Download driver 7.3.4.28

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. Background
2. Product and Industry Characteristics
3. Product Market

	Definitions
	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
	Oracle, Peoplesoft, and SAP Recognize That They Are Competing in a Three Firm Market to Supply High-Function Software to Organizations with Complex Requirements
	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
	SAP, PeopleSoft, and Oracle Also Compete in the Market for Small Business and Mid-Market Accounts
	Customers Would Not Switch to a "Best of Breed" Solution (Or "Point Solution") in Response to a Small, but Significant, Nontransitory Price Increase in High Function FMS or HRM Software Because These Solutions Lack the Functionality Required by High-function Software and Are Costlier to Implement and Maintain
	Customers Would Not Develop FMS or HRM Software in Response to a Small, but Significant, Nontransitory Price Increase in High Function FMS or HRM Software
	Customers' Threats of Using Their Incumbent HRM or FMS Software Would Not Prevent a Significant Price Increase in High Function FMS or HRM Software
	Large and Complex Customers Would Not Outsource in Response to a Small, but Significant, Non-Transitory Price Increase in High Function HRM Software
	Outsourcing Vendors Using Their Own Proprietary Software Do Not Compete with Oracle, PeopleSoft, and SAP for Organizations with Complex HR Requirements
	All the Theoretically Available Options (Listed Above) to High Function Software, Taken Together, Would Not Make a SSNIP in High Function Software Unprofitable

4. Geographic Market
5. Firms in the Market

	Oracle, PeopleSoft, and Sap Are in a Different Class from All Other Vendors of Enterprise Resource Planning Software in Their Ability to Meet the Needs of Large and Complex Enterprises
	Expert Testimony Confirms That Oracle, PeopleSoft and Sap Are the Three Rivals That Determine Pricing in the Relevant Markets
	Oracle, Peoplesoft, and SAP Primarily View Each Other as Competitors for the Sale of High-function Software
	Other Firms are Not in the Market
	Lawson Lacks Functional and Vendor Characteristics to Serve as a Competitive Restraint in the High Function Software Market
	Lawson Counts Several Large Organizations as Customers but a Number of Those Organizations Are Moving off Lawson Having Made the Decision to Acquire High Function Software from Oracle, Peoplesoft and SAP
	Lawson Products Have Problems When Used by Large or Complex Customers
	SSA/Baan is a Mid-Market Firm and Not a Seller of High- Function Software
	Microsoft is a seller of software for the mid-market (and smaller firms), not high function software for large and complex enterprises
	Oracle, PeopleSoft and SAP View Microsoft as Solely a Small to Mid-Market Competitor
	Customers Do Not Believe Microsoft Provides High Function Software
	Microsoft Does Not Provide Customers With High-Function Software
	AMS is a Supplier of FMS Software Solely Tailored for the Public Section
	Hyperion's Software is Complementary, Not Competitive, to Oracle
	IBM Is Not a Participant in the Market

6. Market Concentration
7. Anticompetitive Effects - Concentration and Likely Consumer Harm. The Merger of Oracle and PeopleSoft May Tend to Lessen Competition Substantially
8. Anticompetitive Effects -- Entry/Repositioning
9. Anticompetitive Effects - Efficiencies. Oracle Cannot Demonstrate That Verifiable, Merger-Specific Efficiencies Will Reverse the Anticompetitive Effects of the Merger
10. Oracle's "Stack" or "Infrastructure Layer" Arguments Do Not Alter the Antitrust Analysis of the Proposed Acquisition or Mitigate Its Anticompetitive Impact in the Relevant Markets
11. Many of the Opinions Offered by Oracle's Expert Witnesses Are Unfounded, Contradicted by Other Oracle Witnesses or the Trial Record, or Otherwise Not Credible

Appendix

1 Background.

Oracle Corporation
Oracle is a Delaware corporation with its principal place of business in Redwood City, California. Oracle's Answer, at Allegation 7; Joint Stipulations of Fact, at ¶ 1.

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,

In , Oracle earned over $9 billion in revenues, including over $2 billion of revenues related to enterprise software applications. Oracle's Answer, at Allegation 7.

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,

The E-Business Suite is a fully integrated suite of more than 70 software modules for financial management, Internet procurement, business intelligence, supply chain management, manufacturing, project systems, human resources and sales and 16 service management. P, at xiv.

As of December , Oracle had over customers live on its E- Business Suite, Release Hi. P, at ORUT-EDOC

Oracle's Release Hi and its E-Business Suite are the same products. P, Godwin dep., 1/20/04,

Oracle Sells High Function HRM and FMS Software. Iansiti, 6/17/04, ; See infra.

