Government Exhibit [Non-designated testimony redacted]
00001 | 1 | SOME PORTIONS DESIGNATED HIGHLY CONFIDENTIAL | 2 | SUBJECT TO PROTECTIVE ORDER | 3 | ENTERED ON MARCH 1, 2004 | 4 | * * * | 5 | UNITED STATES DISTRICT COURT | 6 | FOR THE NORTHERN DISTRICT OF CALIFORNIA | 7 | SAN FRANCISCO DIVISION | 8 | _____________________________________ | 9 | UNITED STATES OF AMERICA, et al. | 10 | Plaintiffs | 11 | -v- Case No: C-04-00807 (VRW) | 12 | ORACLE CORP. | 13 | Defendant | 14 | _____________________________________ | 15 | DEPOSITION OF | 16 | DAVID L. DORTENZO | 17 | VOLUME 1 | 18 | Wednesday, May 5, 2004 | 19 | 9:24 A.M. TO 5:22 P.M. | 20 | held at | 21 | 1735 New York Avenue, Northwest | 22 | Washington, D.C. |
00005 | 1 | ***PROCEEDINGS*** | 2 | DAVID L. DORTENZO, | 3 | called as a witness in this case, | 4 | having been first duly sworn upon his oath, | 5 | testified as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00008 | | | | | | | | | | | | | | | 8 | Q. Okay. Very good. | 9 | Mr. Dortenzo, for the record, can you | 10 | spell your name and also state where you work, and | 11 | give the address of your employer. | 12 | A. Sure. It's Dave D-O-R-T-E-N-Z-O. I'm | 13 | a principal with Deloitte Consulting. My business | 14 | address is 1000 One PPG Place, Pittsburgh, | 15 | Pennsylvania, 15222. | 16 | Q. All right. And now, is that Deloitte | 17 | Consulting LLP? | 18 | A. That is Deloitte Consulting LLP. | 19 | Q. And how long have you worked at the | 20 | Deloitte Consulting? | 21 | A. A little bit over ten years. I started | 22 | in April of 1994. |
00009 | 1 | Q. Okay. And what did you do before that? | 2 | A. I was a consultant with Pricewaterhouse | 3 | from 1981 through 1994. | 4 | Q. Okay. | 5 | A. I was in industry for four years before | 6 | that. | 7 | Q. Okay. And what do you do as a | 8 | principal of Deloitte Consulting? | 9 | A. I manage our U.S. operations for our | 10 | Oracle consulting practice. I'm responsible for | 11 | all of our consulting operations, our partner | 12 | deployment, and staff growth. | 13 | Q. Now, at one time were you a global | 14 | leader for the Oracle practice? | 15 | A. Yes. I was a global leader last year. | 16 | Q. And when did that end? | 17 | A. That changed in this fiscal year, which | 18 | began in June of 2003. | 19 | Q. June 2003. | 20 | A. Uh-huh. | 21 | Q. Why -- what was the reason for that | 22 | change? |
00010 | 1 | A. The reason for that change was that the | 2 | Deloitte Consulting was folded back into Deloitte | 3 | & Touche's parent organization, and the accounting | 4 | structure within the organization is of a | 5 | country-specific nature. And so the leaders are | 6 | assigned to the country levels, and not to the | 7 | global levels. | 8 | There are some global leaders that are | 9 | more responsible for alliance operations, | 10 | relationship-type of operations than they are the | 11 | consulting operations and the actual practice of | 12 | consulting in the field. | 13 | Q. Okay. Now, that was a lot of | 14 | information. I just want to go through it so that | 15 | it's clear. | 16 | You said Deloitte Consulting was folded | 17 | back into Deloitte & Touche? | 18 | A. That's correct. | 19 | Q. What's Deloitte & Touche? | 20 | A. The -- there's the parent corporation, | 21 | Deloitte Touche Tohmatsu, that is the global | 22 | holding company. |
00011 | 1 | The parent organization for Deloitte | 2 | Consulting is Deloitte & Touche LLP USA. | 3 | Deloitte & Touche LLP USA is divided | 4 | into two partnerships. Deloitte Consulting LLP | 5 | and Deloitte & Touche LLP so there are two | 6 | organizations that fold up into Deloitte & Touche | 7 | LLP USA, and that is part of holding company of | 8 | Deloitte & Touche and Tohmatsu on a global basis. | 9 | Q. Deloitte & Touche Tohmatsu -- | 10 | A. Tohmatsu. | 11 | Q. Is that headquartered in Switzerland? | 12 | A. That's a Swiss Verein. | 13 | Q. What's a Verein? | 14 | A. It's a holding of partnerships. | 15 | Q. That's just the Swiss terminology for | 16 | holding and partnerships? | 17 | A. Yes. | 18 | Q. Okay. And then Deloitte & Touche LLP | 19 | USA that's the parent organization for both | 20 | Deloitte & Touche and Deloitte Consulting? | 21 | A. That's correct. | 22 | Q. And you work for Deloitte Consulting. |
00012 | 1 | A. That is correct. | 2 | Q. Now, before June when there was that | 3 | reorganization, how did Deloitte Consulting fit | 4 | into this organization? | 5 | A. It was a very similar structure, but | 6 | what was going on at the time was Deloitte | 7 | Consulting was going to spin off from that | 8 | structure and become -- it's a legal entity, and | 9 | it's an organization. The partners voted against | 10 | that spin-off, and that's when the organizational | 11 | change took place that is reflected in the | 12 | structure that I just explained. | 13 | Q. Okay. So was Deloitte Consulting, | 14 | before June, solely a U.S. organization? | 15 | A. No, Deloitte Consulting was a global | 16 | organization at that time. | 17 | Q. And -- | 18 | A. That's when I had the global | 19 | responsibilities. | 20 | Q. Okay. So at that time -- at that time | 21 | Deloitte Consulting operated globally and not just | 22 | in the U.S. |
00013 | 1 | A. That's right. | 2 | Q. Now, after the reorganization, do you | 3 | still provide global services through the | 4 | consulting organization? | 5 | A. We do. We do, through national | 6 | organizations and global organizations, we're | 7 | involved on a global basis in our local practice. | 8 | Q. So do you continue to work with some of | 9 | the same people that you worked with in other | 10 | countries before the reorganization? | 11 | A. Yes, we do. | 12 | Q. They've just been reorganized into a | 13 | different way within Deloitte Touche Tohmatsu? | 14 | A. That's correct. | 15 | Q. Is there anybody else who is nominally | 16 | the leader of the global organization for | 17 | Oracle -- for the Oracle practice any longer? | 18 | A. No. There is a Global Alliance | 19 | Partner, but they're not operations -- | 20 | Q. Who is the Global Alliance Partner? | 21 | A. Jeff Plewa, P-L-E-W-A. | 22 | Q. And where is he located? |
00014 | 1 | A. Chicago. | 2 | Q. So he's in the U.S., too? | 3 | A. Uh-huh. | 4 | Q. And you are the U.S. -- | 5 | A. Practice Leader. | 6 | Q. Practice Leader? | 7 | A. Responsible for Oracle operations. | 8 | Q. And are you a Practice Leader for any | 9 | other -- for any other groups within Deloitte | 10 | Consulting? | 11 | A. Not at this time. | 12 | Q. Okay. And have you been in the past? | 13 | A. Yes, I have. | 14 | Q. Was Retek one of those groups for which | 15 | you were -- | 16 | A. Retek was one of the practices that I | 17 | was responsible for. | 18 | Q. Okay. And when were you responsible | 19 | for the Retek practice? | 20 | A. Retek was the last fiscal year, so it | 21 | would have been from June of 2002 until June of | 22 | 2003. |
00015 | 1 | Q. Okay. And why did your responsibility | 2 | for the Retek practice end? | 3 | A. Retek is a specialty software | 4 | operation, and we folded that responsibility back | 5 | into our industry practice, because the expertise | 6 | required to implement Retek was very specific to | 7 | our consumer business retail -- excuse me -- | 8 | industry segment. | 9 | Q. Okay. And by the way, how long have | 10 | you been, before the reorganization, how long were | 11 | you the Global Practice Leader for the Oracle | 12 | practice? | 13 | A. 18 months. | 14 | Q. And what was your position in relation | 15 | to Oracle before that? | 16 | A. I was the Oracle Americas Leader before | 17 | that, for one year. And for the year prior to | 18 | that I was the Central Region Practice Leader. | 19 | Q. For Oracle, too? | 20 | A. For Oracle. The year ... yeah, that's | 21 | right. | | |
00016 | | | | | | | | | | | | | | | 8 | Q. Eighteen months back would be about to | 9 | the end of 2000 -- no, the beginning of 2002? | 10 | A. Should be the mid of 2002. The global | 11 | responsibility that I had was June of 2002 through | 12 | the calender year of 2003. | 13 | When I mentioned that earlier that | 14 | Deloitte Consulting folded back into Deloitte & | 15 | Touche, the legal date for that transaction was | 16 | actually December of 2003. | 17 | Q. Okay. I understand. | 18 | A. So as we went through -- the overlap | 19 | that I was trying to explain is from June of 2003 | 20 | until December of 2003 I was still the global | 21 | leader although the organization was shifting to | 22 | the country-specific organizations, so we started |
00017 | 1 | to ramp down some of the global responsibilities. | 2 | But I still had the title, if you will, through | 3 | December of 2003. | 4 | So it would have been June of 2002 | 5 | through December 2003, eighteen months. | 6 | Q. And as the U.S. Practice Leader, that | 7 | would have been for the year before June 2002, so | 8 | from about -- | 9 | A. That's correct -- | 10 | Q. June 2001 to June 2002? | 11 | A. That's correct. | 12 | Q. And Central Practice, it would have | 13 | been about June 2000 to about June 2001? | 14 | A. That's right. | | | | | | | | | | | | | | | | |
00018 | | | 2 | Q. Immediately before you became the | 3 | Central Practice Leader were you working with -- | 4 | A. I was working with Oracle -- | 5 | Q. [Inaudible] software -- | 6 | A. Sorry. I did have -- we have major and | 7 | minor responsibilities, so I was an energy | 8 | practitioner as a partner within the firm. | 9 | Q. Uh-huh. | 10 | A. I had a minor or a secondary | 11 | responsibility in the software packages practice. | 12 | And while I was at British Petroleum, | 13 | which is where my assignment was as a line | 14 | partner, as the lead client service partner on | 15 | that engagement, we did work with both Oracle and | 16 | SAP. | 17 | Q. Okay. Was that your first work with | 18 | this enterprise software at British Petroleum? Or | 19 | had you been working for some time with this | 20 | software in your practice before that? | 21 | A. I had been working -- | 22 | |
00019 | | | | | | | | | | | | | | | | | | | | | | | | | | | 14 | Q. Are you familiar with the term ERP or | 15 | Enterprise Resource Planning? | 16 | A. I am. | 17 | Q. What is that, or how do you use that | 18 | term at Deloitte? | 19 | A. Well, ERP is a categorization of type | 20 | of software that discusses the scope of that | 21 | particular software and how it can be used within | 22 | the company. |
00020 | 1 | So when we talk about ERP, typically we | 2 | refer to software that can be used throughout the | 3 | entire enterprise which takes care of financials, | 4 | which takes care of order management and customer | 5 | relationship management, and also fulfills supply | 6 | chain applications, and business processes. So | 7 | when we talk about ERP within the firm, that's the | 8 | scope of processes and applications we usually | 9 | think of. | 10 | Q. Does it include a human resource | 11 | functionality also? | 12 | A. It can. At Deloitte we have a separate | 13 | practice that's entitled the "Human Capital | 14 | Practice," that also deals with human resource | 15 | solutions. | 16 | So sometimes we do incorporate HR | 17 | applications into the ERP, and sometimes we deal | 18 | with them independently through our Human Capital | 19 | Practice. | 20 | Q. Okay. And in terms of the types of | 21 | software that is used for the financial management | 22 | of the corporation for enterprise purposes, can |
00021 | 1 | you just provide some examples of that, of what | 2 | that software is? | 3 | A. Application examples, Kent or brand | 4 | names -- | 5 | Q. Like a general ledger, for example. | 6 | A. Financials usually incorporates general | 7 | ledger, accounts payable, accounts receivable, | 8 | fixed assets, the primary applications. | 9 | Q. Okay. And in your Human Capital | 10 | software packages, what are the types of | 11 | functionality that are normally included within | 12 | that area? | 13 | A. Basically human resources and payroll | 14 | processes. | 15 | Q. Okay. Is an added functionality that | 16 | is often included now a self-service | 17 | functionality? | 18 | MR. YATES: Objection. Vague. | 19 | BY MR. BROWN: | 20 | Q. You can answer the question. | 21 | A. Okay. Self-service is a feature within | 22 | applications. It can be a feature that's involved |
00022 | 1 | around human resources. It can also be involved | 2 | around customer relationship and supply chain as | 3 | well, depending on how that application is | 4 | designed. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00023 | | | | | | | | | | | | | | | | | | | 10 | Q. Okay. I understand. | 11 | Now, just one little piece more on your | 12 | background. At any time have you been responsible | 13 | for another -- any other practices at Deloitte, | 14 | other than Oracle and Retek? | 15 | A. Yes. | 16 | Q. What- | 17 | A. I had responsibility for the PeopleSoft | 18 | practice from June of 2001 to June of 2002, as | 19 | well as Oracle. | 20 | Q. And were you the global leader for that | 21 | practice too? | 22 | A. The Americas. |
00024 | 1 | Q. Americas. | 2 | A. That was the years I was Americas. | 3 | Q. All right. Now, I'd like if you could, | 4 | could you just explain what a -- the Oracle | 5 | practice is at Deloitte. | 6 | What do you mean when you say "the | 7 | Oracle practice"? | 8 | A. We have -- we have a number of staff | 9 | who specialize in implementing the suite of | 10 | applications that Oracle sells in the marketplace. | 11 | In addition -- those could be HR, | 12 | financials, same thing we talked about earlier, | 13 | CRM, supply chain. | 14 | In addition to implementing those | 15 | applications we have practitioners that specialize | 16 | in Oracle technology. So when I say "Oracle | 17 | technology," what I mean is the database | 18 | applications, the integration of the Oracle | 19 | software with any other legacy systems that a | 20 | client might have within their organization. | 21 | And the other services that we provide | 22 | around technology have to do with applications, |
00025 | 1 | database administration. So it's managing the set | 2 | of applications, sizing those applications, tuning | 3 | them from a performance perspective, making sure | 4 | that the tables are set up correctly, and that the | 5 | patches that come out and the updates that come | 6 | from Oracle are applied. | 7 | So the scope of our Oracle practice is | 8 | comprised of practitioners who deliver those | 9 | services to the marketplace. | 10 | We will take those practitioners, and | 11 | join them with practitioners from our industry | 12 | specialties within the firm, and that generally | 13 | speaking constitutes the project -- the people | 14 | component of our projects as we deliver services | 15 | to the market. | | | | | | | | | | | | | | |
00026 | | | 2 | Q. Okay. By the way, with respect to -- | 3 | with respect to the focus of my questions today, | 4 | I'm going to be asking primarily about the ERP | 5 | applications dealing with finance and HR. And | 6 | only peripherally covering the applications that | 7 | might deal with the CRM -- I think that's customer | 8 | relationship management. | 9 | A. Correct. | 10 | Q. And supply chain management. | 11 | If I'm asking a question about | 12 | applications, will you be sure to think of it in | 13 | terms of financial management and HR management? | 14 | A. I will. | 15 | BY MR. BROWN: | 16 | Q. If I want to talk, or ask about the CRM | 17 | or the supply chain management applications, I'll | 18 | extend the question to those areas. | 19 | A. Okay. | 20 | Q. Now, can you tell me a little bit about | 21 | what types of clients Deloitte works with, with | 22 | its Oracle and its PeopleSoft practices? |
00027 | 1 | A. We practice across seven different | 2 | industries to a number of client companies. There | 3 | are about 2000 clients in our Deloitte & Touche | 4 | portfolio. | 5 | Those clients, generally speaking, | 6 | range in revenue size from $500 million revenue, | 7 | all the way up to the largest organizations in the | 8 | world like General Motors. So multiples of | 9 | billions. | 10 | Q. And do you recall what the seven | 11 | industry practice areas are on which you | 12 | specialize? | 13 | A. We can go through them -- I think I'll | 14 | get them all. | 15 | It's consumer business; financial | 16 | services; manufacturing; public sector; health | 17 | care; technology, media and telecommunications; | 18 | and energy. | 19 | Q. Now, when you talk about the 2,000 | 20 | clients that you have at Deloitte Consulting, are | 21 | those the 2,000 - are those 2,000 clients that | 22 | Deloitte Consulting has for its U.S. operations? |
00028 | 1 | A. It is. That is our client portfolio. | 2 | Q. Okay. And in addition to PeopleSoft | 3 | and Oracle, do you have any other -- do you have | 4 | any other practices that are -- in which you | 5 | provide ERP solutions to -- and that's the | 6 | financial and HR solutions -- to these groups of | 7 | clients? | 8 | A. We do. We have an SAP practice | 9 | effective, as of the first of the year, as the | 10 | firm is all back together there is also Lawson in | 11 | our portfolio. | 12 | Q. Okay. | 13 | A. That's primarily it. Retek is still | 14 | part of the industry practice, so we still do deal | 15 | with Retek. And then any particular software | 16 | applications that support any of these might as | 17 | well be included in our ERP practice as well, | 18 | because that falls under our packages practice. | 19 | So if we were dealing with a specific, or as a | 20 | term "bolt-on packages," something to do with | 21 | sales tax, we would also potentially have | 22 | practitioners who have that expertise as part of |
00029 | 1 | this practice. | 2 | Q. Okay. So now, when you talk -- when | 3 | you are talking about this, this would be software | 4 | that would be used together with one of the ERP | 5 | packages that of, say, PeopleSoft, Oracle, SAP or | 6 | Lawson? | 7 | A. That's right. That's right. | 8 | "Complementary," I guess, might be a good term. | 9 | Q. Can you just give us an example of a | 10 | type of software that would potentially be used to | 11 | complement one of the ERP packages? | 12 | A. Sure. It's a company named Vertex, | 13 | V-E-R-T-E-X. Vertex's specialty is to deal with | 14 | sales tax, use tax, processing. So as clients | 15 | look at their financial processes and have to deal | 16 | with taxation issues, that software is specialized | 17 | to work together with the ERP softwares to deliver | 18 | that functionality to manage that tax function for | 19 | our clients. | 20 | So we will implement that together with | 21 | the ERP packages in a lot of cases. | | |
