.2. infra. 1.2.1.4 High function software must be able to perform a variety of related transactions seamlessly. See 2.2. infra. 1.2.1.5 High function software must be able to handle international aspects of an enterprise: multiple languages, multiple currencies, multiple legal regimes. See 2.2. infra. 1.2.1.6 High function software must be able to handle the acquisition of new enterprises and the reorganization of existing ones. See 2.2. infra. 1.2.1.7 High function software must be able to consolidate information across multiple divisions or organizations. See 2.2. infra.
1.3.2 PeopleSoft provides organizations with enterprise software applications and offers related consulting services in the United States and abroad. Oracle's Answer, at Allegation 8; Joint Stipulations of Fact, at ¶ 8. 1.3.3 PeopleSoft earned over $2 billion in revenues in 2003, comprised entirely of enterprise software applications-related revenue. Oracle's Answer, at Allegation 8. 1.3.4 PeopleSoft sells HRM and FMS solutions throughout the United States and around the world. Oracle's Answer, at Response to Allegation 26; Joint Stipulations of Fact, at ¶ 17. 1.3.5 PeopleSoft sells application software that runs commercial and governmental enterprises, whether large, complex enterprises or those in the middle market. Bergquist, 6/08/04, 260:9-17. 1.3.6 PeopleSoft sells four categories of application software: Human Capital Management (HCM), Financial Management (FMS), Supply ChainManagement (SCM), and Customer Relationship Management (CRM). Bergquist, 6/08/04,261:02-06. 1.3.7 PeopleSoft was formed in the late 1980's to develop an HR product for large and complex customers. Bergquist, 6/08/04, 262:24-263:06.
1.3.7.2 PeopleSoft's Enterprise product is primarily sold to large and complex enterprises because it has the functionality to meet their needs. More specifically, it has the breadth and depth of functionality required by such firms, industry expertise, global capabilities and support, high levels of scalability and reliability, and the appropriate technology. Bergquist, 6/08/04, 274:01-15. 1.3.8 PeopleSoft offers suites both in the sense of multiple products within a single pillar (a pillar being a single product line; PeopleSoft has four pillars: HRM, FMS, SCM, and CRM) and multiple products across different pillars because customers are looking for full functionality from a single vendor to minimize both the number of vendors they have to deal with and the cost of integrating multiple products together. For those customers who prefer to buy separate products, PeopleSoft will also sell them module by module. Bergquist, 6/08/04, 262:10-19; 265:10-266:18. 1.3.9 Oracle regards PeopleSoft as a Tier One competitor for ERP software, including FMS and HRM enterprise software. P3009, Block dep., 1/05/04, 386:12-387:9.
1.3.10 PeopleSoft sells high function HRM and FMS software. Iansiti, 6/17/04, 2025:02-13; See 2.2. infra.
1.3.10.2 High function software is scalable. See 22. infra. 1.3.10.3 High function software is configurable. See 2.2. infra. 1.3.10.4 High function software is able to perform a variety of related transactions seamlessly. See 2.2. infra. 1.3.10.5 High function software is able to handle international aspects of an enterprise: multiple languages, multiple currencies, multiple legal regimes. See 2.2. infra. 1.3.10.6 High function software is able to handle the acquisition of new enterprises and the reorganization of existing ones. See 2.2. infra. 1.3.10.7 High function software is able to consolidate information across multiple divisions or organizations. See 2.2. infra. 1.4 Oracle's Unsolicited Offer for Peoplesoft
1.4.2 Pursuant to its public tender offer, Oracle plans to purchase PeopleSoft. Oracle's Answer, at Allegation 38; Joint Stipulations of Fact, at ¶ 9.
1.4.2.2 Oracle's decision to initiate a hostile take-over for PeopleSoft was triggered by a 6/02/03 e-mail from Ms. Catz to Mr. Ellison. Ellison, 6/30/04, 4278:08-20; P3327 at ORCL-EDOC-00030819 (stating "Now would be the time to launch on PSFT"). 1.4.2.3 Oracle had considered acquiring J.D. Edwards in April, 2003. P0035 at 26; P3033, Henley dep., 5/4/04, 88:18-89:05; 110:15-111:09. 1.4.3 Oracle's reasons for launching the hostile tender offer included disrupting PeopleSoft's acquisition of J.D. Edwards and winning competitions against PeopleSoft.
1.4.3.2 In justifying the tender offer to Oracle's Board of Directors, Ellision and Catz solicited the help of Mr. Reece of Credit Suisse First Boston, who contributed to the presentation to the Board. Ellison, 6/30/04, 4279:4-16, see also P0092. 1.4.3.3 Mr. Reece advised that the "[k]ey element is the one you focused on, time is on our side. Unless, and this is a big one, unless they change their bid for JD to an all cash offer or at least enough cash to accelerate and avoid a PST shareholder vote, time is our ally! Right now we are calling our strategy the Twist-in-the-Wind-Strategy. No need to change our bid! Standing firm will begin to create doubts in the minds of the market. Over time, we should see a decline in the price of PSFT in the market. Their quarterly results should, we certainly hope, dampen the markets enthusiam (sic). Of course, if they change their bid, AA and I have worked out a couple of strategy and ad scenarios where we completely BLAST our friends at PSFT." P0092 at CSFB 0028832. 1.4.4 Oracle's Plans Post-Merger
1.4.4.2 Oracle will not be actively selling PeopleSoft products to new customers but will provide some support for all PeopleSoft products. P3171, Ellison dep., 1/20/04, 54:11-56:02 (referencing P2039 (Oracle's Form 8-K including Oracle press release)); Ellison, 6/30/04, 4306:21-4307:8. 1.4.4.3 Post-acquisition, Oracle will not have a separate sales force selling PeopleSoft products. Oracle's sales force is trained in selling Oracle's products, and those are the products they will continue to sell; Oracle's sales force will not be trained to sell the PeopleSoft products. P3171, Ellison dep., 1/20/04, 56:03-59:13; Catz, 6/25/04, 3540:12-3542:17. 1.4.4.4 After acquiring PeopleSoft, Oracle will not develop future generations of PeopleSoft software. Catz, 6/25/04, 3540:12-25. 1.4.4.5 Oracle has no plans to integrate the PeopleSoft and Oracle product lines. Ellison, 6/30/04, 4300:21-4301:11; see also P3270 at 5. 1.4.4.6 PeopleSoft customers have no assurances that they will receive the same level of support and enhancements that they thought they were purchasing from PeopleSoft pre-acquisition. Ellison, 6/30/04, 4307:13-4308:11. 1.4.5 PeopleSoft difficulties resulting from Oracle's tender offer
1.4.5.2 Oracle has used the pendency of the PeopleSoft deal to hurt PeopleSoft's business and win accounts from PeopleSoft. Ellison, 6/30/04, 4286:23-4287:4; P2280 at ORCL-EDOC-0030398. 1.4.5.3 After AIMCO heard about Oracle's proposed acquisition of PeopleSoft, it was apprehensive about making a purchase from PeopleSoft, because PeopleSoft might not be around in the future. Wesson, 6/14/04, 1145:07-13. 1.4.5.4 AIMCO purchased PeopleSoft software only after receiving a guarantee to cover its costs in the event of a takeover of PeopleSoft. Wesson, 6/14/04, 1145:07-1146:22, at 1146:05-07. 1.5 Jurisdictional Requirements
1.5.2 Oracle transacts business and is found within the Northern District of California. Oracle's Answer, at Allegation 5; Joint Stipulations of Fact, at ¶ 6.
1.6.1.2
2.1.1 Function: A function is a business process that can be performed manually and/or can be automated in whole or in part by enterprise applications software. Examples of business functions include paying payroll or preparing a general ledger. Function is related to functionality, but is not used interchangeably. Joint Submission of Definitions, ¶ 2.1.2 Functionality: Functionality refers to the ability of enterprise applications software to automate particular business functions. Functionality can also be thought of as the capabilities of a software program. Joint Submission of Definitions, ¶ 3. 2.1.3 Core financial management services ("FMS") software: The term "core financial management services ("FMS") software," as generally used in the software industry and by the parties in this case, refers to the software necessary to automate an organization's basic financial functions, including the following modules: General Ledger, Accounts Receivable, Accounts Payable, and Cash and Asset Management. Joint Submission of Definitions, ¶ 4. 2.1.4 Core human resource management ("HRM") software: The term "core human resource management ("HRM") software," as generally used in the software industry and by the parties in this case, refers to the software necessary to automate an organization's basic human resource management functions, including the following modules: Payroll, Employee Tracking and Benefits Administration business processes. Joint Submission of Definitions, ¶ 5. 2.1.5 Legacy system; Incumbent system: A legacy system refers to an installed software system that was never or is no longer available for purchase as a new product or platform. An incumbent system refers to whatever software system a customer currently has installed. Legacy systems are one subset of incumbent systems. Joint Submission of Definitions, ¶ 6. 2.1.6 Enterprise resource planning ("ERP") software: Enterprise resource planning ("ERP") software refers, at a minimum, to the set of business applications software that is designed to automate an organization's back-office functions, such as payroll, general ledger, accounts payable and receivable, benefits management, and employee record keeping. It traditionally encompasses HRM and FMS. Some also include one or more other pillars in the definition of ERP, such as Supply Chain Management (SCM) or Customer Relationship Management (CRM). Joint Submission of Definitions, ¶ 7. 2.1.7 Enterprise application software ("EAS"): In contrast to ERP, enterprise applications software ("EAS") refers to the broader universe of software applications that are used by an enterprise to automate its overall business processes. In addition to the Human Resource Management (HRM) and Financial Management Services (FMS) pillars that traditionally comprise ERP, EAS also encompasses the Supply Chain Management (SCM), Customer Relationship Management (CRM), Product Life Cycle Management, Student Information Systems (SIS), and Business Intelligence (BI) pillars. Joint Submission of Definitions, ¶ 8. 2.1.8 Integration: In the context of this case, the term "integration" refers to the ability of a software application in one module to communicate with, work with and update software and data in another module. Most companies, particularly large ones, have a large number of software products that need to be integrated so they can communicate with each other. Joint Submission of Definitions, ¶9. 2.1.9 Analytics: Analytics is software that enables a company to use, analyze, report and aggregate data collected through one or more other business applications. Joint Submission of Definitions, ¶ 10. 2.1.10 Module: A module is software designed to automate one or more functions. Joint Submission of Definitions, ¶ 11. 2.1.11 "High-function software" is a term adopted by Plaintiffs in order to describe more precisely the features of a category of software products that industry participants call "enterprise" software, "up-market" software, or "Tier One" software." See, e.g., Bergquist, 6/8/04, 274:24-275:7; Wilmington, 6/16/04, 1771:5-1772:1; Iansiti, 6/18/04, 2180:22-2181:5.