High function software is capable of executing a wide array of business processes at a superior level of performance. Iansiti, 6/17/04, ; See infra.

High function software is scalable. See infra.

High function software is configurable. See infra.

High function software must be able to perform a variety of related transactions seamlessly. See infra.

High function software must be able to handle international aspects of an enterprise: multiple languages, multiple currencies, multiple legal regimes. See infra.

High function software must be able to handle the acquisition of new enterprises and the reorganization of existing ones. See infra.

High function software must be able to consolidate information across multiple divisions or organizations. See infra.

PeopleSoft, Inc.

PeopleSoft is a Delaware corporation with its principal place of business in Pleasanton, California. Oracle's Answer, at Allegation 8; Joint Stipulations of Fact, at ¶ 7.

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.

PeopleSoft earned over $2 billion in revenues in , comprised entirely of enterprise software applications-related revenue. Oracle's Answer, at Allegation 8.

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 ¶

PeopleSoft sells application software that runs commercial and governmental enterprises, whether large, complex enterprises or those in the middle market. Bergquist, 6/08/04,

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,

PeopleSoft was formed in the late 's to develop an HR product for large and complex customers. Bergquist, 6/08/04,

This focus on the needs of large and complex customers affected the way PeopleSoft designed its human resources product: it had to be highly functional, had to scale well, had to support multiple industries, and had to have a global orientation. Bergquist, 6/08/04,

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,

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, ;

Oracle regards PeopleSoft as a Tier One competitor for ERP software, including FMS and HRM enterprise software. P, Block dep., 1/05/04,

Tier One is another term for high function software. Elzinga, 6/18/04,

PeopleSoft sells high function HRM and FMS software. Iansiti, 6/17/04, ; See infra.

High function software is capable of executing a wide array of business processes at a superior level of performance. Iansiti, 6/17/04, ; See infra.

High function software is scalable. See infra.

High function software is configurable. See infra.

High function software is able to perform a variety of related transactions seamlessly. See infra.

High function software is able to handle international aspects of an enterprise: multiple languages, multiple currencies, multiple legal regimes. See infra.

High function software is able to handle the acquisition of new enterprises and the reorganization of existing ones. See infra.

High function software is able to consolidate information across multiple divisions or organizations. See infra.

Oracle's Unsolicited Offer for Peoplesoft

Oracle's unsolicited $16 per share cash tender offer for PeopleSoft was announced on June 6, P, Ellison dep., 1/20/04, (referencing P (Oracle's Form 8-K including Oracle press release)).

Pursuant to its public tender offer, Oracle plans to purchase PeopleSoft. Oracle's Answer, at Allegation 38; Joint Stipulations of Fact, at ¶ 9.

Oracle CEO Lawrence Ellison decided to initiate a tender offer for PeopleSoft the morning he learned of PeopleSoft's acquisition of J.D. Edwards. Ellison, 6/30/04, ; see also P at ORCL-EDOC

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, ; P at ORCL-EDOC (stating "Now would be the time to launch on PSFT").

Oracle had considered acquiring J.D. Edwards in April, P at 26; P, Henley dep., 5/4/04, ;

Oracle's reasons for launching the hostile tender offer included disrupting PeopleSoft's acquisition of J.D. Edwards and winning competitions against PeopleSoft.

Ellison launched the tender offer the morning he heard about PeopleSoft's deal with J.D. Edwards. Ellison, 6/30/04, ; see also P at ORCL-EDOC

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, , see also P

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." P at CSFB

Oracle's Plans Post-Merger

Oracle is not pursuing PeopleSoft in order to acquire PeopleSoft's technology. Ellison, 6/30/04, ;

Oracle will not be actively selling PeopleSoft products to new customers but will provide some support for all PeopleSoft products. P, Ellison dep., 1/20/04, (referencing P (Oracle's Form 8-K including Oracle press release)); Ellison, 6/30/04,

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. P, Ellison dep., 1/20/04, ; Catz, 6/25/04,

After acquiring PeopleSoft, Oracle will not develop future generations of PeopleSoft software. Catz, 6/25/04,

Oracle has no plans to integrate the PeopleSoft and Oracle product lines. Ellison, 6/30/04, ; see also P at 5.