00030 | 1 | Now, you mentioned after the first of | 2 | the year, your practice with respect to a Lawson | 3 | was within Deloitte Consulting. | 4 | A. Uh-huh. | 5 | Q. Did any of the Deloitte groups have a | 6 | Lawson practice prior to that time? | 7 | A. The Lawson practice was managed from | 8 | our Deloitte & Touche organization prior to the | 9 | reorganization of the firm, effective December -- | 10 | December 27th was that date. | | | | | | | | | | | | | | | | | | | 20 | Q. Why don't - I think that's a good | 21 | idea. After 2004,I think you said there's an | 22 | umbrella organization, and you have -- on one side |
00031 | 1 | you have Deloitte & Touche and Deloitte Consulting | 2 | on the other side. | 3 | A. Uh-huh. | 4 | Q. And so to make the question more | 5 | specific, now, how was -- how are the functions of | 6 | those two organizations split up? | 7 | A. Currently they are split where all the | 8 | consulting, effective, again, December 27th, 2003, | 9 | all the consulting is housed within Deloitte | 10 | Consulting LLP. | 11 | Prior to that, and for a period of very | 12 | close to ten years, about the time I started with | 13 | the firm, the Deloitte & Touche organization had | 14 | commissioned the startup of a practice that was | 15 | called Management Solutions, which was a | 16 | consultancy that was more dedicated to serving | 17 | audit clients, and typically smaller clients, than | 18 | what Deloitte Consulting served in its | 19 | marketplace. | 20 | When I say "smaller," in terms of | 21 | company revenue, again generally speaking. | 22 | So over that period often years, the |
00032 | 1 | Management Solutions organization had grown, and | 2 | the -- one of the services that they delivered to | 3 | the marketplace was around Lawson implementation. | 4 | That practice was primarily focused around health | 5 | care, although there were also retail and public | 6 | sector implementations of Lawson taking place at | 7 | that time. | 8 | So they served primarily those three | 9 | industries. | 10 | When the firm reorganized, and the | 11 | Braxton separation was voted down and the firm | 12 | reorganized and became effective again December | 13 | 27th. | 14 | All of the software practices -- | 15 | software package practices and operations shifted | 16 | at that time into Deloitte Consulting. | 17 | Q. Okay. Did the -- did the Management | 18 | Solutions practice focus primarily on operations | 19 | that were within the U.S.? | 20 | A. Not exclusively. Primarily, but not | 21 | exclusively. | 22 | Said differently, if we ran into a |
00033 | 1 | client situation from a solutions perspective that | 2 | had global operations, again, that would be served | 3 | from the company headquarters site. So if the | 4 | company was headquartered in the U.S. and had | 5 | tentacles into Europe or another part of the | 6 | world, then U.S. firm would also serve that global | 7 | client. | 8 | Q. Okay. I guess what I'm trying to get a | 9 | more precise definition of the types of companies | 10 | that were served by Management Solutions prior to | 11 | the reorganization. | 12 | MR. YATES: Objection. That question | 13 | lacks foundation. | 14 | BY MR. BROWN: | 15 | Q. Do you know what types of companies | 16 | Management Solutions served before the | 17 | reorganization? | 18 | A. I don't think it's --I don't think | 19 | it's easy to categorize those kinds of companies. | 20 | I can say that the client portfolio was very | 21 | similar to what Deloitte Consulting was serving at | 22 | the time. |
00034 | 1 | Q. Okay. But- | 2 | A. So at the early design, Kent, I would | 3 | tell you that there was intent that those | 4 | companies would be smaller, and they, again, | 5 | generally speaking, would be up to a billion | 6 | dollars in revenue. | 7 | However, over time, as consulting was | 8 | competitive, and as these two organizations, | 9 | Deloitte & Touche and Deloitte Consulting became | 10 | more involved in the marketplace, there was even | 11 | internal competition that led to the solutions | 12 | organizations serving very similar clients to | 13 | Deloitte Consulting. | 14 | So if, in using the Lawson example, | 15 | they ran into -- let me think of a good | 16 | representative example ... there's a -- I believe | 17 | an organization called . It was a large health REDACTED | 18 | care organization that operated nationally. | 19 | Q. It's a hospital organization? | 20 | A. Yes. And I was aware that there was a | 21 | large Lawson implementation going on there. But | 22 | this would be a, you know, a multi -- |
00035 | 1 | multiorganizational -- very large client that | 2 | typically you might have found Deloitte Consulting | 3 | serving. So Solutions was in fact serving that | 4 | client and delivering to a very large client some | 5 | very significant services, which, again, is not -- | 6 | was not that original intent I spoke of, up to a | 7 | billion dollars, smaller types of services. | 8 | So the marketplace was very similar to | 9 | what you'd find in Deloitte Consulting. The | 10 | specialty of Lawson existed, and was managed from | 11 | Deloitte & Touche as opposed to Deloitte | 12 | Consulting. | 13 | Q. Okay. Now, do you know approximately | 14 | how many people are working in the Oracle practice | 15 | in Deloitte Consulting today? | 16 | A. I do. We quote two numbers. There are | 17 | about 300 practitioners that are solely dedicated | 18 | to Oracle implementations. And there are 1500 | 19 | practitioners that we speak of in terms of global | 20 | capability. | 21 | The difference between those two | 22 | numbers represents those practitioners who have |
00036 | 1 | specialty in our industry practices, who as well | 2 | have Oracle experience, but have not dedicated | 3 | their careers to implementing Oracle applications. | 4 | So they may have worked in high-tech, | 5 | or they may have worked in telecommunications; | 6 | they may have worked in financial services | 7 | implementing, let's just say, an inventory | 8 | solution or some piece of an Oracle application. | 9 | But after that project's finished they | 10 | may as well go do SAP or something else. So they | 11 | specialize in the business processes, and in | 12 | business transformation, but they don't specialize | 13 | within any one package. | 14 | Q. So, just so that I understand, you have | 15 | 300 who are solely dedicated to Oracle. | 16 | A. That's correct. | 17 | Q. And in addition you have another 1200? | 18 | Or would that be 1500 that you could call on who | 19 | have -- | 20 | A. 1200 - | 21 | Q. -- who have Oracle expertise. | 22 | A. 1200. |
00037 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16 | Q. Okay. Now, do you have a -- and what's | 17 | the size of the Oracle practice in annual revenue? | 18 | A. This year it will be about million. REDACTED | 19 | Q. Is that U.S.- | 20 | A. U.S. | 21 | Q. For U.S. only? | 22 | A. Yes. |
00041 | | | | | | | | | | | | | | | | | | | 10 | Q. Okay. And what about with respect to | 11 | Lawson? | 12 | A. Same thing. Lawson is smaller, though. | 13 | I do know that the annual revenues of the Lawson | 14 | practice are probably $ million. I don't know REDACTED | 15 | the number of people, though. | 16 | Q. Do you know how -- what type of | 17 | global -- whether Lawson has any type of a global | 18 | practice in Deloitte? | 19 | A. I don't know that. | | | | | | |
00046 | | | | | 3 | Q. Okay. Now, do you have a practice | 4 | of -- do you have practices set up to work | 5 | specifically with any other ERP vendors other than | 6 | SAP, Oracle, PeopleSoft and Lawson? | 7 | A. Those are the primary ones. We do have | 8 | a relationship with Vertex, as I mentioned | 9 | earlier. | 10 | Q. Okay. | 11 | A. We do have about 40 different alliance | 12 | relationships within Deloitte Consulting that | 13 | constitute relationships with vendors who support | 14 | this marketplace again. | 15 | So there is a product, as an example, | 16 | named Optio which is used for reporting in many of | 17 | our Oracle projects. We have an alliance | 18 | relationship with Optio, and that is a vendor | 19 | relationship. That actually is software. So | 20 | there are, again, supporting pieces that go with | 21 | the ERP practice, and there are a number of | 22 | alliances around that, about 40. |
00047 | 1 | Q. Okay. And the software that's provided | 2 | by these -- by those companies would once again be | 3 | used as a complement with the ERP software? | 4 | A. That's right. That's right. | 5 | Q. Did -- can you tell me in general | 6 | what's the size of Deloitte Consulting's revenues | 7 | all together? | 8 | A. About 3 billion. | 9 | Q. And that's relating now to the U.S. | 10 | A. Consulting. Right. Consulting revenue | 11 | in the U.S. | 12 | Q. And what portion of those revenues in | 13 | general accounted -- is accounted for by the | 14 | enterprise software package business? | 15 | A. About 25 percent. 25 to 30 percent. | 16 | Q. Why do your clients use Deloitte to | 17 | assist in -- with their ERP work? | 18 | A. The reason our clients buy Deloitte is | 19 | because we do business transformation, which | 20 | infers that we take technology solutions, and we | 21 | take industry expertise, and we use the -- the | 22 | technology to enable process redesign and process |
00048 | 1 | improvement, so that our clients achieve financial | 2 | benefit and business improvement through the | 3 | implementation of both the technology and our | 4 | services. | 5 | So said differently, we try to drive | 6 | performance and financial result through our | 7 | implementations and that is the brand that we try | 8 | to carry in the marketplace. | 9 | Q. Okay. And why do you -- why do you use | 10 | the -- let me focus primarily on the portion of | 11 | the organization that you worked in. Deloitte | 12 | Consulting. | 13 | A. Okay. | 14 | Q. Why historically has Deloitte | 15 | Consulting used People Soft, Oracle and SAP as | 16 | the -- as the software with its -- with those -- | 17 | with the clients that it was -- that was providing | 18 | these business transaction services? | 19 | MR.YATES: Objection. Vague. | 20 | BY MR. BROWN: | 21 | Q. You can answer. | 22 | A. Two reasons I can think of. Number |
00049 | 1 | one, those particular software houses are the most | 2 | prevalent within the different industry practices | 3 | that we talk about. Industries. And therefore | 4 | become primarily the vendors of choice in those | 5 | spaces. | 6 | Consequently, there is millions and | 7 | millions of dollars of revenue associated with the | 8 | implementation services that go together with the | 9 | sale of that software, which is a good business | 10 | opportunity for Deloitte. | 11 | So we have built our business around | 12 | significant vendors in that space. | 13 | Q. Well, is there anything about your | 14 | clients' requirements in general that have caused | 15 | them to turn to the People Soft, Oracle and SAP | 16 | applications? | 17 | A. I would say there are a few reasons for | 18 | that. One is the scope ... the application scope, | 19 | of those applications, of those particular vendors | 20 | have broadened their footprint, or, said | 21 | differently, they have more functionality than a | 22 | lot of the other softwares that are in the |
00050 | 1 | industry. So that's one. | 2 | Some of our clients, because of their | 3 | global nature, look for solutions that can manage | 4 | multinational organizational aspects of their | 5 | implementations, as well as multicurrency, if | 6 | they're dealing in different currency. As well as | 7 | multiple language requirements. Those are the | 8 | primary reasons. | 9 | Q. Okay. I'd just like to follow-up a | 10 | little bit on a couple of these. | 11 | When you indicate that -- with respect | 12 | to some of your global clients, you mentioned that | 13 | there was a multicurrency, multilanguage, and | 14 | multiorganizational functionality that they might | 15 | desire. | 16 | Is there also reporting functionality? | 17 | That's required by a global client? | 18 | A. There are statutory and regulatory | 19 | reports that are required in every jurisdiction, | 20 | every governmental jurisdiction, so yes, there are | 21 | requirements to report financials, in particular, | 22 | in many cases. |
00051 | 1 | In many implementations, there are | 2 | requirements for local -- what are called | 3 | localizations, that are, again, country-specific | 4 | regulatory or statutory reporting requirements | 5 | that require customization, generally speaking, to | 6 | satisfy that requirement. | | | | | | | | | 11 | Q. And what's the relationship between | 12 | these global requirements and the fact that they | 13 | might use SAP, PeopleSoft or Oracle? | 14 | A. Those particular softwares have that | 15 | multi capability. So they can manage the | 16 | organizational setup that exists, where there | 17 | might be different sets of books from an | 18 | accounting perspective that are required. So all | 19 | of those software products house the ability, or | 20 | the capability to deliver on the multiple | 21 | currency, organizational and lingo -- language | 22 | requirements. |
00052 | 1 | Q. Okay. And do you know if other | 2 | products have that same capability? | 3 | A. There are other products that do have | 4 | those capabilities. There are some. I don't know | 5 | how many. | 6 | Q. Why don't you implement those products | 7 | for your clients? | 8 | A. Well, we do have practices, as an | 9 | example, in Siebel or the things that we used to | 10 | do in Arriba, I don't know details around how | 11 | multicapable those were. I don't have that | 12 | experience. | 13 | We do -- did have practices in Siebel, | 14 | we had them in I2 we had them in Arriba, there are | 15 | several other software products that we manage | 16 | that do span global requirements. | 17 | Q. Now, just to clarify this, if we're -- | 18 | if my questions today are focused on the financial | 19 | management and the HR requirements of firms, the | 20 | Siebel is -- provides customer relationship | 21 | management software; is that correct? | 22 | A. That's right. That's right. |
00053 | 1 | Q. It does not supply financial management | 2 | or HR software, does it? | 3 | A. It does not. | 4 | Q. And Arriba and I2 are also firms that | 5 | do not supply financial management and HR | 6 | software; is that correct? | 7 | A. That's correct. | 8 | Q. Now, are you aware of other software | 9 | packages that your clients are using, or even if | 10 | you're just aware of them, that provide similar | 11 | global functionality for financial management and | 12 | HR processes? | 13 | A. No. That's -- those are the primary | 14 | ones that we support. | 15 | Q. Okay. What about Lawson, with respect | 16 | to its global functionality? Are you familiar | 17 | with its global capability? | 18 | A. No, I'm not. I'm not. | 19 | Q. Okay. For the clients with which | 20 | you're familiar, are you familiar with any clients | 21 | who have implemented Lawson for global | 22 | requirements? |
00054 | 1 | A. I've not run into Lawson, competitively | 2 | speaking, within our Oracle practice. | 3 | Q. Okay. Ever? | 4 | A. I don't remember ever competing against | 5 | them. | 6 | Q. I just want to mention a couple other | 7 | firms that have come up. | 8 | There's a product that is owned by | 9 | Microsoft called Great Plains. | 10 | Is this a product that you're | 11 | implementing for Deloitte clients? | 12 | A. Well, we -- I know that we've got | 13 | experience with that, and we have implemented it. | 14 | I think the comment underneath that, Kent, would | 15 | be, how recently? | 16 | Great Plains was a financial -- | 17 | primarily a financial software that was popular | 18 | with the middle market segment, and was | 19 | implemented to manage financial applications. I | 20 | don't know of any Great Plains implementations | 21 | that are going on right now. I don't have | 22 | responsibility for that part of our practice. But |
00055 | 1 | I have not run into it competitively, either. | 2 | Q. Okay. Now, is Great Plains the kind of | 3 | software that Deloitte has been using to provide | 4 | business transformation functions? | 5 | A. Typically not. Typically Great Plains | 6 | would be a, what we might term, "a point | 7 | solution." Something that is able to be | 8 | implemented on a more rapid basis. And when | 9 | you're talking about "rapid," and when you're | 10 | talking about, I'll use the term "simple | 11 | functionality," a lesser set of functionality. | 12 | We don't usually do business | 13 | transformation around something that is done | 14 | rapidly. Business transformation usually has to | 15 | do with, you know, total revamping of the business | 16 | processes. And then enabling that with software. | 17 | That's not typically what we do with Great Plains. | 18 | Q. When you talk about "simple | 19 | functionality," is there anything about the way | 20 | that Great Plains has been configured or the | 21 | nature of the software, that limits its use in a | 22 | business transformation engagement? |
00056 | 1 | MR. YATES: Objection. Lacks | 2 | foundation. | 3 | A. I'm not familiar with Great Plains. | 4 | I -- again, I think that the function -- the level | 5 | of functionality that is delivered with the Great | 6 | Plains package accomplishes simple functions. | 7 | An example of that might be if we're | 8 | going to do accounts payable and we need to go | 9 | through matching functionality, do I have the | 10 | purchase order, do I have the receipt, do I have | 11 | the invoice, do those line up? | 12 | It might offer something that's simple | 13 | at that level. But then there are different kinds | 14 | of matching that some of the other products have | 15 | within their capability sets that Great Plains may | 16 | or may not have. | 17 | So Great Plains, again, is usually | 18 | something that I'm more familiar with as a | 19 | temporary, or a point solution, or a | 20 | "fit-for-purpose" is another term that we use that | 21 | suggests that, I just want to get something in, | 22 | and I want to use something simple to accomplish |
00057 | 1 | the financial requirements of my business but I | 2 | don't want to spend a lot of time going through | 3 | the transformation. That would be a way to | 4 | explain it. | | | 6 | Q. Are you -- have you heard the terms | 7 | "out-of-the-box," or kind of an "all in one ERP | 8 | package"? | | | | | | | 12 | Q. Let's talk about "out-of-the-box." | 13 | A. Out-of-the-box I've heard. | 14 | Q. What does that mean in connection with | 15 | the ERP industry? | 16 | A. It means that -- the inference is that | 17 | a client can take the software -- excuse me -- as | 18 | delivered, without executing a process, or on | 19 | business transformation, or design. And | 20 | therefore, they can use the product as it is | 21 | delivered to manage their systems functions within | 22 | their business. So there is no tailoring |