2.1.11.1.2 There are a variety of enterprise software products that organizations use to automate different types of business functions. Among others, enterprise software can be used to (1) manage employees through HRM software and (2) maintain financial records through FMS software. Oracle's Answer, at Allegation 10. 2.1.11.1.3 Less sophisticated software require organizations to perform more manual processes that are labor intensive, subject to errors and can require significant additional server space. [REDACTED TEXT] 2.1.11.1.4 Although a small to medium sized company might face complicated tasks, because the operations are less diverse and dispersed it is easier to use traditional means - phone, fax, meetings - rather than automation to manage the organization. Iansiti, 6/17/04, 2031:2-16. 2.1.11.1.5 As an organization grows, it's increasingly difficult to use the traditional means to understand even the most basic functioning of the organization. Iansiti, 6/17/04, 2031:2-16 2.1.11.1.6 There are two different types of tasks that need to be accomplished in order to manage a large enterprise: one is to process transactions and the other is understanding critical information necessary in order to implement basic managerial tasks. Iansiti, 6/17/04, 2028:22-2030:12. 2.1.11.1.7 In order for a large complex enterprise to process the transactions and enable the information to be used to manage there are certain high-function requirements that software must meet. Iansiti, 6/17/04, 2033:16-2034:1. 2.1.11.1.8 A sophisticated product can provide enhanced functionality and an ability to streamline all Human Resources, benefits and payroll business processes. [REDACTED TEXT] 2.1.11.1.9 High function HR software allows companies to run their businesses more efficiently and effectively. High function HR software allowed [RED.] to automate a number of manual processes and eliminate costly customization. [RED. TEXT] 2.1.11.1.10 High function software needs to be able to capture the organization and all of its complexity. Where necessary it needs to operate in multiple languages and currencies, across multiple jurisdictions so as to correctly reflect the actual structure and organization of the firm. Iansiti, 6/17/04, 2035:1-17 2.2 "High-Function Software" Is a Software Product That Is Capable of Executing a Wide Array of Business Processes at a Superior Level of Performance. See, e.g., Iansiti, 6/17/04, 2035:1-17. Thus,"high-function" software must have at least the following advanced performance capabilities, not all of which each user may demand:
2.2.1.2 High-function software has the capability (i) to accept thousands of invoices in different currencies and to remit payment in a different currency while automatically recalculating the exchange rates on a real-time basis; (ii) High-function software has the capability of generating reports from hundreds of separate business units while permitting the user to quickly "drill down" to the underlying source data; (iii) the ability to model reorganizations of the business and to generate forecasts; and (iv) the ability to generate reports on costs associated with a product or component that may be drawn from dozens or even hundreds of distinct entities within the larger organization. Iansiti, 6/17/04, 2039:2-2040:7. 2.2.1.3 Enterprise software must meet more demanding scalability and reliability requirements than those required of mid-market software. Bergquist, 6/8/04, 289:8-290:4. 2.2.1.4 Changes in hardware and hardware architecture have not resolved the problems of scalability and the software must continue to address it. Bergquist, 6/8/04, 290:8-14. 2.2.1.5 The software Verizon uses for its financial management and human resources needs must be robust (relatively defect free) and scalable (able to accommodate a large number of users and a large number of transactions). Bradley, 6/9/04, 598:4-600:8. Scalability allows the software to work whether there are hundreds or thousands of people interacting with the system. For Verizon that means processing several billion transactions per month. Bradley, 6/9/04, 599:16-600:8. 2.2.1.6 SAP's high function software can handle 47,000 concurrent users and give a response time of less than two seconds. P3036, Knowles dep., 12/3/02, 103:20-104:2. 2.2.2 Configurability. High Function Software must Be Highly Configurable (e.g., it must Enable Unlimited Levels of Organization), Such That the User Can Mold the Software to Meet its Business Needs Without Having to Undertake Expensive and Inefficient Customization of the Software. See Johnsen, 6/16/04, 1753:9-1754:8; Iansiti, 6/17/04, 2046:19-2048:5, 2036:7-20; Bergquist, 6/8/04, 284:17-285:6, 287:9-17.
2.2.2.2 Configuration or tailoring is defining values in data that indicate how software should behave for a specific business practice. P3038, Godwin dep., 1/20/04, 131:2-132:14. 2.2.2.3 Software package configurations are a series of decisions end-users and management make upon installing software that allows the software to fit more closely with an enterprise's needs. P2896 at ORLITF0091413. 2.2.2.4 Customization is when a customers take the code that Oracle or another vendor has supplied and changes the code to have it work another way. When Oracle updates its software, the customer is required to re-write the code they have changed to update the software. P3038, Godwin dep., 1/20/04, 131:2-132:14. 2.2.2.5 In contrast to configuration, customization, while sometimes necessary, is disfavored as expensive to do and difficult to maintain. For that reason, up-market customers look for a high degree of configurability in the software - where its options are pre-built. Bergquist, 6/8/04, 285:23-287:17. 2.2.2.6 "Well, the simplest way is, a configuration is, the ability to make a change via configuration is a good thing, and customization is a bad thing. Johnsen, 6/16/04, 1753:9-1754:8. 2.2.2.7 Customization or modifications involves changing the software code and are not supported by the vendor. P2896 at ORLITF0091414.
2.2.2.8 2.2.2.9 Software that has configuration flexibility can to be adapted to specific industry needs or different needs within divisions or parts of an enterprise. Configurable software will allow for software to reflect the differences across industry verticals, within industry verticals and even between divisions of an enterprise. Iansiti, 6/17/04, 2035:18-2036:6. 2.2.2.10 By making their applications as configurable as possible customers do not have to go in and invasively modify the code that Oracle has shipped to make the applications work for their business. Oracle puts a lot of effort into configuring capabilities into its software so that a customer may set up the software to work the way they want it to for their business without incurring a high level of expense. P3038, Godwin dep., 1/20/04, 128:13-129:18. 2.2.2.11 Oracle writes it applications to be highly configurable so that a customer will not have to actually write code to make the program work with their business. P3038, Godwin dep., 1/20/04, 129:19-130:20. 2.2.2.12 The flexibility of the application is also an important distinction between up-market and mid-market vendors. Bergquist, 6/8/04, 283:8-284:2. 2.2.2.13 Unlike up-market firms, mid-market entities are less able to afford or operate highly flexible software products and are willing to change their business processes to conform to the software. Bergquist, 6/8/04, 284:3-8. 2.2.2.14 Software flexibility in this sense is the result of the vendor building in "configurability" options. Bergquist, 6/8/04, 284:9-285:6. 2.2.2.15 The flexibility built into high function enterprise software allows the customer to select options at the initial implementation stage and, later, to accept upgrades without customization and the substantial attendant costs. Wolfe, 6/16/04, 1565:21-1568:12; 1600:02-14. 2.2.2.16 Oracle's enterprise application software is highly configurable, which allows it to meet the diverse needs of its customers. Its inherent flexibility makes it adaptable to a variety of business practices. P3033, Henley dep., 5/4/04, 58:15-59:6. 2.2.2.17 Organizations handle transactions differently depending on the industry and business model, these differences should be reflected in the software. P3037, Knowles dep., 5/3/04, 73:18-21. 2.2.2.18 Oracle build into its ERP software more features and more configuration options to allow larger customers to fit the software to their business processes without having to engage in as much customization. P3171, Ellison dep., 1/20/04, 271:14- 274:12; P3038, Godwin dep., 1/20/04, 131:2-132:14. 2.2.2.19 At the broad level industries are different, but even within industries companies are very different. "And the software has to be able to be configured in such a way to solve what the company thinks is the more important elements to run its business, to try to create some element of competitive advantage from the other, their own competitors, within their given industry." P3037, Knowles dep., 5/3/04, 73:18- 75:8. 2.2.3 High Function Software must Be Able to Perform a Variety of Related Transactions Seamlessly (e.g., Provide a "Very Tight Integration Between" Business Processes Without Having to Write Customized Code) and with a High Degree of Ease and Sophistication. Iansiti, 6/17/04, 2039:2-2040:7.