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,

PeopleSoft difficulties resulting from Oracle's tender offer

Oracle believes that Oracle's hostile takeover bid for PeopleSoft will make customers reluctant to purchase its software products that will be discontinued post- merger. P, Block dep., 1/5/04,

Oracle has used the pendency of the PeopleSoft deal to hurt PeopleSoft's business and win accounts from PeopleSoft. Ellison, 6/30/04, ; P at ORCL-EDOC

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,

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, , at

Jurisdictional Requirements

Oracle sells its products throughout the United States and such sales in the United States, and in each of the Plaintiff States, represent a regular, continuous and substantial flow of interstate commerce, and have had a substantial effect upon interstate commerce as well as commerce with and in each of the Plaintiff States. Oracle's Answer, at Allegation 4; Joint Stipulations of Fact, at ¶¶

Oracle transacts business and is found within the Northern District of California. Oracle's Answer, at Allegation 5; Joint Stipulations of Fact, at ¶ 6.

Witnesses

Appendix A contains information on some of the witnesses relied upon by the parties during the trial.

Product and Industry Definitions

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, ¶

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.

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.

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.

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.

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.

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.

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.

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, ¶

Module: A module is software designed to automate one or more functions. Joint Submission of Definitions, ¶

"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, ; Wilmington, 6/16/04, ; Iansiti, 6/18/04,

In today's global economy, the ability to reduce the costs inherent in running an organization is vital to an organization's success. Most organizations (including corporations, federal, state, and local government agencies, and non-profit organizations) therefore automate their financial management and human resource functions in search of operational efficiencies. Oracle's Answer, at Response to Allegation 9; Joint Stipulations of Fact, at ¶

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

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]

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,

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,

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,

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,

A sophisticated product can provide enhanced functionality and an ability to streamline all Human Resources, benefits and payroll business processes. [REDACTED TEXT]

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]

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,

"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, Thus,"high-function" software must have at least the following advanced performance capabilities, not all of which each user may demand:

Scalability. The Software must Be Scalable, Such That it Can Track Thousands of Transactions and Support Thousands of Concurrent Users.See, E.g., Burgum, 6/23/04, Bergquist, 6/8/04, ; Johnsen, 6/16/04,
High-function software generally permits the customer to establish unlimited distinct units and employees within each unit that can share data seamlessly and can be moved -- or reconfigured -- easily (such as with a click and a drag) without causing the loss of historical data. In contrast, the Lawson products permit only 5 levels of organization in FMS and only 3 in HRM and do not enable extensive data sharing across entities. Iansiti, 6/17/04,

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,

Enterprise software must meet more demanding scalability and reliability requirements than those required of mid-market software. Bergquist, 6/8/04,

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,

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, 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,

SAP's high function software can handle 47, concurrent users and give a response time of less than two seconds. P, Knowles dep., 12/3/02,

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, ; Iansiti, 6/17/04, , ; Bergquist, 6/8/04, ,

Configuration is built into the software and allows for a user to select between various options without rewriting code or merely accepting a standardized version of software that does not fit its specific business practices. Iansiti, 6/17/04,

Configuration or tailoring is defining values in data that indicate how software should behave for a specific business practice. P, Godwin dep., 1/20/04,

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. P at ORLITF

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. P, Godwin dep., 1/20/04,

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,

"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,

Customization or modifications involves changing the software code and are not supported by the vendor. P at ORLITF









[REDACTED TEXT]



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,

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. P, Godwin dep., 1/20/04,

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. P, Godwin dep., 1/20/04,

The flexibility of the application is also an important distinction between up-market and mid-market vendors. Bergquist, 6/8/04,

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,

Software flexibility in this sense is the result of the vendor building in "configurability" options. Bergquist, 6/8/04,

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, ;

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. P, Henley dep., 5/4/04,

Organizations handle transactions differently depending on the industry and business model, these differences should be reflected in the software. P, Knowles dep., 5/3/04,

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. P, Ellison dep., 1/20/04, ; P, Godwin dep., 1/20/04,

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." P, Knowles dep., 5/3/04,

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,

Integration: high-function software is sold in integrated suites, which offers many benefits including lower TCO. An integrated suite has a lower TCO because the customer does not have to pay to revise the interface between pillars when a new version or upgrade is released. P, Kender dep., 5/11/04,

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,

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. P, Godwin dep., 1/20/04,

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,

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,

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, 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, Verizon's FMS must be able to quickly adopt to Verizon's frequent corporate reorganizations. Bradley, 6/9/04,

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. P, at ORLIT-EDOC

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 P at ORCL-EDOC 95; ORCL-EDOC; see also Bergquist, 6/8/04,

In order to have broad multi-language support, a vendor must have a Unicode character set, which allows for applications to be written in both Western and Eastern characters. P, Godwin dep., 1/20/04,

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. P, Godwin dep., 1/20/04,

"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." P at ORLIT-EDOC

Multiple language support must be developed by the vendor so that international users can interact with the software in their native language. P, Knowles dep., 12/3/02,

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,

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. P at ORLIT-EDOC- ; P at Appendix, p. 2.