00058 | 1 | required, there is no specialized design or | 2 | specialization around those products, that it's | 3 | intended to be used as delivered from the software | 4 | vendor like it is. | 5 | Q. How many of your clients in Deloitte | 6 | Consulting have been able to use out-of-the-box | 7 | implementations? | 8 | A. I have not seen any. Zero. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00065 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19 | Q. Okay. Let me back up a little bit, | 20 | just so I understand what you've been talking | 21 | about, and focus on specific vendors. | 22 | Are the companies for which you're |
00066 | 1 | providing business transformation services at | 2 | Deloitte Consulting, are you using point solutions | 3 | like great -- Microsoft Great Plains for those | 4 | companies? | 5 | A. Typically not. | 6 | Q. Now, why is that? | 7 | A. They don't have the level of | 8 | functionality that's required to support the | 9 | business transformation that we've talked about | 10 | earlier. You're limited in the level of | 11 | functionality you've got in those solutions. | 12 | Those are -- when I use the term "rapid," those | 13 | are an alternative path to not spending a lot of | 14 | money or a lot of time, to get something up in the | 15 | meantime. | 16 | So typically our solution development | 17 | evolves around the larger packages. | 18 | Q. Okay. And why would you focus your | 19 | solution package -- your solution development | 20 | around the larger packages? What is it about | 21 | those packages that has caused you to do that? | 22 | A. It's the ERP functionality, which is |
00067 | 1 | broader than your financial and HR solution in | 2 | most cases, and the market opportunity that | 3 | exists. And the size of those organizations, | 4 | frankly. Because then those organizations can | 5 | also support that level of development. | 6 | Q. Okay. | 7 | A. So we require, perhaps, software vendor | 8 | support in some of that solution development. | 9 | Q. This brings me back -- you mentioned | 10 | two reasons why your clients and you are using | 11 | PeopleSoft, Oracle and SAP. | 12 | A. Yes. | 13 | Q. And one of the reasons was the global | 14 | nature. | 15 | A. Uh-huh. | 16 | Q. The other reason was the scope of the | 17 | applications, the broader scope. | 18 | A. Uh-huh. | 19 | Q. And I'm wondering, can you provide just | 20 | a little bit more information about what you meant | 21 | by "the broader scope of the applications"? | 22 | A. That has to do with the applications' |
00068 | 1 | footprint that these vendors deliver to the | 2 | marketplace. So when we talk about application | 3 | level functionality, like finance or like HR, many | 4 | of the cleans in our portfolio are interested in | 5 | ERP level services. So again, they like the fact | 6 | that these softwares can deliver back office | 7 | functions, which typically the finance and HR | 8 | applications evolve around. But where the | 9 | marketplace is going, and where the trend in | 10 | business is going, is for companies to tie | 11 | together their customers and their suppliers with | 12 | their ERP systems, and manage that all financially | 13 | through their finance systems, and also deal with | 14 | any of their employee issues or HR issues through | 15 | the back office functions. | 16 | So when we talk about broader scope, | 17 | and broader appeal to the marketplace, it usually | 18 | gets into those customer relationship management | 19 | applications, or the supply chain applications. | 20 | As companies try to say, well, I'm going to buy -- | 21 | if I'm going to make refrigerators and I want to | 22 | buy motors from a certain supplier, then they try |
00069 | 1 | to tie that together through technology. And they | 2 | try to tie themselves together to their suppliers, | 3 | as well as they try to tie themselves together to | 4 | their customers, so they can manage supply and | 5 | demand and profitability, and all those things. | 6 | So through the back office, through | 7 | primarily financial applications more than the HR | 8 | applications, the trend in business now is to try | 9 | to build that electronic supply chain that takes | 10 | it all the way from supply through customer. And | 11 | through the clients' operations. | 12 | So typically, Kent, our client base is | 13 | interested in exploiting the ERP functionality. | 14 | And that's where a lot of the global companies are | 15 | going in terms of trying to improve their | 16 | technologies and improve their business processes. | 17 | That's our market. | 18 | Q. Is there anything about the fact that | 19 | they -- that these providers, Oracle, PeopleSoft | 20 | and SAP, provide functionality beyond financial | 21 | management and HR, that causes companies to use | 22 | that -- those systems for financial management and |
00070 | 1 | HR purposes? | 2 | A. One answer I'd probably give to that | 3 | question is the integration capability. So one of | 4 | the things that clients will look at on that | 5 | global basis that has to do with the financial | 6 | systems and HR systems are, are they tightly | 7 | integrated? | 8 | "Tightly integrated" meaning that, if | 9 | I -- if I'm dealing with a supplier, if I have a | 10 | supply chain types of application functionality, | 11 | can I really understand the financial impact of | 12 | how managing that business, so more tied into the | 13 | financial integration. | 14 | And I think, in the vendors that we're | 15 | talking about, that integration basically exists. | 16 | It can be managed in different ways. There's some | 17 | architectural things underneath the products, in | 18 | terms of how they work, that might suggest that | 19 | the integration takes place in a different way. | 20 | However, the integration from a buyer's | 21 | perspective is there, so that if you're doing | 22 | something in supply chain, you're doing something |
00071 | 1 | in customer relationship management, you can | 2 | usually get that into the system which is the | 3 | objective. | 4 | Typically there is maybe a dividing | 5 | line in terms of the vendors that have that | 6 | capability, and the example that you brought up | 7 | earlier in Great Plains, who may not have that | 8 | extended footprint, or the depth of functionality, | 9 | or that global reach to do the multicurrency, | 10 | multiorganization, multilanguage thing. | 11 | So there's a dividing line between the | 12 | point solutions and the companies that specialize | 13 | in just getting something done. And there's | 14 | companies that have the global capability, the | 15 | extended application footprint. | 16 | Q. Okay. Now, I'd just like to have you | 17 | explain a little bit, what -- what are some of the | 18 | advantages of having this integrated functionality | 19 | as opposed to having a number of products that are | 20 | not integrated? | 21 | A. The integrated functionality has | 22 | everything to do with efficiencies that will take |
00072 | 1 | place within the business. Every business exists | 2 | to make money -- well, not every -- I guess I | 3 | should caveat that -- most businesses exist to | 4 | make money, make profit, and even if not, they | 5 | still need money. So within those operations the | 6 | companies are interested in making sure they're | 7 | efficient in managing what they do, and what the | 8 | financial implications of that are. | 9 | If the integration doesn't exist, or a | 10 | company has to extract data from a number of | 11 | systems, and work with disparate, or separate, or | 12 | different data to try to consolidate that data | 13 | from a financial perspective, that drives | 14 | inefficiency. | 15 | So what integration brings is basically | 16 | efficiency of tying together the operations of a | 17 | business with the financial management of a | 18 | business. So that's typically, I think, how they | 19 | come together. | 20 | And the efficiencies that are created | 21 | in that integration is the primary reason to do | 22 | it, as well as, part of that efficiency is |
00073 | 1 | supported by data, common data, or common business | 2 | process constructs that exist, so that, if Kent | 3 | has an accounts payable process and Dave has an | 4 | accounts payable process as two parts of an | 5 | organization, that we can converse with each | 6 | other, we can understand how each other work, we | 7 | can trade similar data and then we're more | 8 | efficient, because we understand how each other | 9 | works, as opposed to having non-integrated or | 10 | different processes. That makes it difficult to | 11 | account for your data and your business -- I | 12 | should say, account for your business, as opposed | 13 | to data. | 14 | Q. Let me just ask a couple things with | 15 | respect to that. | 16 | With a more efficient system, can a | 17 | business perform its operations with less cost? | 18 | A. Yes. Absolutely. | 19 | Q. Is that one of the reasons why | 20 | companies want integrated systems? | 21 | A. Less cost, less people, simplified | 22 | processes. Those are some of the reasons. |
00074 | 1 | Q. With integrated systems can a business | 2 | perform its processes better? | 3 | A. Yes. Typically that is the case. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00081 | | | | | | | | | | | | | | | | | | | | | | | | | 13 | Q. Okay. And what's the difference | 14 | between a suite of software provided by one | 15 | vendor, a suite of integrated software, and in | 16 | terms of the functionality or the capability of | 17 | the software, and a situation where there's two | 18 | different applications that have been integrated | 19 | via a third party product? | 20 | MR. YATES: Objection. The question is | 21 | overbroad. | 22 | THE WITNESS: I'm sorry? |
00082 | 1 | MR.YATES: Overbroad. | 2 | BY MR. BROWN: | 3 | Q. You can answer. | 4 | A. I'd like to say there's little | 5 | difference. | 6 | From a business process model there is | 7 | little difference. So if we are trying to | 8 | establish that a set of business processes and | 9 | business functions exist that are supported by | 10 | system processes, if I use a multiple vendor | 11 | platform to support that, and I happen to have an | 12 | integration software involved that supports the | 13 | integration, there essentially is no difference in | 14 | terms of the working functionality of that | 15 | particular solution. | 16 | The differences start to enter in, in | 17 | terms of how much companies have invested in their | 18 | legacy platforms. So the last time that we met, | 19 | we talked a little about , we REDACTED | 20 | talked about the fact that they have invested | 21 | significantly in their Oracle suite of | 22 | applications. But when they acquired in REDACTED |
00083 | 1 | early 2000, or whatever the time frame was, they | 2 | were faced with a question that said, should we | 3 | get rid of either Oracle or SAP? What should we | 4 | do? | 5 | And the way that they satisfied their | 6 | particular situation for at least a temporary | 7 | basis was to not get rid of either and make the | 8 | two of them coexist, and manage their | 9 | consolidation requirements using both of those | 10 | products. | 11 | So the point I was making is, companies | 12 | sometimes invest significantly in their software | 13 | platforms, their business events like acquisitions | 14 | or repositionings or whatever of those | 15 | organizations, that beg questions of, what should | 16 | our systems architecture look like, and how will | 17 | we accomplish integration? | 18 | And if those companies leverage hybrid | 19 | software models or hybrid architectures versus | 20 | single platform architectures, they can accomplish | 21 | the same business objectives. | 22 | The issues that are usually there, |
00084 | 1 | again, are the investment that's been made, the | 2 | support requirements of having different | 3 | platforms, and any of the consolidation or | 4 | efficiency-type issues that we talked about | 5 | earlier. | 6 | If they can get past those and they can | 7 | accomplish them through other technology means or | 8 | other business process means, many times the | 9 | companies are okay with having a hybrid model. | | | | | | | | | | | | | | | | | | | 19 | Q. And did make a REDACTED | 20 | decision ultimately as to whether it would | 21 | continue to maintain a hybrid system? | 22 | A. That was their strategy. I'm not |
00085 | 1 | familiar with where they're at currently. There | 2 | was some discussion, ERP strategy projects done | 3 | which again are sensitive, that analyzed whether | 4 | or not they should be on a SAP versus an Oracle | 5 | platform. They were considering moving to a SAP | 6 | platform because the Oracle product was | 7 | desupported in the marketplace. And that the oil | 8 | and gas industry, by and large, was supported | 9 | almost exclusively through the use of SAP. And | 10 | that as they evaluated their strategy and said, | 11 | why would we want to keep this organization on | 12 | something that is so different from what the | 13 | industry standard is? Should we in fact do that? | 14 | That was the $ million question. That was a REDACTED | 15 | very large decision that would have been | 16 | undertaken for them to replace their SAP -- or | 17 | their ERP functionality. | 18 | Q. Did decide to REDACTED | 19 | standardize on SAP? | 20 | A. There was a direction -- they have not | 21 | done that... let me restate. | 22 | At the time that that strategy project |
00086 | 1 | took place, there was a desire to move towards a | 2 | single platform and have that platform be SAP. I | 3 | don't know that the company has appropriated the | 4 | funding to execute that project. | 5 | And in the meantime what they proceeded | 6 | with was a hybrid model and the use of middleware | 7 | to tie it together, any legacy applications that | 8 | needed to be integrated on the interim basis. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00088 | | | | | | | | | | | | | 7 | Q. Well, you mentioned that REDACTED | 8 | decision to at least temporarily use REDACTED | 9 | the -- this hybrid approach seemed -- the | 10 | implication is that it's a -- at least a temporary | 11 | solution. | 12 | A. Uh-huh. | 13 | Q. Are there advantages in terms of these | 14 | efficiencies that you've described with a fully | 15 | integrated system as opposed to a hybrid system? | 16 | A. Well, I'm going to answer that question | 17 | generically, not in 's case. There might be REDACTED | 18 | advantages. It depends on maturity of that | 19 | particular company's business processes and | 20 | supporting technology. | 21 | Said differently, if a company has | 22 | evolved in its operation, to have the kind of |
00089 | 1 | information it requires to manage the sales | 2 | function, to manage the materials management | 3 | functions, to manage the financial reporting, and | 4 | those technologies are mature and highly capable, | 5 | then there may not be any efficiency to moving | 6 | towards a single platform. | 7 | If you take two powerful companies from | 8 | the example that we mentioned -- | 9 | (REPORTER REQUESTED CLARIFICATION) | 10 | A. If you take the two companies that we | 11 | used as an example, and their software and | 12 | business processes are matured, then there may not | 13 | be any efficiencies in the consolidation of that | 14 | systems platform. | 15 | So it really comes down, in my way of | 16 | thinking, and what we refer to in the firm, is | 17 | there that business transformation opportunity? | 18 | Is there a process improvement? Is there a | 19 | financial improvement? You know, why would we | 20 | spend the money, as a client, on doing something | 21 | if we weren't going to get that yield back out of | 22 | it? |
00090 | 1 | So that's the way we would look at | 2 | that. So if those process models, those | 3 | technology models are mature and they're well run, | 4 | there are companies who have made decisions to not | 5 | move forward in that particular case. | 6 | Q. If the company's only developing, say, | 7 | it's CRM applications, or feels that its | 8 | applications or business processes are not in line | 9 | with its competitors, is that the situation when | 10 | it might be more efficient to use a single | 11 | platform? | 12 | A. That could be the case. If they find | 13 | that they get competitive advantage from it, they | 14 | would entertain that strategy. | | | | | | | | | | | | | | | | |
00091 | | | | | | | | | | | | | | | | | 9 | Q. And I think this would be a good time | 10 | to try to put into context what we mean when we're | 11 | talking about integration. And why don't I | 12 | initially start with software that's provided by a | 13 | single vendor. | 14 | Is there -- is software that's provided | 15 | by a single vendor, like Oracle, or PeopleSoft or | 16 | SAP, is there integration between different types | 17 | of functionality that a single vendor provides? | 18 | A. Yes. | 19 | Q. Okay. Now -- is this the kind of | 20 | integration that -- or kind of software that, if | 21 | somebody wants multiple functionality, they'll | 22 | usually say they buy a suite of software? |
00092 | 1 | A. Maybe just -- ask that question again. | 2 | I think you started with, is that the kind of | 3 | integration that they usually buy a suite of | 4 | software for? | 5 | Q. Yes. | 6 | A. They usually buy a suite of software to | 7 | purchase a set of applications that are | 8 | integrated. They usually implement those | 9 | applications in their system environment, and most | 10 | times those systems that they implement, which | 11 | they've just bought, have integration requirements | 12 | to other systems. | | | | | | | | | | | | | | | | | | | | |
00094 | 1 | Q. When you use a -- when you integrate | 2 | the hybrids -- not the hybrid. | 3 | When you integrate the legacy solution | 4 | with the purchased solution, does that create a | 5 | hybrid situation? | 6 | A. It will create a hybrid situation, yes. | 7 | Q. Okay. And what's the purpose of | 8 | integrating the legacy solution with the purchase | 9 | solution? | 10 | A. To process data from the legacy | 11 | environments, usually, into the back office, or | 12 | financial environments, so you can understand the | 13 | impact of a set of processes, financially. | 14 | Q. So the legacy system has to work | 15 | with -- | 16 | A. Oftentimes -- sorry. | 17 | Q. -- the purchased solution. | 18 | A. That can be the case. That's right. | 19 | Q. Is the purchased financial and HR | 20 | solution sometimes integrated with another | 21 | purchased application that might provide other | 22 | types of functionality, like CRM, or supply chain |