2.2.3.2 Nextel wanted an integrated solution for HR and FMS; Nextel was concerned that if it acquired two separate systems and attempted to integrate them, Nextel would never reach optimal efficiency. These concerns would also apply to future upgrades. Cichanowicz, 6/14/04, 1069:23-1071:12. 2.2.3.3 Oracle applications allow financial information to be rolled up from different parts of the organization using different languages and then would allow users to view the results of the roll-up using descriptions in their own language. P3038, Godwin dep., 1/20/04, 180:11-181:17. 2.2.3.4 The ability to capture data, roll-up information, drill down and accomplish it in near real time is important to allow an organization to have critical data be as accurate a possible when management decisions are made. Iansiti, 6/17/04, 2040:19-2041:3. 2.2.3.5 Basic software packages allow the user to track employee names, addresses, salaries and job levels. In contrast, the high-function human resource capital management software sold by PeopleSoft, Oracle and SAP goes beyond the basics and allows an organization to track employees by skills, job classes, job codes, union affiliations, and any number of other criteria. Glover, 6/15/04, 1484:8-1485:3. 2.2.3.6 Verizon needs software that can accommodate a workforce that has significant variation in its contractual relationship with Verizon by virtue of differences in the union contracts with Verizon. Bradley, 6/9/04, 582:24-583:15. Verizon's software needs to be able to accommodate Verizon's need to account for differences in financial reporting requirements for regulated affiliates and its unregulated affiliates. Bradley, 6/9/04, 581:5-23. Verizon's FMS must be able to quickly adopt to Verizon's frequent corporate reorganizations. Bradley, 6/9/04, 581:24-582:19. 2.2.3.7 Managing a tangle of connections between point solutions is extremely costly and complex. Any time you update a point solution, you must go back and review all integration points and potentially update the integration software. P2208, at ORLIT-EDOC-00244083. 2.2.4 International Operations. High Function Software must Have the Capability to Handle International Aspects of a Business, Such as Multiple Currencies, Multiple Languages, and Multiple Legal Regimes (e.g., "Enhanced Multi-currency Transaction Support, Invoicing in Any Currency, [And] Cross-charging and Inter-company Accounting" and the Support of "30 Languages, All Currencies, and Many Regulatory Requirements in a Single Database" with All Languages "Installable in the Same Unicode Instance"). See P2208 at ORCL-EDOC-00244092- 95; ORCL-EDOC-00244113; see also Bergquist, 6/8/04, 290:15-291:6.
2.2.4.2 Oracle's multiple language support is not separate installations of its applications in separate languages, but rather allows users that are using different languages to access and modify the same corporate data. P3038, Godwin dep., 1/20/04, 182:9-12. 212.2.4.3 "Oracle supports 30 languages, all currencies and many regulatory requirements in a single database. All 30 are installable in the same Unicode instance. Trading partner receive business documents in the language of their choice and user view and enter date, number and currencies in their choice of format. There is no separate U.S., Japanese or French software version of the E-Business Suite. Support for local business practices, address formats and reports is all part of the standard product." P2208 at ORLIT-EDOC-00244113. 2.2.4.4 Multiple language support must be developed by the vendor so that international users can interact with the software in their native language. P3036, Knowles dep., 12/3/02, 84:2-85:15. 2.2.4.5 Oracle, Peoplesoft and SAP are able to deal with currency fluctuations on a centralized basis that allows for minute-by-minute, real-time changes to be reflected in the software. Iansiti, 6/17/04, 2057:7-2058:3. 2.2.4.6 In Oracle 11i software applications it is possible to use multiple reporting currencies, which is an Oracle General Ledger feature that allows you to report your functional currency in one or more foreign currencies. P2208 at ORLIT-EDOC- 00244092; P2209 at Appendix, p. 2. 2.2.4.7 High-function financial management software supports multiple currencies so that the organization can report in the local currency but it also rolls up financial reports to the corporate headquarters and automatically converts it to the local currency of the headquarter country. P3036, Knowles dep., 12/3/03, 82:25-84:1. 2.2.4.8 Enterprise software must have global capabilities. Global in this sense means the ability to handle multiple countries, multiple currencies, and multiple languages and to do so concurrently. Bergquist, 6/8/04, 290:15-291:6. 2.2.4.9 Mid-market vendors lack the geographic scope required by many up-market firms. Bergquist, 6/8/04, 291:7-24. 2.2.4.10 Software must account for the differences in reporting certain information from country to country. P3036, Knowles dep., 12/3/02, 84:7-85:15. 2.2.5 Acquisitions and Reorganizations. Software must Be Flexible and Able to Accommodate Rapid Growth, Acquisitions and Reorganizations.
2.2.5.2 PeopleSoft allows for reorganizations to be modeled through the use of a drag and drop function that makes it very easy. Software that cannot do so has enormous limitations. Iansiti, 6/17/04, 2051:18-2052:4. 2.2.5.3 Oracle Application 11i allows customers to model or do reorganizations without losing historical organizations and transactions. "At some point, your company may need to make organization changes. Companies usually make organization changes to better adapt themselves to the new business needs and challenges of the market. One type of organization change you can make is to discontinue one organization...If you create a new organization, you can still access your historical transactions by logging to the responsibility tied to the disabled organization." P2209 at 2-23. 2.2.5.4 Verizon, for example, has 120 unregulated entities, which for business reasons they acquire and sell fairly often. This requires that Verizon be able to separate out the numbers for the companies that they are selling. Bradley, 6/9/04, 581:24-582:19. 2.2.6 Multiple-organizations. High Function Software Allows for Information to Be Consolidated Across the Organization to Generate Reports, but Also Allows for a Manager to Drill Back down to Understand Where the Data in a Specific Entry Came From. Iansiti, 6/17/04, 2039:2-2040:7.
2.2.6.2 It is important for an organization to be able to run a single instance of the product, that will allow for users in different locations, different jurisdictions, perhaps different countries speaking different languages, to have access to the same information at the same time. Iansiti, 6/17/04, 2042:1-12. 2.2.6.3 High function software allows for interorganizational journal transactions which allow for different organizations to be linked to transactions, so that they can be correctly captured in the software accounting can be done correctly, and the books can be closed. Iansiti, 6/17/04, 2049:16-2050:5. 2.2.6.4 Oracle states about its single global instance strategy, "[c]ompanies can manage their worldwide operations using an single standard installation providing consolidated data globally while ensuring fiscal and statutory compliance around the world. Oracle offers a truly global product that supports multiple languages, multiple currencies, unique global business practices, and local statutory and regulatory requirements." P2208, at ORLIT-EDOC-00244083. 2.2.6.5 Oracle's software applications allow customers to separately track and report multiple organizations within a single application. P3038, Godwin dep., 1/20/04, 202:19-203:2. 2.2.6.6 Large, complex organizations typically have multiple legal entities, ranging anywhere from maybe 200 to 2000. Thomas, 6/9/04, 475:3-14. 2.2.6.7 In Oracle, Peoplesoft and SAP it is possible to model unlimited numbers of levels of an organization and match the software to them so that it is useful, accurate and visible to management. Iansiti, 6/17/04, 2047:17-2048:5; P3038, Godwin dep., 1/20/04, 215:18-216-5. 2.2.6.8 Oracle's software applications allow for a customer to model multiple organizations within a single installation of its software, which allows for customers to account for different subsidiaries or different operating units or to subdivide its business along other lines. P3038, Godwin dep., 1/20/04, 206:10-207:17. 2.3 Characteristics of Vendors of High-Function Software Are Important to Purchasers of High-Function Software.
2.3.1.2 In addition to high functional capabilities, vendors of high function software must demonstrate credibility and business capabilities. Financial stability is critical. Iansiti, 6/17/04, 2037:1-2038:6. 2.3.1.3 In addition to the capabilities of the products themselves, vendors who wish to sell to the up-market must establish not only their fiscal stability but also a track record of successful implementations. Bergquist, 6/8/04, 296:7-297:15; 297:20-298:10. 2.3.1.4 Large, complex companies like DaimlerChrysler only purchase HR software from vendors that can provide a reference from a company in the same industry. Gorriz, 6/15/04, 1375:9-15. 2.3.1.5 Reference customers and an extensive network of contacts with similarly situated companies - those with rich complexity and regulatory issues similar to those faced by Verizon - are important to Verizon before it makes a selection. Bradley, 6/9/04, 600:9-602:3. 2.3.1.6 Customers look at functionality, credibility, reputation, and ability to sustain a long-term relationship. P3171, Ellison dep., 1/20/04, 45:2-46:8. 2.3.1.7 Vendors of high-function software to large, complex state and local customers must be able to demonstrate large, credible references that look a lot like the customer. P3171, Ellison dep., 1/20/04, 286:14-287:8. 2.3.2 Research and Development by a Vendor Is Critical to Purchasers of High- Function Software.
2.3.2.2 Oracle has 6000 R&D personnel worldwide working on enhancements to the 11i E business suite applications. P3038, Godwin dep., 1/20/04, 88:6-92:8. 2.3.2.3 Since first releasing the 1li application, the number of R&D personnel making enhancements to the product has grown, because Oracle has been investing more money into its applications to grow its applications business. P3038, Godwin dep., 1/20/04, 89:18-90:6. 2.3.2.4 With the release of 11i, Oracle released new human resources and financials modules. P3038, Godwin dep., 1/20/04, 106:4-108:4. 2.3.2.5 Since Oracle 11i applications were released in 2000, more person years of new development have occurred than had been devoted to the development of all of Oracle applications to that point. P3038, Godwin dep., 1/20/04, 106:4-1-108:4. 2.3.2.6 Vendors engage in R&D to serve their largest customers. Hausman, 6/29/04, 4053:16-4054:11; 4058:7-4059:4. 2.3.2.7 Many customers consider upgrades to the software important. Campbell, 6/22/04, 2749:25-2752:2. 2.3.2.8 Vendors of high function software must invest sufficient development resources to innovate the software and to meet the evolving needs and demands of customers. Knowles, 6/23/04, 2870:24-2871:12. 2.3.2.9 Product integrity and product development is related in part to research and development spending and the stability of that investment over the long term. P3037, Knowles dep., 5/3/04, 86:4-87:16. 2.3.2.10 Reductions in research and development spending signal the marketplace that the software vendor is no longer improving the product. P3037, Knowles dep., 5/3/04, 86:4-87:16. 2.3.2.11 Software evolves over time, it becomes better, it can do more, and it can solve more issues. P3037, Knowles dep., 5/3/04, 142:18-144:4. 2.3.2.12 Customers do not just want better functionality, they want it from a vendor that will continue to improve the product over a five-to-ten year period. P3171, Ellison dep., 1/20/04, 48:8-49:8. 2.3.2.13 Web-enablement is a critical feature for high function software because it assists in accurately entering data, in deploying an application across many different users, in implementing that data and in having the data be visible to all of those who need to use it. Iansiti, 6/17/04, 2043:2-13. 2.3.2.14 Oracle went to a full web-enabled version of its products when it released the 11i product in May 2000. P3038, Godwin dep., 1/20/04, 55:15-21; 64:9-65:12. 2.3.2.15 Laurette Bradley of Verizon believes that Oracle, PeopleSoft and SAP are "right at the forefront of embracing web services. So that if this is a new foundational technology, we don't have to worry that they'll lag 10 years behind. We know that if it counts, they will develop it, they'll integrate it, they'll a super job of it." Bradley, 6/9/04, 598:9-599:5. 2.3.3 Dedicated Sales Forces Are Necessary to Assist Customers in Selecting a Product That Will Meet Their Complex Functional Requirements.
