Interview: JD Edwards chief Bob Dutkowsky

Eighteen months ago, not long after he was recruited to turn around the application software supplier JD Edwards, chief executive Bob Dutkowsky was having dinner with the company's founder and his predecessor, Ed McVaney.

"Ed shook his knife at me and said: 'Don't you go selling my company,'" Dutkowsky told vnunet.com's sister title Computing in an exclusive interview at the supplier's Quest user conference in Denver last week.

The advice was ignored earlier this month as JD Edwards announced its plans to merge with rival PeopleSoft in a $1.7bn (£1bn) deal.

Dutkowsky and his PeopleSoft counterpart, Craig Conway, had been discussing the merger for eight months.

For the last six weeks, Dutkowsky said that he was regularly surviving on two hours' sleep a night as the fine details were thrashed out, ready for him to sell the deal to his customers at Quest.

Then, on the Friday morning before the conference, just four days after the merger was announced, came a bombshell.

"I was in Boston where my son was graduating from high school" he said. "It was seven in the morning and I was with a bunch of other fathers and sons when someone saw PeopleSoft come up on the TV and said: 'Hey Bob, isn't that the company you're merging with?'."

The news of Oracle's $5bn (£3bn) hostile takeover bid was a surprise. "I thought it was a joke," said Dutkowsky.

After hurried phone calls to wake his senior executives in Denver, they contacted the top brass at PeopleSoft - who were equally stunned - and decided to press on regardless.

The rival plans have a long way to go before the outcome is clear and JD Edwards' future is finally resolved.

Last week, PeopleSoft formally rejected the unwanted takeover, and JD Edwards started legal action against Oracle and its chief executive Larry Ellison to prevent the offer from proceeding.

The suit claims that Oracle has "tortuously interfered" with the proposed merger with PeopleSoft. A separate suit alleges that Ellison and executive vice president Chuck Phillips have engaged in "wrongful conduct and unfair business practices".

"We will not sit idly by while Oracle pursues this arrogant, unlawful and destructive course of action," said Dutkowsky.

His frustration at Oracle's aggressive move is understandable. He was recruited when JD Edwards was in trouble - losing money in a market adjusting to post-dotcom realities and slowing growth.

Industry consolidation was inevitable, although Dutkowsky insists that a merger wasn't originally on his mind.

"I was never recruited to sell the company, and I never thought this would be the end game, never in my wildest dreams," he said.

"The board recruited me to take JD Edwards to the next level; that was my charter. We tightened up execution, made the company profitable again, and started the engines running again.

"But to take it to the next level we realised that we had to aggressively get bigger, faster. Big wins in this market. That would be harder for us to do organically, so that led us to some strategic planning. And that led to PeopleSoft."

Dutkowsky explained that 20 different scenarios were evaluated, covering other mergers, acquisition of smaller rivals or organic growth.

"We were never for sale," he said. "At the same time, PeopleSoft was doing the same thing, and homed in on us as an acquisition. I think Craig called me first and we agreed to meet. He was flying cross-country and stopped at Denver.

"The thing that struck both of us was that we were finishing each other's sentences. One conversation led to another and then we talked merger."

The outcome of the battle for PeopleSoft's future could be a turning point for the much-anticipated consolidation of the IT sector.

Hostile takeovers are rare in the industry, and rarely successful. But Oracle's move raises an important question: are shareholders more important than customers?

Oracle's move will appeal to its shareholders, but an online poll by analyst Meta Group suggests that two-thirds of respondents believe that a successful Oracle takeover would be unfavourable for PeopleSoft users.

"Despite what Oracle may say, migrating from PeopleSoft to Oracle would require about 80 per cent of the work and effort of a wholly new installation," said a Meta report.

Ellison, of course, disagrees, calling the merger with JD Edwards a "risky undertaking" for PeopleSoft shareholders.

Dutkowsky has previous experience of large-scale technology acquisitions. He was at EMC when it bought Data General in 1999, and was chief executive of US supplier GenRad when it was acquired by Teradyne in 2001.

He explained that IT mergers fail for one of two reasons: incompatible technologies or incompatible cultures.

"That's the smartest thing Larry Ellison is saying: if I buy PeopleSoft I'm shutting the technology down because it doesn't fit. But that disenfranchises a whole bunch of customers," said Dutkowsky.

He believes that cultural differences undermine Oracle's plan. "They are both Silicon Valley companies competing with each other for years, and they hate each other," he said.

"Are people suddenly are going to say: 'I love you, you're my best friend'? It's not going to happen."

Dutkowsky suggested that JD Edwards' future is secure even if it fails to merge with PeopleSoft.

"We don't want to see it turn out that way, but let's pretend Oracle/PeopleSoft does happen," he said. "It still creates an upside for JD Edwards, because those disenfranchised PeopleSoft customers are not going to flock to Oracle like lemmings."

But Dutkowsky is determined that his efforts will not be in vain. "The merger with PeopleSoft is in the best interest of our customers," he explained.

"It's been well thought out, well planned and well executed. It's fair for our shareholders and both firms. The biggest validation that it makes sense is that Oracle is trying to stop it."