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. P, Knowles dep., 12/3/03,

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,

Mid-market vendors lack the geographic scope required by many up-market firms. Bergquist, 6/8/04,

Software must account for the differences in reporting certain information from country to country. P, Knowles dep., 12/3/02,

Acquisitions and Reorganizations. Software must Be Flexible and Able to Accommodate Rapid Growth, Acquisitions and Reorganizations.

High-function software captures data and can use it to model the organization for purposes of forecasting and reorganization. Iansiti, 6/17/04,

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,

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 organizationIf you create a new organization, you can still access your historical transactions by logging to the responsibility tied to the disabled organization." P at

Verizon, for example, has 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,

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,

High function software can be set up so that it reflects an actual unit of business, rather than a textbook example, and link the data so that it is useful. Iansiti, 6/17/04,

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,

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,

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." P, at ORLIT-EDOC

Oracle's software applications allow customers to separately track and report multiple organizations within a single application. P, Godwin dep., 1/20/04,

Large, complex organizations typically have multiple legal entities, ranging anywhere from maybe to Thomas, 6/9/04,

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, ; P, Godwin dep., 1/20/04,

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. P, Godwin dep., 1/20/04,

Characteristics of Vendors of High-Function Software Are Important to Purchasers of High-Function Software.

Reference Customers: References from Similarly Situated Customers Are Used by Enterprise Software Vendors in Marketing FMS and HRM Solutions. Oracle's Answer, at Response to Allegation 17; Joint Stipulations of Fact, at ¶
Enterprise software vendors compete to secure references from large enterprises. Oracle's Answer, at Response to Allegation

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,

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, ;

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,

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,

Customers look at functionality, credibility, reputation, and ability to sustain a long-term relationship. P, Ellison dep., 1/20/04,

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. P, Ellison dep., 1/20/04,

Research and Development by a Vendor Is Critical to Purchasers of 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, 16 6/17/04,

Oracle has R&D personnel worldwide working on enhancements to the 11i E business suite applications. P, Godwin dep., 1/20/04,

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. P, Godwin dep., 1/20/04,

With the release of 11i, Oracle released new human resources and financials modules. P, Godwin dep., 1/20/04,

Since Oracle 11i applications were released in , more person years of new development have occurred than had been devoted to the development of all of Oracle applications to that point. P, Godwin dep., 1/20/04,

Vendors engage in R&D to serve their largest customers. Hausman, 6/29/04, ;

Many customers consider upgrades to the software important. Campbell, 6/22/04,

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,

Product integrity and product development is related in part to research and development spending and the stability of that investment over the long term. P, Knowles dep., 5/3/04,

Reductions in research and development spending signal the marketplace that the software vendor is no longer improving the product. P, Knowles dep., 5/3/04,

Software evolves over time, it becomes better, it can do more, and it can solve more issues. P, Knowles dep., 5/3/04,

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. P, Ellison dep., 1/20/04,

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,

Oracle went to a full web-enabled version of its products when it released the 11i product in May P, Godwin dep., 1/20/04, ;

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,

Dedicated Sales Forces Are Necessary to Assist Customers in Selecting a Product That Will Meet Their Complex Functional Requirements.

Vendors of high-function software need a dedicated sales force that understands the enterprise's needs and can work to match the software as much as possible to the needs of the enterprise. Iansiti, 6/17/04,

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,

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,

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,

Strong Support Organizations Are Needed to Provide Technical Expertise to Buyers of High-Function Software.

Enterprises require that vendors have strong support organizations. Inansiti, 6/17/04, , at

The ability to provide global support for the software is an important criterium for international organizations. P at 3.

Financial Stability of the Related Vendor Is Critical to Customers Making the Long Term Investment in High-function Software.

Purchasers of high-function software are typically concerned that the vendors they use be financially robust, "so they won't disappear after next quarter's results." Bradley, 6/9/04,

Large, complex companies like DaimlerChrysler only purchase HR software from vendors that have a solid financial background. Gorriz, 6/15/04,

the Vendors' High Function Software Is Differentiated, i.e., Not All Alike, and Different Vendors Have Different Strengths and Weaknesses.

