DoJ witnesses say competition is limited

In testimony yesterday on Oracle's hostile bid for PeopleSoft , two Department of Justice witnesses said they didn't consider outsourcing or building their own human resources and financials management software, bolstering the government's case that competition is limited to the big three.

The Justice Department is trying to block Oracle from acquiring rival PeopleSoft, arguing that the merger would leave only German firm SAP as a significant competitor with Oracle in the market for business management applications.

In the second week of the trial, Richard Cichanowicz, vice president of business systems integration at wireless provider Nextel Communications, said his firm began to explore consolidating the company's business applications needs with one vendor during mid-2002 rather than continue using PeopleSoft for human resources, Oracle for financial management and Ariba for supply chain software.

"We started to talk to consulting firms about wanting something scalable that would lower our operations costs, and the consultants said we needed to think of an 'end-to-end' solution," he said. Upgrading PeopleSoft, Oracle and Ariba software was not viewed as a favorable option, given the continual upgrade costs.

Nextel also decided against outsourcing, because it wanted its own people to handle human resource matters and financial information, due to privacy concerns. And building its own software was too costly, Cichanowicz said.

He said Nextel selected PeopleSoft but continued to negotiate with Oracle as a fallback until the contract was signed in December 2002.

Oracle, in its cross-examination, presented an email from a PeopleSoft sales representative commenting that Nextel was interested in being a cell phone provider to the software company. "[Nextel] has said they will sign with us when we sign with them," according to the email.

A surprised Cichanowicz said being shown that email in court was the first he had heard about such a deal.

PeopleSoft spokesman Steve Swasey later told reporters outside the courtroom that the company does not do business in a "quid pro quo" fashion.

Presiding Judge Vaughn Walker peppered Cichanowicz with questions, ranging from the meaning of integrated solutions to what Nextel received from PeopleSoft when it cut its check for the contract.

Nextel spent $8 million for its software license, which did not include maintenance or support costs, Cichanowicz responded.

The Justice Department's second witness, Scott Wesson, chief information officer of apartment owner and operator AIMCO, said software from another competitor, Lawson Software, did not serve its needs and that the only other choices were PeopleSoft, Oracle and SAP. Oracle contended that AIMCO did not spend a lot of time evaluating potential vendors before narrowing it down.

Other witnesses scheduled to testify on Monday were Charles Peters, a senior executive vice president at Emerson Electric, and Curtis Wolfe, chief information officer of the State of North Dakota.

Over the next two weeks, the Justice Department is scheduled to call other big PeopleSoft customers and economists to the witness stand. Oracle then will make its case, with the trial expected to conclude in early July.

Dawn Kawamoto writes for CNET News.com