00095 | 1 | functionality? | 2 | A. Yes, that is the case. | 3 | Q. Okay. Now, is that the hybrid | 4 | situation that you discussed? | 5 | A. That would be a hybrid situation, yes. | 6 | Q. Now, what's the purpose of integrating | 7 | the CRM and supply chain functionality with the | 8 | finance and HR functions? | 9 | A. The purpose of integrating it with | 10 | finance would be to understand the financial | 11 | impact and financial management decisions that are | 12 | required to be taken. There is usually lower, or | 13 | less utility to integrating HR to supply chain | 14 | applications. | 15 | Sometimes, Oracle, as an example, | 16 | Oracle's purchasing product requires buyers to be | 17 | associated with the purchasing application. Those | 18 | buyers' identities are housed within Oracle's HR | 19 | product. If you were not going to use Oracle's HR | 20 | product, but you were going to use their | 21 | purchasing product, you still need to have those | 22 | buyers able to be recognized by the purchasing |
00096 | 1 | product. So you would be required to integrate | 2 | wherever your buyers are kept from an HR | 3 | perspective with supply chain application and | 4 | purchasing in that case. | 5 | Q. Would you integrate that system, say, | 6 | from a legacy system, if you didn't use the Oracle | 7 | HR product? | 8 | A. Could be, yes. Yes. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00097 | | | | | | | | | | | | | | | | | | | | | 11 | Q. But just so I understand, after REDACTED | 12 | acquired , it had some operations that were REDACTED | 13 | running on a full ERP, including more than | 14 | financial management and HR, Oracle environment; | 15 | is that correct? | 16 | A. That is correct. | 17 | Q. And it had some other operations that | 18 | continued from before the acquisition, that were | 19 | running on a full ERP SAP environment; is that | 20 | correct? | 21 | A. In the environment, that's REDACTED | 22 | correct. |
00098 | 1 | Q. Okay. And-- | 2 | A. And they also had other ERP components | 3 | that were not Oracle in its legacy environment. REDACTED | 4 | Q. Now, with respect to that situation, REDACTED | 5 | was attempting to somehow integrate the Oracle -- | 6 | the legacy systems and the new systems; REDACTED | 7 | is that correct? | 8 | A. The objective was not to integrate. | 9 | They had financial reporting requirements that had | 10 | to be met, again, statutorily and legally. There | 11 | was a question in their mind as to what the best | 12 | strategy would be around their ERP systems, and | 13 | whether or not it was more or less expensive, or | 14 | if there were any benefits associated with having | 15 | one versus multiple ERPs, whether it was either/or | 16 | SAP or Oracle. | 17 | Q. But the solution, at least temporarily, | 18 | has been to have a hybrid solution that integrates | 19 | the and the -- or the SAP and the Oracle REDACTED | 20 | solutions? | 21 | A. The temporary solution does not | 22 | integrate those two softwares. Those two |
00099 | 1 | softwares are still used to run separate parts of | 2 | the business. The integration that has to exist | 3 | is around the consolidation and financial | 4 | reporting requirements. | 5 | Q. Okay. Now, with respect to the | 6 | integration that we've been talking about, you've | 7 | now discussed situations where the financial | 8 | management or HR system would be integrated with a | 9 | legacy system, with a system that might have some | 10 | additional functionality like a CRM or supply | 11 | chain system. And where two different ERP systems | 12 | might have to somehow be potentially combined or | 13 | integrated for the purposes of consolidating | 14 | information. | 15 | Are your customers using a hybrid | 16 | solution to integrate individual components of | 17 | functionality within a financial management system | 18 | like accounts receivable, accounts payable and | 19 | general ledger? | 20 | MR. YATES: Objection. Vague and | 21 | ambiguous. | 22 | A. Some of our clients integrate legacy |
00100 | 1 | applications to the software packages. | 2 | BY MR. BROWN: | 3 | Q. Okay. | 4 | A. Because they bought Oracle, or SAP or | 5 | other, does not necessarily mean that they | 6 | replaced their full suite of financials. Thereby, | 7 | they will have some needs for integration. | 8 | Q. So a customer that bought an Oracle | 9 | financial package may continue to use a portion of | 10 | its legacy financial system? | 11 | A. That's absolutely the case. | 12 | Q. Okay. | 13 | A. We have an existing engagement right | 14 | now, Oracle general ledger has been bought. They | 15 | will integrate their existing purchasing and AP | 16 | applications with Oracle's general ledger. | 17 | Q. Okay. Are your customers purchasing | 18 | different -- are your customers purchasing | 19 | different financial components for the purposes of | 20 | integration or is that integration generally done | 21 | with a legacy system? | 22 | A. The latter. Usually done with the |
00101 | 1 | legacy system. They're not buying the apps to | 2 | facilitate the integration. | 3 | Q. Do you know of any customers who are | 4 | purchasing a set of different financial | 5 | applications to combine together in a single | 6 | financial system? | 7 | A. I don't think so, Kent, if I understood | 8 | your question. | 9 | Q. Okay. Well, let me make sure, because | 10 | I don't want you to be confused by the question. | 11 | Do you know of any customers who are -- | 12 | who are or have purchased from third parties -- | 13 | general ledger, accounts receivable, accounts | 14 | payable, systems for the -- and then are | 15 | integrating those systems with this hybrid | 16 | solution into a single solution? | 17 | MR. YATES: From what I understood, he | 18 | gave you an example of that a minute ago with | 19 | this Oracle general ledger integrating with | 20 | one of the modules, but... so I think the | 21 | question is vague and ambiguous. I think the | 22 | two of you are missing each other someplace. |
00102 | 1 | A. I'm having trouble with the question, | 2 | because that set of circumstances that you | 3 | described does not strike a match in my mind with | 4 | anybody that's done something like that. It's | 5 | highly unlikely that somebody would do that. | 6 | BY MR. BROWN: | 7 | Q. Why? | 8 | A. You don't -- you don't buy an | 9 | application for the purpose of integrating. You | 10 | don't buy an application to cause integration. | 11 | You buy an application to get the business | 12 | transformation. | 13 | Q. Okay. When do you integrate, then? | 14 | A. You integrate to pass data from source | 15 | applications to cause financial reporting | 16 | processes to fall into place. | 17 | You integrate from the back office to | 18 | the operational applications to understand the | 19 | financial management processes of your business. | 20 | You integrate when you are taking a | 21 | piece of an application architecture out of that | 22 | architecture, and bringing in a new piece of |
00103 | 1 | software. But the reason do you that is not to | 2 | cause integration; the reason do you that is to | 3 | drive improved business functionality. You | 4 | wouldn't just do that for the sake of integration. | 5 | You'd do that because you want to improve your | 6 | consolidation and your reporting procedures; you | 7 | want to improve your efficiencies and things we've | 8 | talked about earlier. | 9 | Q. Now, I understand from the example that | 10 | you're talking about, where a company has | 11 | purchased a general ledger that it might use with | 12 | its legacy accounts payable system. | 13 | A. Uh-huh. | 14 | Q. But I also -- I want to ask a situation | 15 | about -- are you familiar with the term "best of | 16 | breed"? | 17 | A. Yes. | 18 | Q. Is a best of breed situation where a | 19 | company might buy software from a variety of | 20 | different vendors -- | 21 | A. Yes. | 22 | Q. ---to fulfill some functionality? |
00104 | 1 | A. Yes. | 2 | Q. Are you aware of companies that have | 3 | adopted a best of breed strategy? For the | 4 | components of their financial system, the major | 5 | components, general ledger, accounts receivable, | 6 | accounts payable? | 7 | A. No. | 8 | Q. Now, broadening the question, do some | 9 | companies have a best of breed strategy with | 10 | respect to, say, all financial software? Or | 11 | all -- and separately, all CRM software? | 12 | A. You would find best of breed when you | 13 | go to the ERP footprint, not within back office -- | 14 | typically within back office functions. | 15 | So as you described it you would find | 16 | best of breed in those companies that extend their | 17 | ERP footprint to include CRPs, and CRM. Which is | 18 | when we talked about Arriba, and software | 19 | applications as such, that's where you would find | 20 | that situation. | 21 | Q. But you don't see a best of breed | 22 | capability within the financial management and HR |
00105 | 1 | back office functions? | 2 | A. No, I have not seen that. | 3 | Q. And why is that? | 4 | A. Typically when companies make those | 5 | purchases they buy those suites of products, and | 6 | the example I gave earlier, there is intent to | 7 | eventually incorporate the rest of the Oracle | 8 | financial applications. There is a limitation on | 9 | the spend. So that company right now is not | 10 | interested in buying all of the Oracle financial | 11 | products, implementing all of the Oracle financial | 12 | products, because they don't have the money or the | 13 | number of people to do it. | 14 | They are interested in piecemealing | 15 | that in. That is not best of breed. That will be | 16 | a legacy requirement of legacy applications to the | 17 | general ledger, they'll eventually replace those | 18 | legacy operations with Oracle, that would be the | 19 | back office solution now being Oracle, overtime. | 20 | When you start to talk about extended | 21 | footprint and CRM and the other thing, yes, you | 22 | will run into the application of Siebel, with the |
00106 | 1 | financials, which is what we have done with a | 2 | client on the West Coast, back to that application | 3 | architecture and start to replace pieces of | 4 | business functions, business processes and | 5 | business systems. | 6 | Q. Okay. Now, I want to just return for | 7 | example -- for a moment to the example that we REDACTED | 8 | talked about. | 9 | A. Okay. | 10 | Q. Where there was a question of whether | 11 | should stay with Oracle and SAP systems -- REDACTED | 12 | separate Oracle and SAP systems, or go to SAP. | 13 | Do you know if there -- if it would | 14 | have been economically reasonable for to REDACTED | 15 | consider any other ERP system in that | 16 | consideration? | 17 | A. "Economically reasonable." I guess, | 18 | what does "economically reasonable" mean. | 19 | Q. Let me just back up. had already REDACTED | 20 | made an investment in its Oracle system. | 21 | A. Uh-huh. | 22 | Q. had already made an investment, or REDACTED |
00107 | 1 | had already made an investment in the SAP REDACTED | 2 | system. Is that accurate? | 3 | A. Yes. | 4 | Q. Was there any other ERP system that- | 5 | that could have used as economically, or as -- REDACTED | 6 | as inexpensively as it might have been able to use | 7 | one of those two systems? | 8 | A. There were no other softwares that had | 9 | the functionality required to meet 's oil and REDACTED | 10 | gas industry requirements. Those are the only | 11 | two. | 12 | Q. Okay. So for my question, my question | 13 | is, perhaps, not important, because there was no | 14 | other possible alternatives. | 15 | A. That's correct. There was no other | 16 | alternative. | 17 | Q. Okay. Now, are you aware of any | 18 | situations where a customer's -- other customers | 19 | have two different systems that they're thinking | 20 | about -- and they're thinking about the | 21 | possibility of consolidating their systems? | 22 | A. Two thoughts come to mind, Kent. There |
00108 | 1 | are clients where we have converted in our | 2 | history, system environments that have converted | 3 | two systems into one. There are a number of | 4 | clients out there today who are considering what | 5 | their system strategy and how their application | 6 | architecture looks, who are considering going from | 7 | multiple hybrid or best of breed environments to | 8 | integrated environments. | 9 | That is the case. There are a number | 10 | of clients that are considering that | 11 | consolidation. | 12 | Q. Okay. And how common is it today for | 13 | Deloitte's clients to have more than one ERP | 14 | system? | 15 | A. It is very common. I'd say, probably | 16 | 75 percent of the cases. | | | | | | | | | | | | |
00110 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 21 | Q. Okay. And just in -- historically, | 22 | when did -- did companies acquire -- historically, |
00111 | 1 | have companies been purchasing their ERP systems, | 2 | disparate ERP systems, for different products or | 3 | for different geographies? | 4 | A. That is true. It's also true that | 5 | companies buy them to have common processes. So | 6 | there are management philosophies that drive | 7 | software buys that say, we got to have common | 8 | businesses -- common business processes, common | 9 | softwares, and we got to drive that from a | 10 | corporate structure perspective. | 11 | Those are businesses that rebut that | 12 | strategy that say, we need to have very specific | 13 | software and very specific processes for an | 14 | aspect, or a business unit of my business. So you | 15 | find companies that are very distributed in their | 16 | thinking, and you find companies that are very | 17 | common in their thinking. | 18 | And those trends move, and management | 19 | philosophy being what it is, not all managers | 20 | always believe that one or the other is perfect, | 21 | and those trends move across industry all the | 22 | time. |
00112 | 1 | So you find cases of common, and you | 2 | find cases of very distributed software | 3 | architectures and software strategies and | 4 | management philosophies. So... | 5 | Q. Okay. And I think I want to focus in | 6 | on was there -- did many companies buy ERP | 7 | software during the 1990s? | 8 | A. Yes. That was a very busy | 9 | software-purchasing period. | 10 | Q. And why were they buying their | 11 | financial and other ERP software at that time? | 12 | A. The biggest driver in the late '90s was | 13 | the Y2K phenomenon. | 14 | Q. Okay. And you mentioned that today | 15 | many of Deloitte's clients have multiple ERP | 16 | systems? | 17 | A. That's correct. | 18 | Q. Is that in part the result of -- of | 19 | many of the purchases made in the '90s? | 20 | A. That could be the case. That could be | 21 | the case. Sometimes those companies updated their | 22 | systems without making software purchases, and now |
00113 | 1 | their systems are in need of replacement. So you | 2 | have different rationale driving what's out there. | 3 | Q. But with respect to the population of | 4 | ERP systems in Deloitte's client base now, did | 5 | many of those disparate systems get purchased and | 6 | implemented during -- in connection with the Y2K | 7 | replacements? | 8 | A. That's true. Many of them did. Is it | 9 | the majority or the bulk? No, there are still a | 10 | number of companies that did not yield to the Y2K, | 11 | that fixed their own systems. | 12 | So what we're seeing in the market | 13 | right now is there is still a command to move to | 14 | the ERP strategy, that says common or distributed, | 15 | so that the market is, again, the market is | 16 | repositioning itself. | 17 | Q. Okay. So let me focus for a moment on | 18 | the companies that did not purchase ERP systems | 19 | fortheY2K. | 20 | A. Uh-huh. | 21 | Q. Are these companies, as we are moving | 22 | forward, are these companies beginning to purchase |
00114 | 1 | ERP systems now? | 2 | A. They are. | 3 | Q. Why is -- why would they purchase an | 4 | ERP system, if they already have a legacy system, | 5 | for example? | 6 | A. Two answers, I think I'd give you | 7 | there. | 8 | One is growth. We've had clients that | 9 | have grown from a couple hundred million dollars | 10 | to, you know, a couple billion dollars, who find | 11 | that they want more -- and this is the second | 12 | answer. | 13 | They find they want more functionality | 14 | within their softwares. | 15 | So we talked earlier about Great | 16 | Plains, simple, rapid, those kind of things, those | 17 | solutions are being outgrown based on the | 18 | company's growth. So it's growth and | 19 | functionality are really the big drivers. | 20 | Q. If the company already has an internal | 21 | legacy system, is there any reason why it would | 22 | want to replace it with an ERP system? |
00115 | 1 | A. The other -- I think the other | 2 | rationale that we should probably list in there is | 3 | also the difficulty of supporting some of those | 4 | systems, and the cost of supporting some of those | 5 | systems, is the answer to the question you just | 6 | asked. | 7 | And probably a third rationale is | 8 | probably moving the companies now. | 9 | So we talked about Baan, for example. | 10 | Baan has shrunken significantly, kind of moving | 11 | off the face of the earth, so to speak. It's | 12 | harder to find Baan resources, it's expensive to | 13 | maintain. Baan, the company, is not investing in | 14 | the software. | 15 | Gee, if I'm running a company, I'm not | 16 | sure I want to be on that anymore. So again, | 17 | market forces and market changes, and a | 18 | requirement of new functionality, and the cost to | 19 | support those types of things are also reasons. | | | | | | |
00116 | | | 2 | Q. Are legacy systems more costly to | 3 | enhance than commercial systems? | 4 | MR. YATES: Objection. Overbroad. | 5 | A. It depends on the -- it depends on the | 6 | functionality that's desired around the | 7 | customization. | | | 9 | Q. Okay. In general, do -- are the | 10 | companies that are purchasing ERP systems to | 11 | replace legacy systems, is there an advantage with | 12 | respect to lowering the cost of enhancements? | 13 | A. Possibly. | 14 | Q. Why do you say that? | 15 | A. I'm smiling, because the -- you know, | 16 | there is a lot of sales hype in selling those | 17 | solutions that suggests that support costs can be | 18 | lowered. That needs to be balanced in the total | 19 | cast of ownership with the requirement to develop | 20 | new skills to support the new environments. So | 21 | there's an offset -- there's an offset there, that | 22 | needs to be investigated, and companies need to |