2.3.3.2 A dedicated sales force is one of the attributes that distinguishes most mid- market vendors, whose distribution model is to have sales made through partners and/or independent distributors, from a dedicated sales force. Iansiti, 6/17/04, 2037:1-2038:17. 2.3.3.3 Peoplesoft, Oracle and SAP have very large, targeted sales forces that are specialized by industry verticals, which sell directly to large customers. Iansiti, 6/17/04, 2054:22-2055:7. 2.3.3.4 High-function software vendors employ large and sophisticated sales forces. The sales force must explain to clients the complexity of the products and how those products will meet an organization's particular needs. Knowles, 6/23/04, 2903:5-2903:9. 2.3.4 Strong Support Organizations Are Needed to Provide Technical Expertise to Buyers of High-Function Software.
2.3.4.2 The ability to provide global support for the software is an important criterium for international organizations. P3155 at 3. 2.3.5 Financial Stability of the Related Vendor Is Critical to Customers Making the Long Term Investment in High-function Software.
2.3.5.2 Large, complex companies like DaimlerChrysler only purchase HR software from vendors that have a solid financial background. Gorriz, 6/15/04, 1375:2-8. 2.4 the Vendors' High Function Software Is Differentiated, i.e., Not All Alike, and Different Vendors Have Different Strengths and Weaknesses.
2.4.2 Oracle, SAP, and Peoplesoft Have All Had Different Strengths Historically; Oracle and Sap Had Taken the Major Market Share in Those Industries in Which Their Respective Strengths Were Important to the Industry. Oracle Had Very Rich Financial Functionality and Won a Majority of Sales in That Area. SAP Had Very Rich Supply Chain and Manufacturing Capability and Had Won a Majority of the Market Share in Industries in Which Those Characteristics Were Important. Peoplesoft Had the Best Human Resources Functionality and Had the Dominant Market Share in the Market for Human Resource Software. Keating, 6/10/04, 898:8-899:3. 2.4.3 Oracle and PeopleSoft have historically sold their products in modules that could be separately licensed and implemented, while SAP, at least until more recently, was all-encompassing and not licensed in separate modules. Keating, 6/10/04, 901:6-19. The customer had to buy the entire SAP suite. Keating, 6/10/04, 946:18-20. The modular architecture gave Oracle and Peoplesoft advantages in industries, such as telecommunications, in which the customers had other key systems that they needed to interface with the Oracle and PeopleSoft products. SAP took the lead in industries in the all-in-one software solution best matched the customer's requirements. Keating, 6/10/04, 901:20-902:15. 2.4.4 Oracle took a major market share in the telecommunications industry because many telecommunications companies have billing systems that must be interfaced with a strong general ledger. Oracle also took a major share of the financial services industry because those customers had other financial systems that had to interface with the general ledger and other core financials. In contrast, SAP had a dominant position in industries that required sophisticated supply chain functionality, including aerospace and oil and gas. Keating, 6/10/04, 899:9-900:19. Some of the financial systems that financial services customers need to integrate with the general ledger include brokerage and lending systems. Keating, 6/10/04, 947:10-21. 2.4.5 In comparison to Oracle and PeopleSoft, SAP was tightly integrated and had closed interfaces. Keating, 6/10/04, 947:4-9. because of its all-in-one architecture, SAP historically was more expensive to implement than Oracle and PeopleSoft. Now that SAP has begun to offer its product in modules, its implementation costs are getting more in line with Oracle and PeopleSoft's implementation costs. Keating, 6/10/04, 903:6-15. However, the gap has not been closed completely between SAP and Oracle and PeopleSoft in terms of modularity and openness. Keating, 6/10/04, 993:16-994:2. 2.4.6 Keating testified that the differences that continue to exist between SAP and Oracle and PeopleSoft continue to provide a competitive advantage for Oracle and PeopleSoft for some customers. Keating, 6/10/04, 994:3-6. 2.4.7 SAP has unsuccessfully attempted for years to sell its software to the North American banking industry. Keating, 6/10/04, 993:3-10. SAP's recent announcement about its product modification plans is SAP's most recent attempt to make its software attractive to North American financial services customers. Keating, 6/10/04, 992:23-993:7. 2.4.8 Keating testified that SAP has been more successful at selling its software to financial institutions in Europe than in North American, but the banks in the U.S. must satisfy additional requirements that European banks do not have. In addition, the U.S. market for Tier One core ERP software in financial services is much bigger than the European market. Keating, 6/10/04, 996:20-997:15.
2.4.8.2 In certain areas like manufacturing, supply chain, and financial management, Oracle's product is more feature-rich than PeopleSoft's. P3171, Ellison dep., 1/20/04, 106:21-109:2. 2.5 After a Review of 148 Vendors, Professor Iansiti Concluded That from the Standpoint of Functionality, Only Oracle, PeopleSoft and SAP Are Able to Satisfy the High Function Requirements of Enterprises. Iansiti, 6/17/04, 2025:2-206:6.
2.5.2 The State of Ohio evaluated five ERP vendors against requirements for functionality, scalability, technical fit, R&D spending, and public sector spending. The State of Ohio short-listed Oracle, PeopleSoft, and SAP as most closely fitting its needs. P1944, at ORLITF 0149246. 2.5.3 BearingPoint's Global Enterprise Solutions Group clients require software that allows them to maintain multiple charts of account so that they can track revenue by all their different products and services and combinations thereof. No software vendor provides multiple chars of account functionality that is comparable to Oracle, SAP or PeopleSoft. Keating, 6/10/04, 871:3-20. 2.5.4 The largest commercial customers and public services clients have software requirements that has predominantly caused them to choose Oracle, PeopleSoft, and SAP. Keating, 6/10/04, 867:5-14.
2.6.2 Firms such as Oracle, PeopleSoft, and SAP have products and sales forces directed to serving mid-market customers. Knowles, 6/23/04, 2814:10-21; 2905:3-2906:21; Wilmington, 6/16/04, 1765:8-1766:8; 1767:5-1768:2; P3033, Henley Dep, 5/4/04, 53:22-55:8; 115:1-116:11. 2.6.3 Customers of any size may require high function software depending on the characteristics of that customer. A smaller company may have complex processes that require high function software. Knowles, 6/23/04, 2908:20-2908:25. 2.6.4 JD Edwards recognized the difference between high function or upmarket and mid-market customers. It identified mid-market as opposed to upmarket customers not by revenues or employee count but by various "buyer characteristics." Thus, for example, mid-market customers have a keen focus on costs and TCO; their IT organizations are small and unsophisticated; and their personnel tend to be generalists. Allen, 6/10/04, 751:25-752:16. 2.6.5 JDE's software was originally designed for the mid-market. When it was able to sell to up-market firms it was almost always to divisions and subsidiaries of large firms, such as Johnson & Johnson, Walmart and Dole Foods. Allen, 6/10/04, 767:7-768:8. 2.6.6 Mid-market buyers are looking for software that is highly integrated, possess features and functions appropriate to their specific industry, and, most of all, are easily configured and rapidly implemented. Allen, 6/10/04, 753:4-20. 2.6.7 Mid-market firms are also interested in tight integration. They do not want to incur the burden of integrating products from different vendors into a suite, to customize the interfaces between various point solutions. Such interfaces are very costly to create and burdensome to maintain. Allen, 6/10/04, 755:2-16. 2.6.8 What distinguishes up-market from mid-market is not employee count or revenues, but the complexity. Thus a large firm with a distributed structure - where division and subsidiaries make their own decisions on IT purchases - might have the buying characteristics of a mid-market firm. Allen, 6/10/04, 760:3-761:3. 2.6.9 The differences between mid-tier and high function software are built right into the code. Allen, 6/10/04, 770:3-16. 2.6.10 PeopleSoft's Enterprise product offers its up-market customers broader and more extensive configuration options than those offered to mid-market customers because the former have broader and more intensive needs for configuration. Bergquist, 6/8/04, 288:15-289:3. 2.6.11 A customer with 1000 seats (users) will configure its software differently than a customer with 10,000 users. Hausman, 6/29/04, 4060:20-4061:16. 2.6.12 The mid-market customers interest in easy configurability reflects its concern with cost. Easy configurability does not mean that the customer wants no configurability but that it does not want to make numerous complex decisions when the software is implemented. They want some choices but also a quick and less costly implementation. The more numerous the choices the more complex the software and the more costly the implementation. Allen, 6/10/04, 754:11-22. 2.6.13 Firms will not change their structure from a centralized to a distributed structure, in order to be able to buy software from a mid-tier vendor. Allen, 6/10/04, 769:2-18. 2.6.14 Although companies send out the same disks and the same code to all customers, smaller customers will not "turn on" the switch for the greater functionality, and therefore, large customers are getting a different product than smaller customers. Hausman, 6/29/04, 4057:3-4060:19. 2.6.15 Large customers need a better product that can handle more transactions. Hausman, 6/29/04, 4053:16-4054:11. 2.6.16 Even though the disk that goes to customers is the same, even though the product is "physically the same, but they [the vendors] know that it's going to be used in a different way, and it's like buying a different product. Hausman, 6/29/04, 4061:4-16. 2.7 Sales Process for High-Function Software: the Sales Process Is Lengthy and Involves Extensive Sharing of Information in Order to Identify a Product That Can Meet the Customer's Functional Requirements.
