REDWOOD SHORES, Calif.— Oracle Corp.'s buyout of PeopleSoft Inc. created a big splash in the software industry at large, but some analysts believe the merger will create little more than a ripple in the $5 billion supply chain software market.

In December Oracle, known for its financial and database software, won its 18-month fight to buy PeopleSoft by raising the acquisition price to $10.3 billion. Oracle launched its hostile takeover bid just after PeopleSoft announced that it had bought software vendor J.D. Edwards & Co. PeopleSoft made its reputation in human resources and financial reporting applications, while J.D. Edwards was active in the supply chain software market.

Although so-called "best-of-breed" vendors have developed the execution programs commonly used in logistics, such as warehouse management systems (WMS) and transportation management systems (TMS), large business software vendors have entered the supply chain market in recent years. Prior to its bid for PeopleSoft, for instance, Oracle had begun to develop its own supply chain execution and planning applications. Now it can offer those solutions as well as those from J.D. Edwards.

ARC Advisory Group analyst Adrian Gonzalez, who directs the research firm's Logistics Executive Council, believes that in the short term, Oracle will continue to support both its own supply chain software offerings as well as those originally developed by J.D. Edwards.

But that won't last long, he predicts. "Everyone foresees Oracle merging these solutions into a common platform one or two years down the road," Gonzalez says.

Yet the Oracle-PeopleSoft combination may not be a significant threat to the top vendors of best-of-breed applications in the supply chain software market, predicts one veteran industry observer.

"I don't see the best-of-breed vendors getting much competition from [the Oracle-PeopleSoft combination]," says Richard D. Armstrong, who publishes a guide to supply chain software. Other global software giants have tried to do the same but are far from dominating the supply chain field, he observes. "SAP and IBM, for all their chatter, have been unable to come up with anything. Most people are staying with standard WMS packages from folks like RedPrairie and Manhattan."

Gonzalez also believes the best-of-breeds aren't in danger. "This merger does not change the landscape on the supply chain execution side," he says. "It will have more of an impact on demand and supply chain planning."

News Capsule