00117 | 1 | understand that, and that's part of what we try to | 2 | help our clients do. | 3 | Q. Well, do the commercial companies, are | 4 | they able to spread their enhancement, or | 5 | development costs over a number of customers? | 6 | A. That is the case. Yes. | 7 | Q. And with respect to an internal system, | 8 | the customer would have to fund the entire | 9 | enhancement? | 10 | A. That's correct. | 11 | Q. Is that -- does that -- does that cause | 12 | customers sometimes to replace their legacy | 13 | systems? | 14 | MR. YATES: Objection. Overbroad. | 15 | Lacks foundation. | 16 | BY MR. BROWN: | 17 | Q. Has it caused customers to replace | 18 | their legacy system? | 19 | A. That can be a driver in their decision | 20 | process, yes. | 21 | Q. Now, you mentioned that companies that | 22 | have an internal system might purchase a new ERP |
00118 | 1 | system because they have grown. | 2 | Are there other reasons why a company | 3 | that already has an internal system might want to | 4 | change to an ERP system? | 5 | A. Well, I think I said growth and | 6 | functionality, was the second one. | 7 | Q. Okay. That's-- | 8 | A. And the third one was the cost of | 9 | support. So those are probably the other more | 10 | prevalent reasons that one sees in companies | 11 | trying to make those changes. | 12 | Q. Are there any industries for which | 13 | Oracle, PeopleSoft and SAP have only recently | 14 | begun to offer the functionality that the | 15 | customers in those industries desire? | 16 | A. The public sector, particularly the | 17 | federal space, generally speaking lags the | 18 | commercial market space. And those software | 19 | vendors have invested more monies in that | 20 | particular space of late. | 21 | And all believe that that space | 22 | represents an opportunity, from a sales and a |
00119 | 1 | profit perspective, into the future. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00121 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20 | Q. Are you aware of any - of any | 21 | commercial segments where -- where new | 22 | functionality is providing an inducement for |
00122 | 1 | customers to switch to the commercial ERP systems? | 2 | MR. YATES: Objection. Vague as to | 3 | functionality and ERP. | 4 | A. The only thing I can think of along | 5 | those lines might be around health care, | 6 | particularly within the life sciences segment, | 7 | when it comes to clinical trials associated with | 8 | new drugs. | 9 | And there has been, again, some new | 10 | product development, some extension of softwares | 11 | to support those requirements of that industry. | 12 | That has some pretty significant dollar | 13 | impact and safety and product safety and FDA | 14 | impacts associated with it. It has become more of | 15 | a driving force in that particular industry. | 16 | But I -- it's still not as big as what | 17 | we've talked about in terms of the federal shift. | 18 | BY MR. BROWN: | 19 | Q. Is this -- does this have any impact on | 20 | any incentives of the -- of companies in the | 21 | pharmaceutical industry to purchase what we've | 22 | been talking about, that ERP software for |
00123 | 1 | financials, or HR? | 2 | A. Not so much financials and HR. | 3 | Q. Okay. Now, I want to talk about the | 4 | other group of customers that are not new | 5 | purchasers, but have already made many of their | 6 | purchases -- purchase -- at least purchased | 7 | commercial systems initially during the 1990s. | 8 | A. Uh-huh. | 9 | Q. Now, I think you are -- is it correct | 10 | that those customers now often have a variety of | 11 | ERP systems? | 12 | A. That is true. | 13 | Q. Are any of these customers today | 14 | considering the possibility of combining their ERP | 15 | systems to reduce the number of systems they have? | 16 | A. Some of them are, yes. | 17 | Q. And are you seeing that as a growing | 18 | trend? | 19 | A. I wouldn't say growing. I would say it | 20 | is a trend. I think that, again, companies are | 21 | constantly evaluating their systems strategy and | 22 | structures, asking the question if common is |
00124 | 1 | better, or if they should go to single versus | 2 | multiple ERP system support. | 3 | So you know, I don't know that I've | 4 | seen a dramatic shift in that, and as we're | 5 | talking about this other set of clients who didn't | 6 | make the decision in the late '90s, they're still | 7 | evaluating whether or not they want to be common, | 8 | whether or not they want to be unique at the | 9 | business unit level. | 10 | So again, that question exists, whether | 11 | it's 1996, '7, '8, '9, 2004, '5, '6,I think we'll | 12 | see it in the future as well. | 13 | Q. Okay. Why -- what are some of the | 14 | advantages that a company might consider if it | 15 | wants -- that would cause it to want to | 16 | consolidate on to a fewer number of systems? | 17 | A. I go back to the three answers I gave a | 18 | minute ago. I'd say again it's cost of support, | 19 | its functionality, and its growth. | 20 | On top of that, if there's a perceived | 21 | notion that a company can be more efficient, make | 22 | more money, again, through the use of new software |
00125 | 1 | or by changing its IT organization, or | 2 | facilitating a change of the business through | 3 | transformation, then they will evaluate their | 4 | system strategy. They may buy a new ERP system, | 5 | they may implement that at a corporate common | 6 | level or they may implement at a business unit | 7 | level. | 8 | Q. Okay. Are Deloitte's clients today, | 9 | are -- are considering the possibility of | 10 | implementing ERP systems other than Lawson, SAP, | 11 | PeopleSoft and Oracle? | 12 | A. Not at an ERP level, Kent. When you | 13 | say "ERP level," if I'm thinking the full suite, | 14 | those are the most popular providers. Companies | 15 | are thinking about looking at their ERP | 16 | architectures, and they're replacing single levels | 17 | of functionality, which are the companies that are | 18 | doing, and executing on a best of breed | 19 | philosophy. | | | | | | |
00127 | | | | | | | | | 5 | Are you aware of any Deloitte clients | 6 | who are considering finance and HR systems other | 7 | than Oracle, People Soft, Lawson and SAP? | 8 | A. I'm not personally aware of an example. | 9 | But do I know that, at the firm level, we do do | 10 | analysis for companies that would try to help them | 11 | understand if they can have a financial systems | 12 | strategy that could be facilitated by any number | 13 | of products, which may not be ERP. | 14 | Q. Okay. And have you -- have you -- are | 15 | your clients using -- are you aware of clients who | 16 | are -- who are implementing financial strategies | 17 | for handling their financial processes that | 18 | would -- that -- let me strike that. | 19 | Are you aware -- are Deloitte's clients | 20 | implementing financial process strategies for | 21 | handling all of the integrated financial | 22 | capabilities that would be supplied by -- |
00128 | 1 | ordinarily supplied by Oracle, PeopleSoft or SAP | 2 | or Lawson? | 3 | THE WITNESS: You got a second? Let me | 4 | discuss that question. Because ... I think I | 5 | need -- | 6 | MR. BROWN: Do you need a break? | 7 | MS. SABO: Yeah, let's take a break. | 8 | MR. BROWN: Off the record. | 9 | (OFF RECORD DISCUSSION) | 10 | (REPORTER READ FROM THE RECORD) | 11 | (OFF RECORD DISCUSSION) | 12 | (RECESS TAKEN FROM 12:19 TO 12:29 P.M.) | 13 | MR. BROWN: Back on the record. | 14 | BY MR. BROWN: | 15 | Q. Can you answer the question that was | 16 | posed before we took a break? | 17 | A. What I want to say is that, my personal | 18 | experience in managing the Oracle practice, I've | 19 | not seen any of our clients entertain the use of | 20 | vendors outside of the four that we've been | 21 | talking about. | 22 | I do know that, as a firm, there are |
00129 | 1 | clients that can be large or small, under many | 2 | circumstances, who are interested in -- and | 3 | something we've talked about earlier on -- point | 4 | solutions, who will move outside of the universe | 5 | of the solutions that we've been talking about, | 6 | and look at different alternatives to manage the | 7 | financial or back office functions. | 8 | Q. Well, I do want to -- who are the | 9 | clients that you've heard of, who have used a | 10 | different solution than Oracle, Lawson, People Soft | 11 | and SAP to manage their back office? And by "back | 12 | office," I mean their financial management, or HR | 13 | functions? | 14 | A. The category of those clients could be | 15 | middle market, or emerging clients in our | 16 | portfolio. Those clients, again, might be | 17 | interested in something that is more rapid than it | 18 | is comprehensive. There are also CFOs in business | 19 | who are not interested in undertaking the cost | 20 | associated with the caliber of the software | 21 | companies that we're talking about here today. | 22 | Q. Okay. Now, in terms of the category of |
00130 | 1 | the middle market, or the emerging companies, are | 2 | these the smaller companies with simpler | 3 | requirements that you discussed earlier? | 4 | A. It could be smaller companies with | 5 | smaller requirements, it could be simpler revenue | 6 | companies, but you will find within the large | 7 | corps, sometime, CFOs not wanting to spend a lot | 8 | of money on their infrastructure. They might be | 9 | down, you know, at a business level that, again, | 10 | might be smaller, but it might not be fair to say | 11 | that General Motors might have, as an example, | 12 | some business unit that's 10 or $15 million. So | 13 | if we talk about General Motors at that level, you | 14 | can't generalize around General Motors and say, | 15 | gee, General Motors has never entertained anything | 16 | other than these four. | 17 | You'd have to say, well, gee, all the | 18 | way down at that business unit level, there might | 19 | be the CFO over here that's in an emerging | 20 | opportunity that's part of GM that might not want | 21 | to implement a corporate standard, and he's be | 22 | allowed to do that. |
00131 | 1 | So that's why I had the difficulty in | 2 | trying to specifically answer that question. | 3 | Because there will be situations in our firm, or | 4 | our client portfolio, that people are asking what | 5 | financial capabilities they need to run their | 6 | business, and those companies do entertain looking | 7 | at other than the Big Four. | 8 | Q. Now, can you identify for me any | 9 | companies who, in the last two or three years, | 10 | in -- that are Deloitte's clients, that have | 11 | implemented, for financials or back office, | 12 | systems other than Lawson, Oracle, SAP and | 13 | PeopleSoft, and with one caveat, excluding from | 14 | that universe the smaller companies that you've | 15 | talked about that have simple requirements? | 16 | A. In my -- | 17 | MR. YATES: It's vague as to "smaller." | 18 | Do you want to define that with any | 19 | more particularity? | 20 | MR. BROWN: Not right now. | 21 | MR. YATES: Vague and ambiguous. | 22 | BY MR. BROWN: |
00132 | 1 | Q. I will have you define that later, but | 2 | answer the question first. | 3 | A. Okay. In my practice, in the Oracle | 4 | practice, I've not seen anyone look at those other | 5 | vendors. That's not the space that I operate in. | 6 | At the firm level, I can't speak to | 7 | that question with a level of specificity. | 8 | Q. So you're not aware -- | 9 | A. It's just not my practice. | 10 | Q. You're not aware of any at the firm | 11 | level? | 12 | A. Again -- | 13 | MR. YATES: Objection. Asked and | 14 | answered. | | | | | 17 | Q. You're not aware of any other -- you're | 18 | not aware of that happening anywhere in the firm. | 19 | Is that accurate? | 20 | MR. YATES: Same objections. | 21 | A. Not by specific identity. | 22 | |
00133 | | | | | | | | | 5 | Q. Okay. Now, I would like to learn a | 6 | little bit about, what are the kinds of companies | 7 | that you have categorized as emerging or middle | 8 | market companies? Is there -- are there any ways | 9 | that Deloitte uses to categorize those companies? | 10 | A. Emerging has no technical definition. | 11 | Middle market, or mid count, as it can | 12 | be referred to within the firm, generally speaking | 13 | again, were companies under a billion dollars. | 14 | The market size that our Oracle | 15 | practice deals with, by the way of example, is | 16 | generally speaking, again, $500 million and up. | 17 | Q. Okay. Now, is an emerging company a | 18 | new company? | 19 | A. It could be a new company, or it could | 20 | be a piece of a very large organization that's in | 21 | startup. It could be a joint venture between two | 22 | organizations; it could be any number of things. |
00134 | 1 | Q. So a new -- but it's a new operation, | 2 | is one of the characteristics? | 3 | A. That's how I was referencing it. | 4 | Q. Is that usually - is an emerging | 5 | company that would have simple requirements | 6 | usually have a smaller operation as opposed to a | 7 | big company? | 8 | A. You can't generalize on the | 9 | requirements. Again, if it's part of a large | 10 | organization, and there are corporate policies | 11 | that drive requirements, a simple company could | 12 | have very difficult and complex financial | 13 | reporting requirements. So that's not necessarily | 14 | the case. | 15 | It may be the case that it is a small | 16 | company who is in startup mode who is looking to | 17 | get some simple financial information, that may | 18 | drive them away from the spend that's associated | 19 | with some of the larger software vendors. | 20 | Q. Are you aware of any circumstances | 21 | where an emerging operation, whether it's | 22 | independent or part of a joint venture, or a |
00135 | 1 | component of a larger company, that has more | 2 | complex requirements, has used an ERP system other | 3 | than Oracle, PeopleSoft or SAP? | 4 | A. No. | | | | | | | | | 9 | Q. Okay. And you mentioned that Deloitte | 10 | uses this categorization of less than one billion | 11 | in revenues for a mid market definition? | 12 | A. Yes. | 13 | Q. Now, does the amount of revenues of the | 14 | company dictate whether its requirements are | 15 | complex? | 16 | A. No, it does not. | 17 | Q. Are some companies with less than one | 18 | billion in revenues complex? | 19 | A. Yes. | 20 | Q. And how can you -- how do you -- can | 21 | you tell whether a company will have complex | 22 | requirements by a factor other than just the |
00136 | 1 | revenues? | 2 | A. The way to tell is by analyzing that | 3 | company's requirements. | 4 | Q. Okay. Now, what are some of the | 5 | requirements of the company -- of companies | 6 | that -- that tend to -- that make them complex? | 7 | And for this purpose -- well, let me | 8 | ask, first: | 9 | You mentioned that Oracle, People Soft | 10 | and SAP offer various types of global | 11 | functionality; is that correct? | 12 | A. Uh-huh. Yes. | 13 | Q. And I think you mentioned | 14 | multicurrencies -- | 15 | A. Right. | 16 | Q. -- functionality? | 17 | A. I did. | 18 | Q. Multilanguage functionality? | 19 | A. I did. | 20 | Q. Your mentioned multiorganization | 21 | functionality? | 22 | A. I did. |
00137 | 1 | Q. And multi -- ability to prepare reports | 2 | for many countries? | 3 | A. I did. | 4 | Q. Are those the features of small | 5 | organizations that would tend to require them to | 6 | have more complex requirements? Or is there other | 7 | features that could also? | 8 | A. There can be other features. It's a | 9 | function of their business processes, and where | 10 | they're doing business, that would really drive | 11 | the functionality requirements that they've got. | 12 | Q. And are you aware of any firms that -- | 13 | with less than a billion dollars in revenues, that | 14 | have sufficiently complex requirements that they | 15 | would have to use an Oracle or People Soft or SAP | 16 | for their ERP systems? | 17 | A. Yes. | 18 | Q. Can you just give a couple examples? | 19 | A. The one I think about was REDACTED | 20 | Company. REDACTED | 21 | Q. Is that a client of yours ? | 22 | A. It is a client of the firm. |
00138 | 1 | Q. What's the revenues of that company? | 2 | A. $600 million. | 3 | Q. Why does it have complex requirements? | 4 | A. It does business globally; it's got | 5 | mixed modes of manufacturing. It has acquisitions | 6 | and shedding of companies in its portfolio. It's | 7 | got cost accounting requirements that are rather | 8 | significant. | 9 | Q. Do you have a client -- do you have any | 10 | specific clients with -- that -- with less than a | 11 | billion dollars in revenue, who have complex | 12 | requirements that are sufficient to require them | 13 | to use PeopleSoft, SAP or Oracle? | 14 | A. We do. | 15 | Q. I'm talking about, not "we," but you | 16 | yourself? | 17 | A. Deloitte does have clients that use | 18 | those softwares that are under a billion dollars. | 19 | Q. Okay. But let me just ask the question | 20 | one more time. I'm talking about you personally. | 21 | As opposed to Deloitte. | 22 | Do you have any clients? Not you -- |
00139 | 1 | A. Yes-- | 2 | Q. Not you, not the client -- but | 3 | Mr. Dortenzo. | 4 | A. Have Oracle clients? Yes, I do. | 5 | Q. Can you give an example of one of the | 6 | clients or two of the clients with less than a | 7 | billion that you have that have those | 8 | requirements? | 9 | A. We are in discussions right now with | 10 | . We are in discussions right now REDACTED | 11 | with . Both of those are smaller REDACTED | 12 | concerns. | 13 | Q. Now, what about -- what about REDACTED | 14 | makes -- makes it a company that has REDACTED | 15 | sufficiently complex requirements to require the | 16 | use of SAP, Oracle or People Soft? | 17 | A. They have financial reporting | 18 | requirements that have to do with FERC accounting, | 19 | which is regulatory for the industry. | 20 | Q. Can you, for the record, say what FERC | 21 | stands for? | 22 | A. Federal Energy Regulatory Commission, I |
00140 | 1 | believe. | 2 | Q. Okay. | 3 | A. They have complex numbers of | 4 | operations, and maintenance and repair operations | 5 | that they want to account for their materials and | 6 | supplies for, and expenses associated with those | 7 | things. | 8 | They have customer information systems | 9 | that are significant in terms of number of people | 10 | served in the marketplace, and the account | 11 | information that's required to satisfy the | 12 | management processes associated with that. | 13 | Q. How does that last category relate, if | 14 | it does, to the financial or the HR systems? | 15 | A. Well, the customers have to be billed. | 16 | So it strikes right to the heart of the | 17 | receivables process, and strikes right to the | 18 | heart of their market, and the financial systems | 19 | are pretty central to that operation. | 20 | Q. Okay. Is there any other functional | 21 | requirements that -- or did you mention most of | 22 | them? |