2.7.1.2 Most customers will engage some third party consultants to aide them in their selection process. Bullock, 6/7/2004, 203:14-205:1; P4075R, at NEXTEL-000030-NEXTEL-000034; Cichanowicz, 6/14/04, 1060:10-18; P3062, Elliott dep., 5/20/04, 58:24-59:16. 2.7.1.3 Prior to evaluating vendors, customers may form a selection team composed of technical and functional specialists who will identify all the functions they want in a software package. Bullock, 6/7/2004 202:24-203:13. 2.7.1.4 Customers may form project teams composed of as many as 50 representatives to evaluate software alternatives. P3155, at 4. 2.7.1.5 The sales process provides the information that permits the vendor to distinguish between firms that need high function software and those which don't. Indeed, it is the sales person's responsibility to "qualify" a prospect, to not spend time or effort on an up-market account that JDE could not satisfy. Allen, 6/10/04, 761:4-763:15; 764:6-765:15; 766:4-24. 2.7.1.6 Customers often develop a list of candidate vendors before consulting of the Big Five systems integrators, based on market research obtained from firms such as Gartner, AMR, and Meta Group. Keating, 6/10/04, 890:17-891:23. 2.7.1.7 BearingPoint will often assist its Tier One clients that are selecting software in preparing the solicitation documents that will be issued to the potential vendors. The documents typically have a list of requirements that the client needs for regulatory or business reasons, a list of technical requirements, and questions about the stability of the potential vendor, the vendor's service and support, and the vendor's training programs and capabilities. Keating, 6/10/04, 891:24-893:11. 2.7.2 Customers typically issue detailed requests for proposals that outline the functions that the customer is seeking to automate. P4866, "Request for Proposal: CH2M Hill Human Resources Management System;" P3061, DeSimone dep., 5/19/04, 109:2-4, 139:9-18; Cichanowicz, 6/14/04, 1067:25-1068:03; P3062, Elliott dep., 5/20/04, 76:9-77:7.
2.7.2.2 Typically customers will define issues such as the functionality required, the scope of work, and where the software will be deployed. P3009, Block dep., 15.12/16/03, 166:22-167:8. 2.7.2.3 Vendors will follow-up with the customer to learn as much as possible about the customers requirements. P3009, Block dep., 12/16/03, 169:8-17. 2.7.3 Second, high-function enterprise software is time consuming to purchase. The procurement process for some customers lasts from six to eighteen months and involves extensive interaction with software vendors and third-party consultants. Oracle's Answer, at Response to Allegation 18; P3191, Block dep., 12/16/03, 173:17-174:3.
2.7.3.2 Emerson's ERP vendor selection process took 21 months. Peters, 6/14/04, 1264:24-1265:6. 2.7.3.3 The sale of high function software is a long protracted process that may take 6 months to over a year to complete. P3036, Knowles dep., 12/3/03, 170:23-171:5. 2.7.3.4 Nextel kicked off its "Financial, HR, Procurement Systems Overhaul Project" in October, 2002, and had a scheduled delivery of 2004. P4074R, at NEXTEL- 000074. 2.7.3.5 When selecting enterprise software, large companies go through a much more detailed evaluation process - they do a deep-dive technical evaluation of your product. Smaller companies rely more heavily on references. P3171, Ellison dep., 1/20/04, 258:2-259:21. 2.7.4 Demonstrations are designed to identify software products that can be configured to meet a customers business requirements .
2.7.4.2 Customers will provide vendors detailed scripts that they expect the vendor to follow during the demonstrations. These are often very detailed because the customer does not want "any amazing discoveries." Bullock, 6/7/2004, 212:24-213:16. 2.7.4.3 Customers expect vendors to demonstrate the abilities of the software to meet their functional requirements. Knowles, 6/23/04, 2911:6-2911:9. 2.7.4.4 Nextel sent RFPs to Oracle and PeopleSoft. Both responded and performed demonstrations for Nextel. Nextel also did reference checks and had executive interviews with both Oracle and PeopleSoft. Cichanowicz, 6/14/04, 1071:13-24. 2.7.5 Substantial information is exchanged between customer and vendors in the sales process. Customers provide vendors extensive information about their needs in order to ensure that they select the product that is the closest functional fit.
2.7.5.2 Oracle learns the potential customer's business processes and how its software meets the customer's business needs through a series of meetings, and demonstrations. Potential customers provide information regarding how its business operates so that Oracle can configure its software to run business scenarios for the potential customer during software demonstrations. P3009, Block dep., 12/16/03, 192:15-195:13. 2.7.5.3 It is in the customers best interests to be forthcoming about their functional needs when purchasing enterprise software. P3009, Block dep., 12/16/03, 175:6-10. 2.7.5.4 Oracle's dedicated North American sales force includes "SWAT sales teams" that are highly knowledgeable specialists who are expertise in the products, can explain the qualities to potential customers, and "understand how to beat the competition." P2054, at ORCL-EDOC-00049907. 2.7.5.5 Many customers conduct a detailed assessment of their functional requirements as part of the software procurement process. Oracle's Answer, at Response to Allegation 19. 2.7.5.6 The sales process allows a vendor to identify a prospect's requirements through a series of conversations with the customer and meetings over a period of time. Often in the sales cycle a vendor will send a team to a customer to find out the prospect's needs and capabilities, an interaction that gives the vendor a very good idea of the problem they're trying to solve and if their needs match the criteria of large and complex. The demonstration process likewise gives the vendor substantial amounts of information about the customers needs and capabilities. Bergquist, 6/8/04, 276:6-24. 2.7.5.7 The sales process gives the vendor information about whether the prospect is attempting to solve the whole organization's problems or just a division; whether the solution is to be deployed worldwide or for a specific geographic area; whether the prospect needs a specific functionality or a broad suite of functionality to run its whole organization. Bergquist, 6/8/04, 276:25-277:9. 2.7.5.8 Vendors obtain detailed information about the customers' business and unique requirements. P3050, Render dep., 5/11/04, 29:3-18. 2.7.5.9 Substantial information is exchanged between vendors and customers concerning their requirements, so that it is "an iterative dynamic process." P3059, Johnson dep., 01/13/04, 87:5-88:5. 2.7.5.10 High function software vendors will do an assessment up-front of whether the prospective client has the budget for the software and based on that assessment they will decide whether to pursue the client. P3036 Knowles dep., 12/3/03, 187:11-188:1. 2.7.5.11 A vendor of high function software must collect a great deal of information about a potential customer's business and the issues faced by the client in order to package a software solution to meet that client's needs. The sales process becomes a collaborative effort between customer and vendor. P3036, Knowles dep., 12/3/03, 64:9-65:8. 2.7.5.12 A customer reveals information about its business operation that enable vendors to make an informed judgment about the set of vendors that can meet the demand, as well as the customer's probable ranking of vendors. P3036, Knowles dep., 12/3/03, 168:11-168:23. 2.7.5.13 During the sales process Peoplesoft has many meetings and conversations with a potential customer who conveys their business requirements. Customers try to present a complete picture of what they are looking for. Wilmington, 6/16/04, 1785:24-1786:24. 2.7.6 Vendors seek and obtain information about how customers value the high- function software they are seeking to buy. 2.7.7 Oracle and Peoplesoft attempt to learn how much the product is worth to the customer. Campbell, 6/22/04, 2785:11-25.
2.7.7.2 A vendor of high function software must collect a great deal of information about a potential customer's business and the issues faced by the client in order to package a software solution to meet that client's needs. The sales process becomes a collaborative effort between customer and vendor. P3036, Knowles dep., 12/3/03, 64:9-65:8. 2.7.7.3 Starting from the very beginning of a sales cycle, account executives spend a great deal of time with a prospective customer to understand the key decision drivers behind going to market for a new software solution. P3036, Knowles dep., 12/3/03, 164:20-166:3. 2.7.7.4 Vendors seek and obtain information about how customers value the high-function software they are seeking to buy. P3036, Knowles dep., 12/3/03, 168:11-168:23. 2.7.7.5 Customers have no incentive not to disclose all their requirements. The reason for this is that if a customer does not select the right application the customer might have to customize or write application code outside the application selected and this will add to the total cost of ownership. Wilmington, 6/16/04, 1786:25-1787:20. 2.7.7.6 To understand the business processes that a customer has, Peoplesoft relies on its 'solution consultants.' These are experts who specialize in specific industries, or in specific software products, human capital management or financial management for example, or in both. Wilmington, 6/16/04, 1788:14-1789:16. 2.7.7.7 Oracle's sales staff seek information from the customer about the price the customer expects to pay for the software. P3171, Ellison dep., 1/20/04, 289:20-290:13. 2.7.7.8 Vendors seek information regarding business scenarios that the client needs the software to support so that they can run demos and workshops to show that the software can perform as desired. P3009, Block dep., 12/16/03, 169:22-170:16. 2.7.7.9 In a competitive bid at Merrill Lynch for HR, an Oracle sales representative observed that "[t]his is for a Peoplesoft competitive replacement for the HR Suite and complete ERP commitment to Oracle. The price of PSFT migration to V8.8 is seen as expensive and considered a new implementation for Merrill. We have verified that this price point puts us in a competitive position.... Oracle is the only other vendor they are considering." Later, the representative came back with a new discount because "[a]fter discussions with Tony Kender and License sales management, we need to request an additional 3% discount for this PSFT competitive HR replacement.... PSFT has come in to protect their HR install at Merill and undercut our price ...." P1176, at ORCL-EDOC-00403221 (00403219-27). 2.7.8 Vendors generally learn who else is on the short list of competitors being considered.