Oracle, SAP, and Peoplesoft Perform Many of the Same Functions, but They Have Different Heritages Based on the Historic Strengths of Their Respective Products. There Are Architectural Differences Between the Products and the Products Operate Differently. Keating, 6/10/04,

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,

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, The customer had to buy the entire SAP suite. Keating, 6/10/04, 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,

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, 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,

In comparison to Oracle and PeopleSoft, SAP was tightly integrated and had closed interfaces. Keating, 6/10/04, 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, However, the gap has not been closed completely between SAP and Oracle and PeopleSoft in terms of modularity and openness. Keating, 6/10/04,

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,

SAP has unsuccessfully attempted for years to sell its software to the North American banking industry. Keating, 6/10/04, 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,

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,

CH2M Hill rejected SAP as an option because it had a reputation of being costly and complex, and it lacked reference clients in the engineering & construction industry. Bullock, 6/7/,

In certain areas like manufacturing, supply chain, and financial management, Oracle's product is more feature-rich than PeopleSoft's. P, Ellison dep., 1/20/04,

After a Review of 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,

Oracle, PeopleSoft and SAP provide a different class of software, different products, aimed at solving different requirements than other software providers. Iansiti, 6/17/04,

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. P, at ORLITF

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,

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,

Mid-Market Software

Mid-market software customers are often identified by proxies of size such as company revenue. Knowles, 6/23/04, ; Wilmington, 6/16/04,

Firms such as Oracle, PeopleSoft, and SAP have products and sales forces directed to serving mid-market customers. Knowles, 6/23/04, ; ; Wilmington, 6/16/04, ; ; P, Henley Dep, 5/4/04, ;

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,

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,

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,

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,

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,

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,

The differences between mid-tier and high function software are built right into the code. Allen, 6/10/04,

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,

A customer with seats (users) will configure its software differently than a customer with 10, users. Hausman, 6/29/04,

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,

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,

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,

Large customers need a better product that can handle more transactions. Hausman, 6/29/04,

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,

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.

A sale is much more complex than just showing a customer a product's features and functionality. Customers "look at the total cost of ownership, which is the license, the business benefit provided by the application, the cost of ownership related to the technology, and the relationship with the company that they will have into the future." Wilmington, 6/17/04,
Organizations will identify a need for a new software system. A customer may be struggling with a business process. P, Knowles dep., 12/3/03,

Most customers will engage some third party consultants to aide them in their selection process. Bullock, 6/7/, ; PR, at NEXTELNEXTEL; Cichanowicz, 6/14/04, ; P, Elliott dep., 5/20/04,

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/

Customers may form project teams composed of as many as 50 representatives to evaluate software alternatives. P, at 4.

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, ; ;

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,

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,

Customers typically issue detailed requests for proposals that outline the functions that the customer is seeking to automate. P, "Request for Proposal: CH2M Hill Human Resources Management System;" P, DeSimone dep., 5/19/04, , ; Cichanowicz, 6/14/04, ; P, Elliott dep., 5/20/04,

During the sales process for high-function software, the customer typically will issue a high level requirements definition. P, Block dep., 12/16/03, ;

Typically customers will define issues such as the functionality required, the scope of work, and where the software will be deployed. P, Block dep., /16/03,

Vendors will follow-up with the customer to learn as much as possible about the customers requirements. P, Block dep., 12/16/03,

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; P, Block dep., 12/16/03,

From Cox Communications' identification of the need to replace its FMS (formation of "Project Catalyst") until signing a contract (end of "Project Cornerstone") took from the Spring of until the summer of Hatfield, 6/7/04,

Emerson's ERP vendor selection process took 21 months. Peters, 6/14/04,

The sale of high function software is a long protracted process that may take 6 months to over a year to complete. P, Knowles dep., 12/3/03,

Nextel kicked off its "Financial, HR, Procurement Systems Overhaul Project" in October, , and had a scheduled delivery of PR, at NEXTEL-

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. P, Ellison dep., 1/20/04,

Demonstrations are designed to identify software products that can be configured to meet a customers business requirements .

Two to four vendors are typically invited to do demonstrations of their products for a potential customer. Knowles, 6/23/04, ; P, Knowles dep., 12/3/03,

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/,

Customers expect vendors to demonstrate the abilities of the software to meet their functional requirements. Knowles, 6/23/04,

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,

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.

Unless the vendor can demonstrate its ability to meet a customers functional requirements, there is no need to even discuss a price for the software. P, Block dep., 12/16/03, ,

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. P, Block dep., 12/16/03,

It is in the customers best interests to be forthcoming about their functional needs when purchasing enterprise software. P, Block dep., 12/16/03,

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." P, at ORCL-EDOC

Many customers conduct a detailed assessment of their functional requirements as part of the software procurement process. Oracle's Answer, at Response to Allegation

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,

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,

Vendors obtain detailed information about the customers' business and unique requirements. P, Render dep., 5/11/04,