00141 | 1 | A. I think I got most of them. | 2 | Q. Okay. Now, is , an electric REDACTED | 3 | company that has global operations? | 4 | A. No. It does not. | 5 | Q. So are there domestic companies in just | 6 | the U.S. with complex requirements that require | 7 | them to use SAP, Oracle and People Soft? | 8 | A. In addition to the ones we've just | 9 | said? Sure. | 10 | Q. Like ? REDACTED | 11 | A. Yes. | 12 | Q. Now, what is it about that REDACTED | 13 | creates a complex requirement for it? | 14 | A. This is a global distribution -- | 15 | manufacturing and distribution company who make | 16 | health supplements, I guess is the best way to put | 17 | it. Pills and vitamins, and different supplements | 18 | that people would take. | 19 | They distribute through a number of | 20 | both distributors, broker/dealers, and their own | 21 | network on a global basis. So managing the | 22 | inventory requirements, managing their capital |
00142 | 1 | investment to make that inventory requirements, | 2 | measuring profitability associated with the | 3 | particular products, and managing customer | 4 | information associated with all that is important | 5 | to them. | | | | | | | | | | | | | 12 | Q. Now, with respect to your clients who | 13 | have multiple ERP systems, that are considering | 14 | the possibility of consolidating, are you aware of | 15 | whether any of those clients are considering | 16 | consolidating onto ERP systems other than Oracle, | 17 | PeopleSoft or SAP? | 18 | A. No, I'm not. | | | | | | | | |
00143 | | | | | | | | | | | 6 | Q. Let me ask you: Do you have a client | 7 | now that is using Baan? | 8 | A. We do. | 9 | Q. And it's a -- what client is that, by | 10 | the way? | 11 | A. The client's name is , REDACTED | 12 | , Incorporated. This is also highly REDACTED | 13 | confidential. | 14 | Q. Is -- how long has Diebold been a Baan | 15 | customer? | 16 | A. Probably five to seven years. | 17 | Q. And is it in -- is it now considering | 18 | whether or not it wants to change its ERP systems? | 19 | A. They are doing that. They are changing | 20 | their ERP systems. | 21 | Q. Why is that? | 22 | A. To move to a common global structure. |
00144 | 1 | Q. Okay. | 2 | A. Business process and business systems. | 3 | Q. Okay. And what systems are they | 4 | considering moving to? | 5 | A. They've made a decision to move to | 6 | Oracle. | 7 | Q. Did they consider any other systems in | 8 | evaluation? | 9 | A. They consisted -- I'm sorry, considered | 10 | SAP; they considered the best of breed strategy as | 11 | well. | 12 | Q. And by "best of breed strategy," what | 13 | vendors were considered in the best of breed | 14 | strategy? | 15 | A. It's a combination of Oracle, and some | 16 | of the other vendors that supply SCM and CRM | 17 | applications, Siebel, Arriba. There are some | 18 | independent HR vendors that were associated with | 19 | that particular decision. | 20 | Q. So, just so that I understand, with | 21 | respect to the financial aspect of the best of | 22 | breed, Oracle was the company that was being |
00145 | 1 | considered in the best of breed strategy? | 2 | A. Oracle was the company being considered | 3 | as the homogenous strategy. Right. | 4 | Q. Yes. And then did you say that, if I | 5 | understood you correctly, that for the best of | 6 | breed strategy, it was Oracle, plus other venders? | 7 | A. Yes, I'm sorry, that's right. | 8 | Q. And so that -- and Oracle would have | 9 | been under consideration for the financial | 10 | management side? | 11 | A. That's right. | 12 | Q. And with respect to the other HR | 13 | vendors that were considered in the best of breed | 14 | strategy, which companies were that -- was that? | 15 | A. I'd to have go back and look. The one | 16 | I think I remember was Tesoro, which is a best of | 17 | breed, HR offer. The other thing they looked at | 18 | was the use of ADP as an outsource provider. | 19 | Q. For -- for HR for payroll -- | 20 | A. And payroll. HR and payroll. | 21 | Q. And Tesoro, is that -- what type of a | 22 | services does that company offer? |
00146 | 1 | A. Human resource software. | 2 | Q. It offers a software package? | 3 | A. (Nodding head) | 4 | Q. Do you know what area of the world it | 5 | covers? | 6 | A. Geography? | 7 | Q. Yes. | 8 | A. I do not. | 9 | Q. Do you know anything at all about the | 10 | functionality that Tesoro offers? | 11 | A. I do not. | 12 | Q. Do you know if your -- Deloitte's | 13 | customers, other Deloitte customers, are using | 14 | Tesoro, as a HR package? | 15 | A. There are other customers that have | 16 | that software, yes. | 17 | Q. Which customers are using Tesoro? | 18 | A. I don't have specific names. | 19 | Q. Do you know, is there anything about | 20 | the requirements, the HR requirements of certain | 21 | customers that would allow them to use the Tesoro | 22 | HR as opposed to PeopleSoft or Oracle, or SAP? |
00147 | 1 | A. I think the offerings were similar. | 2 | Tesoro was a very popular vendor back in the '90s | 3 | marketplace. Tesoro. There was another one named | 4 | Tesseract, T-E-S-O-R-O, and T-E-S-S-E-R-A-C-T. | | | | | | | | | 9 | Q. Okay. And you said Tesoro was a | 10 | company that was around in the '90s. Are you | 11 | aware of new installations that Tesoro has made? | 12 | A. I'm not. | 13 | Q. Do you have any information as to why | 14 | it has not made new installations? | 15 | A. I do not. I don't follow the company. | 16 | Q. And what about Tesseract? Are you | 17 | aware of any new installations of Tesseract? | 18 | A. No, I'm not. | 19 | Q. Or any new sales? | 20 | A. No. | 21 | Q. Does Deloitte implement Tesseract | 22 | software? |
00148 | 1 | A. It has in the past. | 2 | Q. Has it in the 2000s? | 3 | A. I don't know the answer to that. I'm | 4 | not aware that we have. | 5 | Q. Okay. Was PeopleSoft considered in any | 6 | way in connection with the evaluation? REDACTED | 7 | A. I don't remember PeopleSoft being in | 8 | the field of contenders there. | 9 | Q. Okay. What did -- was Baan considered? | 10 | A. There was a question of whether or not | 11 | to keep the Baan software in place. | 12 | Q. Okay. First of all, why was there a | 13 | question about whether to keep the Baan software? | 14 | A. The company was considering a strategy | 15 | to be common and global in their business | 16 | processes. | 17 | Q. Okay. And what is there about Baan | 18 | that would have caused the company to have a | 19 | question about Baan? | 20 | A. They implemented Baan specific to some | 21 | of their geographies, so they had two or three | 22 | instances of Baan implemented that were not |
00149 | 1 | common. | 2 | Q. Okay. What are -- was there any | 3 | other -- was there any other issues that caused | 4 | the company to have a question about whether it | 5 | wanted to continue with Baan? | 6 | A. I think they were questioning Baan's | 7 | market strength and its positioning into the | 8 | future. | 9 | Q. Why is that something that a company | 10 | like would be concerned about? REDACTED | 11 | A. They only like to do business with | 12 | significant vendor partners who have growing | 13 | business and financial health and strength. | 14 | Q. And why is that - why would that be | 15 | useful, or important for a company with respect to | 16 | its business application software for finance or | 17 | HR? | 18 | A. It brings into question whether that | 19 | particular software concern would be strong enough | 20 | to be part of its systems architecture in the | 21 | longer term. | 22 | Q. Why does a company like want -- REDACTED |
00150 | 1 | care about how long it will have the software? | 2 | A. Well, because they don't want to invest | 3 | a lot of money into their systems support | 4 | structure. Often. So if they were going to make | 5 | an investment at one point in time, they wanted to | 6 | make sure it was the right investment, and that | 7 | they considered all the components of that | 8 | investment, and they don't like to spend money on | 9 | systems, so therefore, they were trying to | 10 | minimize their spend. | 11 | Q. Okay. So- | 12 | A. And make sure they had a long-term | 13 | strategy in place, so they wouldn't have to spend | 14 | again, or spend more. | | | | | | | | | | | | | | | | |
00151 | | | | | | | | | | | | | | | | | | | | | 11 | Q. And would that mean that the Baan | 12 | software may not be a particularly good | 13 | alternative if--- with the changes? | | | | | 16 | A. The -- if they went to common systems, | 17 | they would either have to select Baan over another | 18 | platform, and if they used Baan, they would have | 19 | to make Baan common and reimplement Baan across | 20 | its operations. | 21 | So that the question in their strategy | 22 | was whether they wanted to do that, or whether |
00152 | 1 | they wanted to do other than that, and use another | 2 | player. | | | 4 | Q. Okay. And what was the decision with | 5 | respect to whether they wanted to use Baan to | 6 | reimplement Baan? | 7 | A. They decided that they wanted to go to | 8 | a new platform, and they did not want to | 9 | reimplement the Baan software. | | | | | | | | | | | | | | | | | | | | | | | | | | |
00153 | | | | | | | | | | | | | 7 | Q. Was the company - was REDACTED | 8 | concerned about -- about Baan from a financial | 9 | perspective? | 10 | A. I don't -- I wouldn't use the term | 11 | "concerned." Again, I think they had the question | 12 | of, in its longer term business strategy, how did | 13 | they -- who did they want to partner with; what | 14 | kind of solution did they want to use in terms of | 15 | common global versus not, and what was the right | 16 | answer. | 17 | I don't think there was concern, per | 18 | se, over financial viability. | 19 | Q. Was the -- was concerned about REDACTED | 20 | the lack of development, or enhancements that it | 21 | had received with respect to the Baan software? | 22 | A. That was not an issue. |
00154 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 21 | Q. Have -- but has Baan fallen behind | 22 | Oracle, PeopleSoft and SAP in comparisons with the |
00155 | 1 | functionality that it has to offer -- to provide? | 2 | A. I don't think the -- I don't think the | 3 | functionality is that different. Baan's sales | 4 | have declined over time, and I think over time the | 5 | financial viability question has come in. I don't | 6 | know that that's directly impacted their release | 7 | strategy or the level of functionality. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
00156 | | | | | | | 4 | Q. Have any of your clients today | 5 | considering -- let me rephrase that. | 6 | Do you know of any of Deloitte | 7 | Consulting's clients today, who are actively | 8 | considering performing Baan ERP software? | 9 | A. No, I don't. | 10 | Q. And with respect to the clients that | 11 | you're aware of that are -- that are making any | 12 | judgments with respect to Baan's software, the | 13 | decision whether to replace the platform? | 14 | A. It is whether to replace the platform, | 15 | or maintain it. | | | | | | | | | | | | | | |
00161 | | | | | | | | | | | | | | | | | | | | | 11 | Q. Are they -- of the platforms that | 12 | they're considering, is it platforms that they | 13 | already have some work with in one division or | 14 | another? | 15 | A. Yes, it is. | 16 | Q. Is that a factor that a company that's | 17 | considering consolidating on platforms will | 18 | usually consider? | 19 | A. Sure is, yes. | 20 | Q. Now, why is that? | 21 | A. They have familiarity with the degree | 22 | of complexity, the cost requirements, the |
00162 | 1 | technological sophistication, number one, so they | 2 | know what they're getting into. | 3 | Number two is, in the cases where the | 4 | companies already have that platform, they are | 5 | just about guaranteed to have skill sets in that | 6 | platform. The question is, do we have enough | 7 | skill sets to drive across the entire corporation, | 8 | so they may have to grow that skill set, but they | 9 | usually have it. So they'd look at that. | 10 | Then ultimately what they're trying to | 11 | discern between, is this product versus product B | 12 | cheaper to run? Better to run? Do we get more | 13 | out of it from a business case? A financial | 14 | benefit perspective? So those are really kind of | 15 | the way they're looking at those situations. | 16 | Q. Okay. Now, in comparison with | 17 | considering a product that you already have | 18 | installed and are familiar with in the case of a | 19 | possible consolidation, if you're already using | 20 | the product, and part of the company is already | 21 | using the product, and part of it's operations, is | 22 | it less expensive to implement the product over |
00163 | 1 | additional than it would be a new product over the | 2 | entire organization? Or can't you say that? | 3 | MR. YATES: Objection. Overbroad. | 4 | A. It's not easy to generalize. It could | 5 | be. It doesn't necessarily have to be. | 6 | Part of the answer to that, Kent, | 7 | depends on that company's strategy around their | 8 | infra -- technology infrastructure. | 9 | Said differently, if they are trying to | 10 | give the business units autonomy, then those | 11 | business units are either on computers or servers, | 12 | that infrastructure. And if they're going to | 13 | install their own softwares on top of that, that | 14 | could be just as expensive, a different brand than | 15 | what they've already got. | 16 | If they're going to consolidate, go | 17 | more towards a shared or common environment, then | 18 | they might be able to enjoy some of the economies | 19 | of scale that come with that, than staying on one | 20 | product would, most of the time, be more | 21 | economical, and they would get more leverage from | 22 | the skills that they've already developed. |
00164 | 1 | BY MR. BROWN: | 2 | Q. Okay. Is there -- would it be less | 3 | risky for a company who is considering | 4 | consolidating platforms to use one of the | 5 | platforms that it is already using? | 6 | A. Yes, I think so. | 7 | Q. Now, why is that? | 8 | A. I think, again, they understand the | 9 | requirements associated with that particular | 10 | software. | 11 | B, they have some sense of how to size | 12 | those applications. So if they understand their | 13 | transaction volumes, they understand, generally | 14 | speaking, the capability of the software to manage | 15 | those transactions, and when they get underneath | 16 | running the software and they look at the | 17 | technology infrastructure required to support | 18 | that, the server architecture, the network | 19 | architecture, those types of things, then they've | 20 | at least got some internal benchmarks of how that | 21 | works. | 22 | Or -- so they could take a look at |
00165 | 1 | their number of transactions today on the type of | 2 | infrastructure and say, okay if we're going to | 3 | double that tomorrow, then, do we have to go to X? | 4 | Something like that. | 5 | The other thing that they have a degree | 6 | of comfort around is that they're processing an | 7 | accounts payable transaction, and they note today | 8 | that it takes a minute. Just because more | 9 | transactions are going to go through, there are | 10 | some concerns with processing times, but they know | 11 | it will take about a minute. | 12 | So if a minute is acceptable -- which | 13 | is a long time -- but if a minute is acceptable, | 14 | then they feel good about that. So they have some | 15 | process-oriented benchmarks and they know what | 16 | they're getting into, from the standpoint of | 17 | running their business. | 18 | That becomes more important if you | 19 | have, you know, a customer service person on the | 20 | telephone taking a call from the consumer, and | 21 | they have to look up something and it takes | 22 | forever, and that consumer is saying, it is taking |
00166 | 1 | too long to get this done. | 2 | So those kinds of familiarity start to | 3 | come into play, and you do leverage what you know | 4 | about the product. So that makes them feel that | 5 | the risk equation has gone down in terms of | 6 | staying with a particular software that they may | 7 | have in place. | | | | | | | | | 12 | Q. Are there differences today in the | 13 | functional capabilities that are provided by | 14 | Oracle, PeopleSoft and SAP, in terms of their | 15 | financial and HR management software? | 16 | MR. YATES: Objection. Overbroad, | 17 | compound. | 18 | A. At the grossest level -- at the | 19 | applications level, yes, they are HR and they have | 20 | benefits administrations, such as we talked about | 21 | earlier. | 22 | The way to really understand that would |
00167 | 1 | be to analyze the specific business process | 2 | requirements and/or information requirements that | 3 | exist at a company requirement level, and then | 4 | compare that to the different softwares. | 5 | So broadly speaking, an application, or | 6 | maybe even a business process level, you could | 7 | generalize and say, a lot of them do the same | 8 | things. | 9 | When you get down to the specific | 10 | methods or ways that the softwares manage a | 11 | transaction, they may be different. The market | 12 | has matured to a point where, when I talked about | 13 | Tesoro and Tesseract, those are sort of | 14 | last-generation players. As we look at how SAP | 15 | and Oracle and PeopleSoft, et al., have tried to | 16 | mirror that market, and then actually improve | 17 | their products to exceed that market, each of | 18 | those vendors have invested significantly in their | 19 | HR products, and brought those products up to a | 20 | level that meets or exceeds Tesoro and Tesseract, | 21 | and some of the older softwares that are out | 22 | there. |
00168 | 1 | So by and large, though, that | 2 | functionality level is fairly equivalent at the | 3 | higher level, and then when you get into the | 4 | requirements, that's where you might see some | 5 | differentiation. | | | 7 | Q. Okay. Let me just try this a little | 8 | bit different: I just -- on a very -- basically, | 9 | is there a difference in the functional capability | 10 | provided by SAP, Oracle and PeopleSoft? Focusing | 11 | on those three vendors, do they offer the | 12 | equivalent functionality for finance and HR? Or | 13 | is there even differences between their softwares? | 14 | MR. YATES: Same objections. Also | 15 | asked and answered. | 16 | A. I think basically they offer the same | 17 | functionality. | 18 | BY MR. BROWN: | 19 | Q. Okay. And has that always been the | 20 | case? | 21 | A. No. | 22 | Q. When -- about when, or over what period |