2.7.8.2 Keating testified, based on his experience working for Oracle and PeopleSoft and his dealings with the software vendors, he believes that Oracle, SAP and PeopleSoft are fully aware of the functional capability of the other vendor's products. Keating, 6/10/04, 895:22-896:20. 2.7.8.3 Customers sometimes "identify competing vendors and the prices that they are offering in an effort to encourage price competition." Oracle's Answer, at Response to Allegation 20. 2.7.8.4 Some customers will explicitly tell the vendors who their competition is for the customer's business. Bullock, 6/7/2004, 214:18-214:25. 2.7.8.5 In the selection of its FMS and its HRMS software, NM told OR and PS that they were the only remaining finalists after NM had eliminated SAP from the competition. OR and PS also knew that NM did not plan to retain its legacy system and did not intend to develop a system internally. Maxwell, 6/9/04, 670:19-671:7, 687:17-688:3. 2.7.8.6 During head-to-head competition, Oracle and PeopleSoft did what they could to determine the status of the evaluation process and where they ranked against each other. Wolfe, 06/16/04, 1560:6-14; 1585:18-1586:10. 2.7.8.7 Vendors will know the identity of the other vendors participating in the demonstrations. Knowles, 6/23/04, 2911:16-2911:19. 2.7.8.8 Vendors try to learn who is on the short list. P3036, Knowles dep., 12/3/03, 168:11-168:23. 2.7.8.9 During the sales process Peoplesoft learns who else is competing. Many times the customer identifies the competition. Based on industry knowledge, the customers business requirements, and feedback from the customer, Peoplesoft is able to determine who the competitors are. Wilmington, 6/16/04, 1789:17-1790:18. 2.7.8.10 KMG disclosed to PS and OR that they were the finalists in it's KMG HRMS selection process. P3062, Elliott dep., 5/20/04, 118:14-20. 2.7.8.11 Oracle salesmen are strongly encouraged to learn if there are other vendors competing for a customers business. P3009, Block dep., 12/16/03, 175:17-176:2. 2.7.8.12 Knowledge of competitors in an account permits a vendor to package his offer to win against the competitor that is being faced. P3009, Block dep., 12/16/03, 180:20-181:9. 2.7.8.13 The vendors also learn the current software footprint of the customer, which may include a split footprint of Oracle and PeopleSoft products. P1002, at ORLITE0086650-51; P1004, at ORCL-EDOC-00128424; P1019, at ORCL-EDOC-00224858. 2.7.9 Different customers have different (heterogenous) needs. Vendors expect their salesmen to work with a prospective client understand that client's business problems or the business process issues. Knowles, 6/23/04, 2910:18-2911:5.
2.7.9.2 Although the code provided to customers is the same, the use of the software by the client may be unique. P3009, Block dep., 12/16/03, 205:11-22; 206:1-19. 2.7.9.3 The individualized needs of a customer may affect the vendors that it believes can satisfy its requirements. P3009, Block dep., 12/16/03, 208:5-10. 2.7.9.4 Small business customers are "very different than other types of organizations" because "they have very simple needs." P3191, Block dep., 12/16/03, 83:20-84:10. 2.7.9.5 Certain customers have unique needs that require highly configurable software. Therefore, they cannot purchase a solution in a box, which is a software version with limited options that comes pre-configured. P3191, Block dep., 12/16/03, 132:16-133:8. 2.7.9.6 Individual customers have differing needs because of their different business practices and customers are to some extent unique. P3038, Godwin dep., 1/20/04, 126:1-22. 2.7.9.7 Oracle witness Harris testified that in his experience as CIO at various divisions of Pepsico, Nike, and Gap, every customer has different needs and seeks different solutions to meet those needs. Harris, 6/24/04, 3196:5-19; 3228:3-25, 3229:1-9. 2.7.9.8 Different customers have different (heterogenous) needs. P3036, Knowles dep., 12/3/03, 65:9-66:17. 2.7.9.7 Up-market customers have different business issues and different business requirements. Peoplesoft and its competitors have experts who put on detailed demonstrations for customers to show how the application meets their business requirements. Wilmington, 6/16/04, 1787:21-1788:13. 2.7.10 Prices are individually determined, customer by customer.
2.7.10.2 Typically, pricing is not discussed until the vendor understands the functional requirements of the customer. P3009, Block dep., 12/16/03, 212:18-213:16. 2.7.10.3 Pricing (through the approval of discounts) is based on the circumstances of each transaction. P3171, Ellison Dep, 01/20/04, 44:4-46:8. 2.7.10.4 Vendors of high function software compete on price and capability. P3171, Ellison dep, 01/20/04, 45:9-18. 2.7.10.5 When pricing (discounting) high-function software, Oracle considers whether competing products can meet the functional requirements of the customers. P3171, Ellison Dep, 01/20/04, 44:4-45:8. 2.7.10.6 Vendors such as SAP have good information about the functional capability of competitors such as Oracle and PeopleSoft and will not discount as heavily against vendors that cannot meet the needs of a particular industry. Knowles, 6/23/04, 2934:19-2935:7. 2.7.10.7 A vendor of high-function software may not be forced to meet a price offered by a competitor if the vendor's product is a better functional fit to the customer's requirements. Knowles, 6/23/04, 2934:5-18. 2.7.1l Vendors submits bids and prices are negotiated from those bids, often during a multiple-round negotiation process.
2.7.11.2 Keating testified that, when negotiating price, Tier One firms that are selecting software will always negotiate with 2 or 3 finalists and try and get the best deal possible. Tier One firms rarely try to negotiate with only one firm. Keating, 6/10/04, 895:6-21. 2.7.11.3 Price is typically not discussed until after a customer is satisfied a particular vendor can meet their minimum requirements. Once the demonstrations have been completed vendors will have a good idea about the solution the customer is looking for and will be in a better position to provide pricing information. P3037, Knowles dep., 5/3/04, 162:19 - 163:6. 2.7.11.4 The most important job in selecting software is to license a product that meets the organization's requirements, and a vendor whose product did not satisfy the customer's requirements probably would not be kept in play during the final negotiations just for leverage. Keating, 6/10/04, 897:2-21. 2.7.11.5 Vendors cannot provide detailed pricing until after they understand the customer's specific requirements. P3036, Knowles dep., 12/3/03, 185:1-185:18. 2.7.11.6 A customer will negotiate with two to three vendors on price. Knowles, 6/23/04, 2848:25-2849:6. 2.7.11.7 The first price quoted to a prospective customer will be fairly close to list price. P3036, Knowles dep., 12/3/03, 190:9-191:2. 2.7.11.8 Oracle is often told that there is another competitor's price that they must beat in order to win a deal. P3009, Block dep., 12/16/03, 216: 3-14. 2.7.12 Maintenance & Enhancements
2.7.12.1.2 The statement "software doesn't wear out" is misleading. Vendors of high function software must continually develop the software to meet the changing needs of customers and to ensure that the software is compliant with legal requirements. Knowles, 6/23/04, 2919:22-2920:16; see also P3150, at 1 (no Bates). 2.7.12.1.3 Technology is not static and customers depend on upgrades. Cichanowicz, 6/14/04, 1122:05-24; access to upgrades in software is very important for customers. Cichanowicz, 6/14/04, 1075:12-21. 2.7.12.1.4 Oracle sets maintenance fees as a percentage of the customer's net (discounted) license fee. P3192, Block dep., 1/05/04, 445:11-21. 2.7.12.1.5 Oracle's fee for maintenance is 22% of the license price. P3349, Catz dep., 6/25/04, 3506:04-08. 2.7.12.1.6 High-function software is usually purchased with a maintenance contract from the software vendor, often for 5 years for 15-20% of the purchase (license) price annually. Support, updates, and enhancements are included. Elzinga, 6/18/04, 2395:3-2397:9. 2.7.12.1.7 Maintenance fees are typically calculated as a percentage of the list price of the new software product. The fees ranges between 15-25% depending upon what a company can negotiate. Maintenance contract typically need to be negotiated every 3-4 years. Gorriz, 06/15/04, 1385:6-24. 2.7.12.1.8 It is extremely rare for a customer or a third party vendor to maintain high function software, for example SAP provides maintenance to well over 90% of its customers. P3037, Knowles dep., 5/3/04, 130:3-130:15. 2.7.12.1.9 At the time of licensing a maintenance contract is also initiated. The maintenance fee is based on a percentage of the license fee. The maintenance contract provides the customer with three things: 'hot line support,' basically question answering on the application, updates to the application software, and enhancements or upgrades. Wilmington, 6/16/04, 1776:3-19. 2.7.12.1.10 'Hot line support' is necessary when there is a problem such as a 'bug' in an application. A customer calls into the Peoplesoft support analyst who fixes the problem and sends the product fix to the customer. Wilmington, 6/16/04, 1776:20-1777:3. 2.7.12.1.11 'Updates' are changes to an application that Peoplesoft sends to a customer and usually address changes in regulatory reporting, for example, changes in W-2 processing. Wilmington, 6/16/04, 1777:4-13. 2.7.12.1.12 'Upgrades' or 'enhancements' are more significant changes where Peoplesoft provides a customer with increased functionality or changes in technology to a product. An example would be where Peoplesoft upgraded from release 7 to release 8 and changed the technology base from client server to internet enabled. Wilmington, 6/16/04, 1777:14-25. 2.7.12.1.13 Maintenance contracts do not guarantee a certain level or amount of upgrades or updates but Peoplesoft is inventive and driven to provide a high level of service to meet customer demands. Wilmington, 6/16/04, 1778:1-7. 2.7.12.1.14 Enhancements and upgrades are very important to customers. When a customer licenses an application Peoplesoft takes over responsibility for the application's development and enhancement, and for making sure it keeps pace with the needs of the industry in which the customer operates. This relationship drives the references a customer will give to other customers looking to license a Peoplesoft product. Wilmington, 6/16/04, 1778:8-1779:5. 2.7.12.1.15 Virtually all High-function software customers take and maintain maintenance contracts. Wilmington, 6/16/04, 1779:8-1780:1. 2.7.13 The investment in a new enterprise software application is significant. Bullock, 6/7/2004, 202:6-202:9. Typically in the range of multiple millions of dollars. Maxwell, 6/9/04, 676:10-13 ($1.9 million for New Mexico); Exhibit P4035, "Analysis of Vendor Proposals for New Financial Systems"($14.96 million for MetroNorth); Cichanowicz, 6/14/04, 1121:11-17 ($8 million for Nextel's license). 2.7.14 Customers purchase High-function enterprise software because of the benefits that they receive from the software in supporting mission critical functions. High-function enterprise software is mission critical, failed or delayed implementation would have grave economic consequences. P3037, Knowles dep., 5/3/04, 120:3-121:16.
