SPIEGEL ONLINE:

The research firm Gartner says that the market for business software applications will be pretty much flat in 2004. Is your outlook as gloomy as theirs?

Craig Conway: We disagree with that, I think the market will grow between six and twelve percent. The reason is that companies have wanted to invest in technology and in the last two years, but the economy has been so difficult that they have not been able to do it. I do not think it will be much less than six percent because there is this backlog of investment on technology that has wanted to occur.

SPIEGEL ONLINE: But will companies really spend even more money on business software? Everyone has some kind of system for enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM).

Conway: I do not think that most companies have an ERP system in place. Most enterprise systems still concsist of homemade legacy software. CRM has maybe a 30 percent market penetration. When I came to Peoplesoft in 1999 on my very first conference call with analysts, the very first question was: 'now that ERP is in place, where will you get your money?' The enterprise software market is still a very open market. That is one source of growth. The other one are mid market companies which is in most cases are not running any kind of enterprise software.

SPIEGEL ONLINE: Will you be able to gain more market share? What's your objective?

Conway: The objective now is clear: to compete with SAP and present ourselves as the strong, logical alternative to companies around the world, especially in Europe. If we were in a running race then I'd say we can see the back of their jersey and we believe we will gain on them. At some point you get to be so large, that the only objective is to be the largest. It is like BMW and Mercedes. What is BMW's strategy? To better compete with the bigger company, Mercedes. Once you achieve a certain level of credibility where you become a logical choice, you have to compete.

SPIEGEL ONLINE: SAP is not in such a sad state. How will you grab market share from them?

Conway: We overlap in many areas, but there are some things, like human resources, that we probably do better than SAP and others like manufacturing where they are ahead of us. So one way to compete with them is by shoring up the areas where we are weaker than them. Our acquisition of J. D. Edwards helps us - they have more manufacturing customers worldwide than SAP does. Secondly, both SAP and Peoplesoft have traditionally sold the large enterprise. But both companies are now looking to the mid market.

SPIEGEL ONLINE: Pretty much everyone is aiming at smaller companies these days. You will have to compete with the likes of SAP and Microsoft.

Conway: The mid market is probably a 100 times larger than the one for large enterprises, so there is room to grow. What differentiates us from SAP in the mid market is that they are starting with a brand new product, a new architecture and no customer base. Our architecture from J. D. Edwards is already in use with 6000 mid market customers. Microsoft might gain market share, but it will take them many years as it has in other areas. That will provide SAP and Peoplesoft with opportunities as we will probably both be there before Microsoft.

SPIEGEL ONLINE: What about Oracle? They still have a sizeable market share.

Conway: If you look at the applications licence revenue of Oracle, you will see that it used to be about 300 million Dollars. Last quarter it was 107 million. Our license revenue has gone past theirs. I don't think that Oracle today are viewed as being on the same level as SAP and Peoplesoft and I think their direction is down. We don't worry about Oracle. We don't lose to Oracle. We do lose to SAP, particularly in Europe, but in certain industries we don't lose to SAP either. We're bigger than SAP in the US and we're bigger than SAP in six industries worldwide.

SPIEGEL ONLINE: Apart from competitive advantages, you promised Wall Street financial synergies from the merger with J. D. Edwards. Does your estimate of saving between 160 and 205 million dollars in 2004 still stand?

Conway: It does. On Thursday afternoon you will see figures for our the license revenue, total revenue and some of the financial synergies.

SPIEGEL ONLINE: Do you have any gaps in your product portfolio that you might fill by acquiring another company?

Conway: This was just the latest, we have done eleven acquisitions in the last two years. Today our product line is pretty full. You cannot name a product category from SAP that Peoplesoft does not have. That is not to say that we won't acquire any more companies. Even if you have a full landscape, you try to make it stronger.