00169 | 1 | of time did the functionality that's offered by | 2 | those three companies start to converge? | 3 | MR. YATES: Objection. Overbroad. | 4 | Compound. | 5 | A. The market leader in human resource | 6 | products was originally PeopleSoft. And that was | 7 | probably the case -- mid '90s is probably a good | 8 | time frame. At that point in time SAP and Oracle | 9 | both started to invest more heavily in their HR | 10 | product sets. I think SAP matured faster than | 11 | Oracle, and that maturation, probably around the | 12 | year 2000, and then Oracle just a little bit | 13 | behind that. | 14 | So for -- probably about 2001 for | 15 | Oracle. | 16 | So our experience, in Oracle, for | 17 | example, in the past two or three years, is that | 18 | it's pretty fully equivalent to the other | 19 | offerings out there, and the market is beginning | 20 | to believe that. So we've seen an uptick, as an | 21 | example, in our Oracle HR implementation business | 22 | based on its ability to compete with the other |
00170 | 1 | products. | 2 | BY MR. BROWN: | 3 | Q. Okay. And with respect to financial, | 4 | the People Soft financial capability, how does it | 5 | compare with the financial functionality provided | 6 | by Oracle or SAP? | 7 | A. I think in some parallel -- well, not | 8 | parallel -- I would say Oracle had the strongest | 9 | financial package and product, suite, in the | 10 | beginning. | 11 | People Soft was very good, and very | 12 | close, and both of those products were able to be | 13 | used in a best of breed environment. | 14 | SAP by its own architecture and its own | 15 | nature is less friendly, less -- it's more | 16 | difficult to break SAP apart, because it's built | 17 | on a very integrated business process and | 18 | information process model. | 19 | So to understand that, when you enter a | 20 | purchasing transaction, and purchasing always has | 21 | to go through accounts payable and the general | 22 | ledger, in PeopleSoft and Oracle those |
00171 | 1 | transactions are managed separately from a cueing | 2 | and a processing perspective. | 3 | In SAP, it's all highly integrated, so | 4 | when you enter that purchasing transaction, it | 5 | goes straight through to AP, straight through to | 6 | GL. There are not three transactions. It's one | 7 | transaction that goes that way. (Indicating) | 8 | I'm sorry, that performs on an | 9 | integrated basis. | 10 | Q. GL means general ledger, AP is accounts | 11 | payable -- | 12 | A. Yes. And PO, purchase order -- | 13 | Q. I'm sorry, did you finish -- | 14 | A. Yes, okay. So I would say that Oracle | 15 | was the strongest. | 16 | In terms of functionality, again, like | 17 | the HR applications, all three of them have very | 18 | strong financials and are all viable in the | 19 | marketplace in terms of processing your financial | 20 | requirements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16 | Q. So in terms of what is happening today, | 17 | it's not typical that you'll see a company | 18 | purchase Oracle financials and PeopleSoft HR | 19 | today. Is that what you're saying? | 20 | A. That's correct. That's what I'm | 21 | saying. | 22 | Q. And that's because now the functional |
00175 | 1 | differences between Oracle and PeopleSoft for the | 2 | financial HR package are sufficiently small that | 3 | it doesn't -- it's not profitable for a company to | 4 | invest in two different products. | 5 | A. They're insignificant. And not | 6 | profitable really is -- it's difficult for a | 7 | company to support two different tools. So if the | 8 | functionality's equivalent, then the question | 9 | inside would be, why would we want to do that? | 10 | Because all that's going to do is increase costs, | 11 | and we'll have to have skill type A, skill type B, | 12 | and that doesn't make a whole lot of sense. | | | | | | | | | | | | | | | | | | | | |
00176 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15 | Q. And what would be the benefit to the | 16 | company of consolidating its financial management | 17 | and HR systems? | 18 | A. It primarily goes back to, you would | 19 | have a common support mechanism, a common set of | 20 | skills, a common maintenance program that comes | 21 | from a single vendor, as opposed to a | 22 | multiple-vendor strategy. So it conceivably is |
00177 | 1 | more efficient, and easier for a company to run | 2 | one platform than multi. | 3 | Q. And in general, is it less costly for a | 4 | company to be able to reduce the number of | 5 | software packages or platforms that it runs? | 6 | MR. YATES: Objection. Overbroad; | 7 | lacks foundation. | 8 | A. I would say that, generally speaking, a | 9 | common systems strategy is less expensive to | 10 | manage than a multiple systems strategy. | 11 | BY MR. BROWN: | 12 | Q. And what is your basis for saying that? | 13 | A. Primarily the difficulty associated | 14 | with managing the releases of several vendors' | 15 | products on a concurrent basis, and then having | 16 | the requirement to have to interface those | 17 | particular applications together, in that, if -- | 18 | in the Olston example, if Oracle releases | 19 | something that changes something in the financial | 20 | management -- or the financial package | 21 | environment, then that might cause a requirement | 22 | for something to trickle through and change inside |
00178 | 1 | HR, then that's a maintenance and a development | 2 | function that has to be undertaken by that | 3 | company. | 4 | Same thing, if PeopleSoft releases | 5 | something the next day and then it trickles back | 6 | into the financials, then they have to keep that | 7 | up. So conceptually the company ends up with | 8 | deeper and more hours required to maintain two | 9 | products, and keep those products in synch, than | 10 | it does having a single product, or you would | 11 | expect that vendor, the single-product vendor to | 12 | manage that process for you, so that they're | 13 | synchronizing the requirements and their | 14 | package -- or something in their package impacts | 15 | finance, you would expect them to be an R & D | 16 | function -- research and development, before | 17 | anything ever gets to you, the user. | | | | | | | | | | |
00179 | | | | | | | | | | | | | | | | | | | | | | | | | | | 14 | Q. Well, SAP was - was SAP originally | 15 | developed and focused on companies in the | 16 | manufacturing industry? | 17 | A. That was its biggest target group. I | 18 | think that's a fair statement. | 19 | Q. And does it - did SAP build rich | 20 | functionality into the software to serve | 21 | manufacturing companies non-discrete and process | 22 | manufacturing companies? |
00180 | 1 | A. They did do that. | 2 | Q. Now, did that functionality, and the | 3 | fact that it was built into the product, create | 4 | any complexities for firms that didn't need it? | 5 | Such as a services company? | 6 | A. Typically not. They could opt out of | 7 | using that functionality. Most times that kind of | 8 | functionality is not required functionally to make | 9 | the product work. It's functionality that you | 10 | elect, through the setup of the software, to use. | 11 | Q. Would you agree that there have been | 12 | issues with respect to SAP over the years that | 13 | it's too complex of a product for certain | 14 | industries or customers to use? | 15 | MR. YATES: Objection. Vague; lacks | 16 | foundation. | 17 | A. There are market perceptions that SAP | 18 | is more difficult to implement than an Oracle, as | 19 | an example. | 20 | There are arguments that would also | 21 | suggest that the functionality in Oracle and other | 22 | products is actually deeper than what's in SAP. |
00181 | 1 | The market argument used to be that SAP | 2 | came fully integrated so you didn't have to build | 3 | in any of that integration. That building of the | 4 | integration, the development of that, and the | 5 | interfaces between systems, is very expensive and | 6 | complex. | 7 | So SAP sold on the platform that | 8 | suggested that their software was highly | 9 | functional and highly integrated, although, in a | 10 | head-to-head competition, if you got down to just | 11 | a business application or business -- business | 12 | application level -- I was going to say business | 13 | process, but -- business application level -- that | 14 | its functionality may not in fact be as rich or as | 15 | deep as what you might find in products that were | 16 | competing on a best of breed basis, to include | 17 | Oracle and PeopleSoft, as I said earlier. | 18 | So SAP sold integration; the others | 19 | sold depth of functionality. | | | | | | |
00182 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 21 | Q. Okay. Let me just focus, then, again, | 22 | on the oil and gas industry, because that's one |
00183 | 1 | where you mentioned. | 2 | A. Uh-huh. | 3 | Q. Did you say that Oracle has desupported | 4 | its oil and gas product? | 5 | A. It sold those products away from its | 6 | portfolio. Sold the products to other vendors. | 7 | Q. Do you know why it did that? | 8 | A. The company purchased the downstream | 9 | applications -- there's upstream and downstream at | 10 | oil and gas. They purchased the downstream | 11 | applications from who developed REDACTED | 12 | them internally for their own use. The | 13 | applications were considered to be very rich in | 14 | functionality, and Oracle's strategy at that point | 15 | in time was, because SAP had cornered the market | 16 | on the very large oil and gas players, that there | 17 | were a group of companies called the independent | 18 | producers in the oil and gas industry, which were | 19 | companies such as ARCO, which were very large | 20 | concerns in terms of everyday thoughts, you know, | 21 | companies that are, you know, 10, 20, 30 billion | 22 | in size, as opposed to companies like , today, REDACTED |
00184 | 1 | who is 150 plus in size. | 2 | So Oracle's perception was that they | 3 | could buy this product from and REDACTED | 4 | then sell, on a more competitive basis, on a cost | 5 | basis, against SAP in a market where had REDACTED | 6 | actually evolved this functionality to work for, | 7 | and within its own business. | 8 | And so to be able to take 's REDACTED | 9 | reputation, and build that software into a | 10 | marketplace where they would be able to go, and | 11 | then corner the middle market, the middle oil | 12 | market being the small oil companies, 10 to 30 | 13 | billion, they put a sales campaign together. | 14 | ARCO was the first company that bought | 15 | into that strategy. ARCO was eventually bought | 16 | out by as well. So ARCO never REDACTED | 17 | got the Oracle energy downstream -- which is that | 18 | product that they bought from -- never got it REDACTED | 19 | implemented. And Oracle was unsuccessful in | 20 | pushing its sales strategy into the other oil and | 21 | gas companies; therefore, it did not make money. | 22 | And Oracle was very aggressive about managing its |
00185 | 1 | software portfolio. | 2 | And after about two years of not making | 3 | money, the Board of Directors and company | 4 | management said they decided to get out of that | 5 | business. So it didn't ever blossom into a highly | 6 | profitable operation for Oracle, and they sold | 7 | out. | 8 | Q. Was the software that developed and REDACTED | 9 | sold to Oracle, which now Oracle has desupported, | 10 | was that financial management software? | | | | | 13 | A. No, it was not financial management | 14 | software. It dealt with their downstream | 15 | operations. So it dealt with everything that | 16 | happened after the refining operations. So once | 17 | crude is turned into petroleum products, it dealt | 18 | with the post-refinery process from the gate of | 19 | the refinery out through the terminal and | 20 | distribution networks, out into the dealer/broker | 21 | networks in terms of gasoline distribution. | 22 | So it was everything between the |
00186 | 1 | refinery gate and the final -- and the final point | 2 | where the consumer buys the product. So it was | 3 | all operational. | 4 | The thing that had done was, they REDACTED | 5 | had interfaced that downstream product set with | 6 | Oracle financials. And so again, Oracle was | 7 | trying to sell the integrated ERP, for downstream, | 8 | consisting of Oracle financials plus the | 9 | downstream applications, into that market segment, | 10 | and that did not work -- | | | 12 | Q. Is - | 13 | A. I'm sorry, the strategy did not yield | 14 | the desired financial result. | 15 | Q. Does -- is Oracle continuing to sell | 16 | its financial management and HR software to oil | 17 | and gas companies? | 18 | A. To the best of my knowledge, yes. | 19 | Q. And has it been successful in selling | 20 | its financial management, or HR software, to oil | 21 | and gas companies? | 22 | A. To a small number of companies, yes. |
00187 | 1 | Q. Okay. But even for financial | 2 | management and HR functionality, SAP is the | 3 | leading vendor? | 4 | A. SAP still is the dominator. | 5 | Q. Is SAP's advantage in financials and HR | 6 | related to the additional functionality it | 7 | provides outside the financial and HR area? | 8 | A. That's my belief, yes. | 9 | Q. Okay. | 10 | A. With some experience in that industry, | 11 | yes. | 12 | Q. Now, there are industries where Oracle, | 13 | or People Soft, have become the leaders, based on | 14 | the -- on the greater depth of functionality that | 15 | you've described? | 16 | A. I would think that -- yes. Oracle, in | 17 | my mind, enjoys an edge in the marketplace in the | 18 | financial services industry. They have penetrated | 19 | that market space more than its competition. Let | 20 | me think of other places -- I think that might be | 21 | it, really. | 22 | People Soft, on the other hand, had |
00188 | 1 | enjoyed an advantage in the higher education | 2 | marketplace, with its -- mostly its HR | 3 | applications that focused on student information | 4 | systems and big university settings, and some of | 5 | the HR applications in the public sector space. | 6 | Those are probably the two more | 7 | prominent places for those two vendors. | 8 | Q. Okay. Does Oracle have an advantage in | 9 | the discrete manufacturing industries? | 10 | A. Not -- no. | 11 | Q. Not in comparison -- | 12 | A. Not more than anyone else, I guess -- | | | | | | | | | | | | | | | | | | | | |
00190 | | | | | | | | | | | | | | | 8 | Q. In your experience, how often has SAP | 9 | been sold or offered as a module that has been | 10 | combined with a -- PeopleSoft or Oracle? | 11 | A. In terms of percentage, Kent? How do | 12 | you want me to answer that? High, low, medium, | 13 | that kind of thing? | 14 | Q. No. First of all, are you aware of | 15 | that happening? | 16 | And second, if so, how often? | 17 | MR. YATES: The question is vague, and | 18 | now it's compound. | 19 | A. I have seen many queries in our | 20 | national system about coexistence of the two | 21 | softwares and companies making switches from | 22 | strategies. So I know that they exist -- they |
00191 | 1 | coexist in certain clients. I don't know how | 2 | many. | 3 | And I would say that the circumstance | 4 | where they coexist is low in number. That's the | 5 | best information I've got. | | | 7 | Q. Yeah. Have you ever seen a competition | 8 | for financials in which, for any of the Deloitte's | 9 | customers, for just the financials involving SAP | 10 | and Oracle? Not involving the integrated | 11 | manufacturing functionality. | 12 | A. Sure. Absolutely. | 13 | Q. When -- and in what instance was that? | 14 | A. In our public sector practices I know a | 15 | lot of the state and local governments have looked | 16 | at, again, back office solutions. And we've done | 17 | some work around the requirements of those back | 18 | office solutions that involve those various | 19 | vendors. | 20 | Q. Okay. And you have -- and you have -- | 21 | and SAP has been involved in a major competition | 22 | for just its financials -- |
00192 | 1 | A. Yes. | 2 | Q. -- without its manufacturing -- | 3 | A. Yes. | 4 | Q. -- functionality. | 5 | A. Yeah. You can implement SAP financials | 6 | standalone. And I guess the other thing I'd add | 7 | to the earlier conversation is that SAP, to my | 8 | knowledge, started to believe that maybe they were | 9 | losing, in a lot of those contests where they were | 10 | involved, and people assumed they had to buy | 11 | everything to implement the SAP software. | 12 | So my understanding is they started to | 13 | evolve their architecture, in particular the | 14 | financials, to a point where the financials | 15 | systems could stand alone, and could accept, | 16 | through program interfaces, automated program | 17 | interfaces that SAP would provide, transactions | 18 | from other systems so that it would be easier to | 19 | use SAP in a limited application -- let's back up | 20 | a couple words here. | 21 | Be easier to use SAP in the sense where | 22 | you just wanted to buy financials. That's |
00193 | 1 | probably said better. | 2 | Q. Is SAP's - are SAP's efforts to be | 3 | able to sell its software in a way that would | 4 | allow a company to just use financials, is that a | 5 | development that has taken place in the last | 6 | couple of years? | 7 | A. I would say it's probably the last -- | 8 | sorry -- five years. | 9 | Q. In the last five years? | 10 | A. I'd say the last five years, at least | 11 | to my knowledge. | 12 | Q. And before that, five years ago, SAP | 13 | was offered as an integrated system? | 14 | A. Integrated, uh-huh. | | | | | | | | | | | | | | | | |
00194 | | | | | | | | | | | | | | | | | 9 | A. Why don't we go back and restate. So | 10 | it was for companies buying ERP? How do they make | 11 | use of customers references? | 12 | BY MR. BROWN: | 13 | Q. Yes. | 14 | A. They do make use of customer | 15 | references -- some don't. Some companies are very | 16 | interested in speaking with other customer sites | 17 | that have implemented softwares that are being | 18 | considered. Some aren't interested in hearing | 19 | other people's stories, because a lot of times the | 20 | companies' culture, business, and there's some | 21 | factors associated with implementations that | 22 | aren't common across the different prospects, I |
00195 | 1 | guess. | 2 | So I would say maybe 65, 70 percent of | 3 | the time clients do ask for references. I would | 4 | say on probably 60 percent of those occasions they | 5 | follow through in calling those references. | 6 | The references are usually very | 7 | important, and can certainly make the decisions | 8 | for companies more comfortable in terms of their | 9 | companies' thought processes. So they can use the | 10 | reference checks as a means to validate their | 11 | decisions, would be the way to put it, in a | 12 | business sense. | 13 | Q. In terms -- to continue to have a | 14 | vendor be considered as a viable alternative -- | 15 | A. Uh-huh. | 16 | Q. -- how important is it for the vendor | 17 | to be able to offer customer references? | 18 | A. It's critical -- | 19 | MR. YATES: That's overbroad. | 20 | A. Critical. | 21 | BY MR. BROWN: | 22 | Q. Why do you say that? |