2.7.14.1.2 Ford's objective is to simplify its business processes by implementing PS HRMS software throughout the company as quickly as resources permit, and reducing the number of multiple systems Ford uses. P3041, Patel dep., 6/03/04, 54:25-55:5. 2.7.14.1.3 KMG concluded that its new Human Resources Information System ("HRIS") would provide numerous company benefits and efficiencies. Its new system would enable it to effectively manage its global workforce, eliminate certain outsourcing, automate tasks that were previously performed manually, eliminate the need to run and support duplicate systems in multiple locations, assist employees and managers via self-service, and employ a vendor-supported system which would benefit from upgrades reflecting HR best practices. P0095R, at Kerr McGee013. 2.7.14.1.4 KMG estimated that the complete implementation of its PS HRMS software would save it in excess of $4 million per year. P0095R, at Kerr McGee022. 2.7.14.1.5 Enterprise customers want to standardize and consolidate their enterprise software applications in order to save costs. P3191, Block dep., 12/16/04, 98:8-15. 2.7.14.2 Between 90 and 95% of Tier One, Fortune 2000, or Public Service organizations that begin the process of selecting a Tier One software solution will ultimately license software because they need to meet certain reporting requirements, they want to realize economies, or they want to employ management reporting to run their business. Keating, 6/10/04, 930:2-9. 2.7.14.3 Oracle witness Harris testified that financial management software was mission critical to the companies where he worked as CIO (Gap, Nike, and divisions of Pepsico). Harris, 6/24/04, 3207:23-25, 3208:1-5. 2.7.14.4 "[We could not operate the company without these kind of systems [HRM and FMS software]. Bradley, 6/9/04, 597:22-598:3. 2.7.14.5 Oracle witness Harris testified that financial management software was mission critical to the companies where he worked as CIO (Gap, Nike, and divisions of Pepsico). Harris 6/24/04, 3207:23-25, 3208:1-5. 2.7.14.6 [REDACTED TEXT] 2.7.15 Total cost of ownership for High-function software consists of the license fee for the application, the maintenance fee, the cost to implement the software, and the cost to have ongoing support to run the application. Wilmington, 6/16/04, 1774:10-1775:1; P3050, Render dep., 5/11/04, 78:14:22.
2.7.15.1.2 For license and maintenance fees in the sale of high function software, PeopleSoft competes with Oracle and SAP. Wilmington, 6/16/04, 1781:22-25. 2.7.15.2 Implementation includes business consulting to match software and business processes, installation, set-up, and configuration. P3191, Block dep., 12/16/03, 18:9-19:7; Wilmington, 6/16/04, 1780:6-18.
2.7.15.2.2 In the up-market, implementing the product can take from six to 12 month or longer. There are thousands of 'tables' or menus of choices in the software that an implementation team must choose from to configure the software to a customer's business processes. Implementation is much more detailed than just flipping switches on and off. Wilmington, 6/16/04, 1780:2-1781:18. 2.7.15.2.3 Implementation services are available from the software vendors or third-parties such as Accenture. Harris, 6/24/04, 3223:8-25, 3224:1-25, 3225:1-9: 2.7.15.2.4 PeopleSoft, Oracle and SAP can implement their own software but do not compete to implement each others software. Competition for implementation comes from systems integrators such as IBM Global Services, Accenture, Bearing Point, Capgenimi Ernst & Young. Wilmington, 6/16/04, 1782:1-1783:2. 2.7.15.2.5 When Peoplesoft sells software to the up-market it also offers technical training courses for the people who will be supporting the infrastructure of the application. Oracle and SAP do not compete to offer this training on Peoplesoft's products because they lack the expertise. Wilmington, 6/16/04, 1783:3-1784:1. 2.7.15.2.6 The transaction for implementations services is a separate and distinct transaction from the license purchase and there are a different set of vendors who offer those services. Peters, 06/14.04, 1283:6-17. 2.7.15.2.7 Mr. Peters also testified that there was nothing in Emerson's license agreement that "has any linkage to the prices" Oracle charges for implementation services. Peters, 06/14/04, 1283:6-17. 2.7.15.3 The total cost of ownership can also include the cost of acquiring database software and additional computer hardware to run the application software. Wilmington, 6/16/04, 1784:2-16.
2.7.15.3.2 Oracle, PeopleSoft, and SAP do not sell the computer hardware necessary to run their application products. Wilmington, 6/16/04, 1784:13-21. 2.7.15.3.3
3.1.2 The licensing and maintenance of high-function FMS software constitutes a relevant product market. Elzinga, 6/18/04, 2149:9-2149:23. 3.1.3 High function software describes a software product that is capable of executing a wide array of business processes at a superior level of performance. Iansiti, 6/17/04, at 2035:1-17.
3.1.3.2 High function software is highly configurable (e.g., it must enable unlimited levels of organization). Johnsen, 6/16/04, 1753:9-1754:8; Iansiti, 6/17/04, 2046:19-2048:5, 2036:7-20; Bergquist, 6/8/04, 284:17-285:6, 287:9-17. 3.1.3.3 High function software is able to perform a variety of related transactions seamlessly and with a high degree of sophistication. Wesson, 6/14/04, 1135:16-1136:13; Iansiti, 6/17/04, 2039:12-2040:7. 3.1.3.4 High function software is able to provide robust functionality that allows organizations to go beyond the basics. Iansiti, 6/17/04, 2039:2-2040:7. 3.1.3.5 High function software has the capability to handle international aspect of a multi-national organizations, such as multiple currencies, multiple languages, and multiple legal regimes. P2208, at ORCL-EDOC-00244092; Bergquist, 6/9/04, 290:15-23. 3.2 Customers Consistently Identify Oracle, PeopleSoft, and SAP as the Only Vendors of HRM or FMS Software That Can Automate Complex Human Resource and Financial Management Processes.
3.2.2 Organizations that have acquired software to automate complex financial management processes identified only three commercial software alternatives that could meet their requirements: Oracle, PeopleSoft and SAP. Bradley, 6/9/04, 598:4-599:11; Gorriz, 06/15/04, 1428:14-18; Maxwell, 6/9/04, 664:25-665:3, 685:21-686:1; Cichanowicz, 6/14/04, 1066:11-17; Hatfield, 6/7/04, 96:7-12, 114:22-115:10; D8107, Anderson dep., 6/3/04, 189:15-190:6; P3041, Patel dep., 6/3/04, 90:11-16. 3.2.3 Organizations with complex requirements currently evaluating HRM and FMS software alternatives identify Oracle, PeopleSoft and SAP as the only vendors capable of meeting their requirements. Johnsen, 6/16/04, 1739:10-14. 3.2.4 Complex organizations identify Oracle, PeopleSoft and SAP as alternatives based on a number of selection criteria including functionality, industry specific experience, price and vendor viability. Maxwell, 6/9/04, 669:23-670:8; P3171, Ellison dep., 1/20/04, 45:2-46:8..
3.2.4.2 [REDACTED TEXT] 3.2.4.3 Large, complex companies only purchase software from vendors that can provide a reference from a company in the same industry. Gorriz, 6/15/04, 1375: 9-15; Bradley, 6/9/04, 600:9-602:3; P3171, Ellison dep., 1/20/04, 286:14-287:8. 3.2.4.4 High function software vendors must be able to demonstrate a level of research and development investment and spending that will ensure that the software is constantly upgraded and maintained to make certain that software improves as technology improves. Iansiti, 6/17/04, 2037:1-2038:6. 3.2.4.5 High function software vendors must have a dedicated sales force committed to understanding the requirements of large and complex organizations in different industries and can work to match the software as much as possible to the needs of the enterprise. Iansiti, 6/17/04, 2037:1-2038:6; Knowles, 6/23/04, 2903:5-2903:9. 3.2.4.6 High function software vendors must have strong support organizations. Iansiti, 6/17/04, 2037:1-2038:6. 3.2.4.7 Large, complex organizations purchase high function software from vendors with a solid financial background because they need the vendor to be around to support and enhance the product over time. Gorriz, 06/15/04, 1374:25-1375:8; Bradley, 6/9/04, 598:9-599:5. 3.2.5 Customers expect high-function software vendors to maintain and support the software over the life of the product.
3.2.5.2 Upgrading high-function software enables organizations to implement new business strategies. D8107, Anderson dep., 6/3/04, 110:15-113:14; P3189R at DOJ-DC-NOV-000020. 3.2.5.3 Through continued research and development and ongoing demands from clients, high function software is continually evolving to better meet changing customer needs. Knowles, 6/23/04, 2919:22-2920:16; P3150. 3.2.5.4 Most customers purchase a maintenance contract from the software vendor. Knowles, 6/23/04, 2918:6-7; Catz, 6/25/04, 3488:21-3490:2, at 3489:6-11. 3.2.6 Accenture, IBM Global Services, BearingPoint, Deloitte, and CGEY ("The Big 5 consulting firms") recommend Oracle, PeopleSoft, and/or SAP as alternatives for clients seeking to automate complex human resource or financial management processes. Elzinga, 6/18/04, 2184:5-2188:9.
3.2.6.2 SAP, Oracle and PeopleSoft "are the only ones that provide a product that will be acceptable to a large company in terms of product capabilities, vendor reliability, scalability, cost, handling multiple currencies, multiple calendars, and multiple charts of accounts." P0203 at 11; Keating, 6/10/04, 912:15-916:7; P3183, [REDACTED TEXT]. 3.2.6.3 Oracle, PeopleSoft, and SAP are the only vendors with global functionality that can serve organizations with worldwide operations seeking to generate reports in multiple languages and multiple currencies and satisfy international requirements. Thomas, 6/9/04 474:13-475:5; P3183,.[REDACTED TEXT]; Keating, 6/10/04, 867:15-868:6. 3.2.6.4 Organizations with 200 to 2,000 plus legal entities seeking to support the reporting requirements of those entities using a single software solution have three alternatives: Oracle, Peoplesoft, and SAP. Thomas, 6/9/04 475:18-476:3; Keating, 6/10/04, 869:8-870:5. 3.2.6.5 Organizations with multiple lines of business seeking to support those businesses with a single software solution have three alternatives: Oracle, Peoplesoft, and SAP. Thomas, 6/9/04, 476:10-15. 3.2.7 Third party consulting firms cite the product breadth and depth, marketing prowess, and geographic coverage of Oracle, PeopleSoft and SAP in characterizing those three firms as the market leaders in financial management and human resource management software. Elzinga, 6/18/04, 2183:21-2184:4.
3.2.7.2 Forrester Research's 2004 survey noted that multinational organizations are limited to Oracle, PeopleSoft and SAP because the "global features and localizations for HRMS tend to be far stronger among the big three ERP vendors." P3324, at p.8. 3.2.7.3 The META Group released a 2003 study that stated Oracle, PeopleSoft and SAP "demonstrate an ability to both define a vision/strategy for ERP [defined in the study as "a suite of enterprise business applications and at least one of the following manufacturing, supply chain, or customer relationship management"] and execute against is globally across a wide range of industries." P4352 at PS-C076279. 3.2.7.4 The Gartner Group distinguishes Oracle, PeopleSoft, and SAP HRM software from other vendors based on several criteria. Elzinga, 6/18/04, 2181:24-2183:4. 3.2.8 Customers would not have considered other vendors if Oracle, PeopleSoft, and SAP were all to increase their prices for software by 10 percent while the prices charged by other vendors were held constant. Gorriz, 06/15/04, 1381:11-1381:19; Maxwell, 6/9/04, 669:23-670:8, 686:19-24.
3.2.8.2 Customers believe a hypothetical merger of Oracle, PeopleSoft, and SAP would result in a loss of negotiating leverage, higher software license and maintenance fees and a loss in innovation. D8107, Anderson dep., 6/3/04, 148:5-22. 3.3 Oracle, Peoplesoft, and SAP Recognize That They Are Competing in a Three Firm Market to Supply High-Function Software to Organizations with Complex Requirements.
3.3.1.2 PeopleSoft, Oracle, and SAP continue to compete after the initial software license because otherwise they risk losing the customer to one of the other two vendors. Wilmington, 6/17/04, 1948:16-1949:6.
3.3.1.2.2 All three firms work to lower the total cost of ownership. Wilmington, 6/17/04, 1948:16-1949:6. 3.3.1.2.3 All three firms work to make sure the customer would be willing to be a reference for other clients. Wilmington, 6/17/04, 1948:16-1949:6. 3.3.1.3 Oracle, PeopleSoft and SAP respond to one another's product announcements and compete to bring new products to the market. P4933. 3.3.2 Oracle's executives recognize they compete with SAP and PeopleSoft to sell software to organizations with complex human resource and financial management requirements.
3.3.2.2 Oracle's Chief Executive Officer Larry Ellison identifies SAP and PeopleSoft as Oracle's biggest competitors for ERP application software. P3171, Ellison dep., 1/20/04, 164:8-165:7.
3.3.2.2.2 Mr. Ellison identifies PeopleSoft and SAP as its most frequent competitors for human resources software opportunities in the United States and worldwide. P3171, Ellison dep., 1/20/04, 184:11-16. 3.3.2.3 Oracle's primary competitors for selling HRM software to federal agencies are PeopleSoft and SAP. P3059, Johnson dep., 1/5/04, 254:19-255:4.
3.3.3 Oracle's annual reports filed prior to its offer for PeopleSoft consistently identify PeopleSoft and SAP as Oracle's primary competitors in the ERP applications software market. P2048 at 9, P2049 at 9, P2050 at 9.
3.3.3.2 Mr. Ellison does not believe the ERP applications market suddenly fragmented between the time Oracle filed its fiscal year 2002 annual report and the time it filed its fiscal year 2003 annual report. P3171, Ellison dep., 01/20/04, 247:1-248:18. 3.3.4 Oracle win-loss customer survey data consistently identify PeopleSoft as Oracle's most frequent competitor in larger accounts. Elzinga, 6/18/04, 2188:21-2189:18; [RED.]; P2093 at ORCL-EDOC-00042675; P2132 at ORCL-EDOC-00054306; P3192, Block dep., 1/5/04, 509:11-510:8; P2090 at ORCL-EDOC-00038647. 3.3.5 Oracle's Discount Approval Forms reveal that Oracle discounts most aggressively when competing against PeopleSoft and SAP. Elzinga, 6/18/04, 2176:9-2177:2; 2179:5-14; P3175; P4015A; P4015B.
3.3.5.2 "Oracle is in a very competitive competition with PeopleSoft (& SAP) for the Crane Global HR Project. Past history competing with SAP & PeopleSoft indicates the need to discount at the levels above to win the business." Cran Company Discount Approval Form. P1114 at ORCL-EDOC-00511095. 3.3.6 IBM's Senior Vice President of Software Steve Mills believes large or complex organizations will have three choices to automate their complex human resource or financial management processes: Oracle, PeopleSoft and SAP.
3.3.6.2 "And one area that we've seen a lot of activity around for trying to choose from a limited number of choices has been in the ERP space, accounting, ledger, basic bookkeeping, human resources tracking, common core applications.... Again, as we were talking about, the larger-size businesses are looking for sophisticated packages that have a lot of function that can match scalability. If you have thousands or even tens of thousands employees, any old accounting package is not going to do. It has to match the nature of your business, and the three dominant providers of that technology in the market today are SAP, PeopleSoft and Oracle." P3193, Mills dep., 5/27/04, 128:5-129:25. 3.4 Organizations with Complex Human Resource or Financial Management Requirements Do Not View "Mid-Market" HRM or FMS Software Applications as a Substitute for the High-Function Software Sold by Oracle, PeopleSoft, and SAP.
3.4.1.2 Large or complex organizations tend to require a more sophisticated and complicated business application software than do smaller organizations. Hausman, 6/29/04 4057:11-4059:4; Wilmington, 6/17/04, 1849:16-19. 3.4.1.3 "Mid-market" software does not offer one or more of the following dimensions: breadth and depth of functionality; global functionality; industry specific expertise; scalability and reliability; and technology. Bergquist, 6/8/04 277:22-278:3. 3.4.1.4 The software sold by Oracle to large organizations is not an "out-of-the-box" product. P3009, Block dep., 12/16/03, 125:5-125:13. 3.4.1.5 Oracle's documents distinguish high-function software from mid-market software. Elzinga 6/18/04, 2190:2-12. 3.4.1.6 Large organizations may license and use mid-market software solutions for use at the division level. Wilmington, 6/17/04, 1972:20-1973:1.
3.4.1.6.2 Divisions operated as a stand-alone profit center, might find a mid-market solution viable. Wilmington, 6/17/04, 1973:2-1973:5. 3.4.2 There are number of commercially available HRM and FMS software solutions for small and medium sized organizations.
3.4.2.2 "Off-the-shelf business software describes HRM or FMS software designed to be used as delivered, without any business transformation or specialized design or tailoring of the software to the client's business requirements. [REDACTED TEXT]. 3.4.2.3 "Out-of-the-box" software is quicker and cheaper to implement than high function software because the system is pre-configured and the customer does not have the ability to make as many choices. P3009, Block dep., 12/16/03, 126:9-127:14. 3.4.3 "Mid-market" organizations do not have the same characteristics or functional needs as complex organizations. P2061 at ORCL-BLOK-002-001091; P3032, Henley dep., 5/4/04, 100:24-101:20.
3.4.3.2 Mid-market organizations typically process fewer transactions, have fewer employees, smaller IT budgets and typically have less sophisticated requirements than large organizations. P3032, Henley dep., 5/4/04, 112:25-114:05; P4492 at SAP-DOJ002509. 3.4.3.3 Mid-market organizations do not need necessarily need the depth and breadth of functionality or the global functionality available in high-function software. Wilmington, 6/17/04, 1971:18-1972:4; P3036, Knowles dep. 12/3/03, 46:7-47:15.
3.4.3.3.2 Some mid-market |