00196 | 1 | A. Well, any firm that sells intangibles, | 2 | shall we say, whether it's software or | 3 | professional services, relies heavily on its | 4 | reputation and its ability to deliver into that | 5 | marketplace. | 6 | So a firm's ability to have its prior | 7 | customers, or current customers, speak in favor of | 8 | it can be an influencing factor in a purchase. So | 9 | that's a fairly important factor, if the | 10 | purchasing company believes that's an important | 11 | part of their validation process. | 12 | Q. Okay. Now, in terms of the nature of a | 13 | reference customer, what type of a -- of a current | 14 | user would a new potential customer want to talk | 15 | to? | 16 | MR. YATES: Objection. Overbroad. | | | | | | | | | | | | |
00200 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19 | Q. Will your clients who are considering | 20 | purchasing a new -- a new ERP software consider | 21 | what type of likely new developments will come in | 22 | the future of this -- in the future? |
00201 | 1 | MR.YATES: Overbroad. | 2 | A. It can be a factor in their decision | 3 | process. | 4 | BY MR. BROWN: | 5 | Q. Okay. And why would that be a factor? | 6 | A. Prospects don't like to be obligated to | 7 | customize the software products. Sometimes they | 8 | are wishful that the functionality that they are | 9 | desirous of be incorporated into the standard | 10 | product of that software vendor. | 11 | Q. Okay. And how would that benefit the | 12 | customer? | 13 | A. The customer then does not have to pay | 14 | for that customization for services, or doesn't | 15 | have to take the time to incorporate that | 16 | customization. Or down the road, when the | 17 | software vendor releases an update or an upgrade, | 18 | or a patch that's associated with any of that | 19 | functionality, then the customer doesn't have to | 20 | maintain that separately from their maintenance | 21 | requirement that comes from the software vendor. | 22 | Q. So is it a circumstance that -- that |
00202 | 1 | customers might initially customize an ERP | 2 | solution, but in a future upgrade they'll be able | 3 | to eliminate that customization? | 4 | A. If the vendor incorporates that | 5 | customization into their standard offering, yes. | 6 | Q. Is that scenario a benefit for the | 7 | customer? | 8 | A. Usually, yes. | 9 | Q. Why? | 10 | A. I think I answered that a minute ago. | 11 | Because they don't have to maintain that | 12 | customization, and then they would not have to pay | 13 | for that customization into the future. | 14 | Q. Is it -- is there -- if they have to | 15 | maintain the customization, would one of the | 16 | issues involve the need to continue integrating | 17 | that customized software with the ERP software? | 18 | MR. YATES: Objection. Overbroad. | 19 | A. Not typically integrating it, Kent. | 20 | If -- that's probably the last thing that happens. | 21 | Once the integration is done, the thing | 22 | you have to worry about around the integration is |
00203 | 1 | the date of change, the construct of the date of | 2 | change. Did something change in the feed of that | 3 | data? Did something change in the parent system, | 4 | in the core system? | 5 | It's not so much you have to pay for | 6 | the integration again. What you have to do is you | 7 | have to make sure that that customization is | 8 | retrofitted, and regression tested, to the newer | 9 | software. | 10 | So if you did a customization in | 11 | version one, and then SAP or Oracle releases | 12 | version two, you have to take your customization | 13 | and make sure that works with version two. That | 14 | may require additional customization; it may | 15 | require an update to a table or an update to the | 16 | data. It may be very simple. | 17 | It doesn't mean you have to redo the | 18 | customization. It means that you, in a minimum, | 19 | have to make sure that you test it and make sure | 20 | it works with version two. It could mean that you | 21 | have to do some more integration. It doesn't | 22 | necessarily mean. So hopefully that answers your |
00204 | 1 | question. | | | | | | | | | 6 | Q. Do you know whether potential customers | 7 | of the -- of the Deloitte's clients are -- who are | 8 | potentially purchasing financial management, or HR | 9 | software, are willing to be the first customers to | 10 | use a new system? | 11 | A. I do know that. Sometimes they're | 12 | willing, and sometimes they're not. | 13 | Q. Okay. Why would they -- why aren't -- | 14 | the ones that don't want to use the new system, | 15 | what is the reason for that? | 16 | A. Well, it's not always fun to be first. | 17 | Because there could be difficulties in terms of | 18 | how well the design has been thought out; how well | 19 | that design has been tested; how the data flows | 20 | through the software product. And if a company is | 21 | considering being number one, and that product | 22 | then doesn't work, the company may suffer a delay |
00205 | 1 | associated with the implementation; it may suffer | 2 | a malfunction of the software; it could lose a | 3 | customer; it could incur greater costs; it could | 4 | mean that, you know, a project gets delayed and | 5 | they have to invest more people to fix that. | 6 | All the above, or any of the above, and | 7 | any combination of the above could be the | 8 | rationale that clients don't like to be number | 9 | one, or alpha or beta test sites, as they're | 10 | referred to. | 11 | Q. Now, I'm focusing -- remember, we're | 12 | focusing on the financial management and HR | 13 | software. | 14 | A. Uh-huh. | 15 | Q. Are you aware of clients who, for that | 16 | functionality, are interested in being the first | 17 | users of a new product? | 18 | MR. YATES: Objection. The question is | 19 | overbroad. | 20 | A. Yeah, I'm not sure that question | 21 | applies to the current market status. Because | 22 | particularly as we talk about finance and HR, |
00206 | 1 | maturity of those products is very high. So you | 2 | won't find, even with new releases -- financial | 3 | system requirements within these products are very | 4 | well articulated, and highly developed and evolve. | 5 | So you don't find a lot of breaking | 6 | functionality -- I'm sorry, emerging, or new, or | 7 | newly required functionality that is being built | 8 | into the products. | 9 | So being number one is really kind of a | 10 | moot issue any more. There's really -- you're not | 11 | number one. You just can't be number one, because | 12 | the products are that mature. | | | | | | | | | | | | | | | | | | | | |
00211 | | | | | | | | | | | | | | | | | 9 | Q. Okay. Now, I'm once again focusing on | 10 | your clients, Deloitte's clients, that have | 11 | requirements that require them to use People Soft, | 12 | SAP and Oracle. | 13 | A. Uh-huh. | 14 | Q. Are you aware of any company today who | 15 | is at a stage where they're looking for clients to | 16 | test their software to build that track record? | 17 | A. For back office, for the financial and | 18 | HR applications? | 19 | Q. Yes. | 20 | MR. YATES: Let me interpose an | 21 | objection. It's argumentative in light of | 22 | the witness's previous testimony. |
00212 | 1 | A. We receive offers, through our alliance | 2 | programs, with our various vendors to become | 3 | involved in the testing of any new product, or new | 4 | product development. And sometimes we do | 5 | participate in that process. | 6 | BY MR. BROWN: | 7 | Q. Okay. So are you aware of any | 8 | companies -- let me -- I just want to rephrase -- | 9 | restate the question, because the question was a | 10 | little different than what I think your answer | 11 | was. | 12 | Are you aware of any companies who are | 13 | in the process of looking for potential customers | 14 | who will -- that they can use to test, and serve | 15 | as reference customers to basically build the | 16 | track record to compete for the clients that now | 17 | require the use of PeopleSoft, Oracle or SAP for | 18 | their back office software? | 19 | MR. YATES: Same objection. | 20 | A. No, I'm not. | | | 22 | Q. And -- |
00213 | 1 | A. Let me ask a question, if I may. There | 2 | are new product developments within companies that | 3 | we're working with. So within Oracle there is a | 4 | new product that we've been asked to test, that | 5 | we've been asked to potentially get a market with, | 6 | where Oracle are seeking new clients. | 7 | Q. I understand. | 8 | A. That was not the condition that you | 9 | were asking about? | 10 | Q. The condition was with respect to | 11 | companies other than Oracle -- | 12 | A. Other than. Okay. | 13 | Q. - SAP and PeopleSoft. | 14 | A. Then I answered. | | | | | 17 | Q. Does Deloitte assist companies or | 18 | organizations from time to time in selecting the | 19 | ERP software? | 20 | A. There are occasions where Deloitte is | 21 | involved in software selection. Up until -- this | 22 | is confusing for everyone. |
00214 | 1 | Up until the December 27th date when | 2 | Deloitte Consulting folded back into Deloitte & | 3 | Touche, the policy internally was to not get | 4 | involved by role in software selections, and we | 5 | tried to steer away from that particular business. | 6 | Q. That would have been at Deloitte | 7 | Consulting. | 8 | A. That's right. | 9 | Q. Before December 27th? | 10 | A. That's right. Right. | 11 | Q. Okay. | 12 | A. If a set of circumstances came up where | 13 | a client said, I would like you to evaluate my | 14 | total cost of ownership between vendor X, Y and Z, | 15 | we would entertain those types of activities. | 16 | That may not infer selection, but it could | 17 | certainly result in a selection. | 18 | There were some projects that I'm aware | 19 | of that were on our list, where there was some | 20 | selection work done. So the policy was not to do | 21 | it, not to get involved, because the consequences | 22 | are rather costly from a firm perspective to get |
00215 | 1 | involved, based upon the fact that you can | 2 | alienate your vendor partners and things like | 3 | that. So the policy, by and large, was not to do | 4 | those things, unless client circumstances dictated | 5 | that someone would entertain within the | 6 | partnership accepting that kind of a job. | 7 | But typically we did not do selection | 8 | work. We tried to stay away from it. | 9 | Q. Now, you have done a few selection | 10 | projects over the -- over the last few years; is | 11 | that correct? | 12 | A. A few. | 13 | Q. And based on the selection work that | 14 | you have done, do you know whether -- do you know | 15 | whether the selection of a vendor product is a | 16 | short process or a long process? | 17 | A. Those processes can vary. | 18 | (LAUGHTER) | 19 | A. Sorry. It's a consulting answer. | 20 | (LAUGHTER) | 21 | A. You know, Kent, in my twenty-plus years | 22 | consulting, I've seen clients take as little as |
00216 | 1 | four weeks, and I've seen them take up to eighteen | 2 | months, that's another reason I personally don't | 3 | like to do consulting work -- I'm sorry -- oops -- | 4 | let me back up on that, let me strike that. | 5 | (LAUGHTER) | 6 | A. Especially if Deloitte is going to read | 7 | this. | | | | | | | | | | | | | | | 15 | From the four weeks to eighteen months. | 16 | That's why I don't like to do selection work, and | 17 | the firm doesn't like to do selection work, | 18 | because by and large, there's not a lot of value | 19 | added there to a company. We're not making | 20 | widgets faster, we're not reducing inventory, | 21 | we're not driving toward that business transaction | 22 | result that I talked about earlier today. |
00217 | 1 | So that phenomenon, together with the | 2 | fact that if we're in an Oracle versus PeopleSoft, | 3 | or SAP versus PeopleSoft, or whatever the | 4 | situation, we're going to make one of them mad if | 5 | we do the selection. So Deloitte's policy was to | 6 | not do them as a rule. | 7 | Those processes can take anywhere from | 8 | four weeks to eighteen months. And they do. It | 9 | depends on the client's ability to make a | 10 | decision. Our policy is not to make a | 11 | recommendation but to present factual results | 12 | associated with the products, if we were to do | 13 | one. | 14 | And ultimately we are always precluded | 15 | and prohibited from making a decision based on | 16 | internal policy and some other SEC policies and | 17 | different things like that. | | | | | | | | | | |
00219 | | | | | | | | | | | | | 7 | Q. And during the course -- the selection | 8 | projects with which you're familiar are at least | 9 | four weeks long? | 10 | A. I can't think of anything that's | 11 | shorter than that. | 12 | What I was quoting with the four weeks | 13 | was my own personal experience. From the firm's | 14 | perspective and my Deloitte Consulting | 15 | responsibility perspective, I was only aware of | 16 | very few in our record that were done, and I think | 17 | all of those did exceed four weeks. | | | | | | | | | | |
00228 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15 | Q. Mr. Dortenzo, did you find out what -- | 16 | how many people you have, or Deloitte Consulting | 17 | has, in its SAP practice? | 18 | A. I did. | 19 | Q. And how many people does SAP have in | 20 | its -- or Deloitte have in its SAP practice? | 21 | A. Dedicated SAP practitioners, 675. | 22 | Q. Is that in the U.S.? |
00229 | 1 | A. U.S. | 2 | Q. Okay. And how many all together, or | 3 | resources, can Deloitte call on for its SAP | 4 | practice? Or did you not have that? | 5 | A. I didn't get that count. | | | | | | | 9 | Q. Let me just... (Searching) | 10 | How many people does SAP -- does | 11 | Deloitte have in its PeopleSoft practice? | 12 | A. PeopleSoft is about 400. | 13 | Q. Does that include both J.D. Edwards and | 14 | PeopleSoft? | 15 | A. That does include the combination of | 16 | those two, in the U.S. | 17 | Q. And that's U.S. only? | 18 | A. That's U.S. only. | 19 | Q. Okay. And how many people does SAP | 20 | have in its Lawson practice? | 21 | A. Lawson is 70. | 22 | Q. Seventy? |
00230 | 1 | A. How many does Deloitte have, not SAP; | 2 | correct? | 3 | Q. Yes. | 4 | A. Just checking. | 5 | Q. Deloitte Consulting has 70 dedicated | 6 | people in its Lawson practice. | 7 | A. Yes, it does. | 8 | Q. Do you know if it has more people | 9 | outside the U.S. in its Lawson practice? | 10 | A. I don't know that answer for certain, | 11 | Kent. | | | | | | | | | | | | | | | | | | | | | | |
00231 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19 | Q. Okay. The document says that, | 20 | "Deloitte has over 6,200 dedicated SAP | 21 | practitioners. And we are able to quickly put | 22 | leading professionals on the ground anywhere in |
00232 | 1 | the world to quickly address your business | 2 | challenges." | 3 | A. Uh-huh. | 4 | Q. Is that -- do you know whether Deloitte | 5 | Consulting on a global basis has 6,200 dedicated | 6 | SAP practitioners? | 7 | A. I don't know the certainty of that | 8 | number -- what I would tell you that I do know | 9 | this number includes would be those practitioners | 10 | with SAP experience that are also in our industry | 11 | practices. So as I differentiated earlier, | 12 | dedicated Oracle practitioners versus Oracle | 13 | practitioners with industry experience, this | 14 | number would include the industry experience, is | 15 | my understanding. | 16 | Q. So this number would be more related to | 17 | the 1,500 Oracle practitioners as opposed to the | 18 | 300 Oracle practitioners. | 19 | A. That's right. That's right. | | | | | | |
00233 | 1 | MR. BROWN: Let's see, I want to now | 2 | mark another exhibit as Government Exhibit | 3 | 102. | 4 | (DEPOSITION EXHIBIT 102 | 5 | MARKED FOR IDENTIFICATION) | 6 | BY MR. BROWN: | 7 | Q. Mr. Dortenzo, our Government Exhibit | 8 | 102 is a document produced by Deloitte Consulting | 9 | in response to a Civil Investigative Demand issued | 10 | to it in The Department of Justice's investigation | 11 | in Oracle's proposed acquisition of PeopleSoft, | 12 | purports to be an SAP HRMS Assessment dated May | 13 | 2000, prepared by Deloitte Consulting. | 14 | Do you know whether this document is a | 15 | summary of a vendor selection engagement for | 16 | ? REDACTED | 17 | A. Yes, I do. My understanding was that | 18 | this document was not a summary of a software | 19 | selection project, but a respond to a question of, | 20 | should we use SAP HR? Will it work? And if it | 21 | won't work, why won't it work? | 22 | So it wasn't a selection -- it wasn't a |
00234 | 1 | runoff between two software companies. My | 2 | understanding was it was more of a validation of | 3 | SAP as the answer in this particular situation. | 4 | Q. Okay. But this was -- this document | 5 | was prepared for ; is that correct? REDACTED | 6 | A. That's my understanding, yes. This is | 7 | a document. REDACTED | 8 | Q. And this document involves -- involves | 9 | an engagement with respect to -- with respect to | 10 | ERP questions that raised for Deloitte REDACTED | 11 | Consulting? | 12 | A. For the HR application. | 13 | Q. Yes. And was this document prepared | 14 | and capped in the ordinary course of business at | 15 | Deloitte Consulting? | 16 | A. Yes. | 17 | Q. And was it also -- was the information | 18 | in this document also provided to ? REDACTED | 19 | A. Yes. | 20 | Q. And I noticed in the document the | 21 | company's name, , as being used as company REDACTED | 22 | X, as opposed to the name . REDACTED |
00235 | 1 | A. Yes. | 2 | Q. Can you explain why that's the case? | 3 | A. This document was pulled from our | 4 | Internet web site. And when we store documents on | 5 | that particular web site, we usually do strike the | 6 | client's name to protect the client | 7 | confidentiality, which is the policy of the firm. | 8 | Q. Okay. And so was this document put on | 9 | the Internet web site so that it would be | 10 | available for other -- others in Deloitte | 11 | Consulting to see and use after it was prepared? | 12 | A. Yes. Potentially the documents are | 13 | stored on the web site to have an electronic | 14 | record of our deliverables from our engagements. | 15 | Other projects, if they're searching the web site, | 16 | they certainly would have an opportunity to read | 17 | them. | 18 | Q. Okay. And do you see, midway down on | 19 | the right-hand side of the page on this document, | 20 | there's some characters that say "DEL000673"? | 21 | A. I see that. | 22 | Q. These are Bates stamped numbers that |
00236 | 1 | are assigned to this document by Deloitte when it | 2 | produced the document. And if you could, please | 3 | turn to the Bates stamp numbered page DEL000682. | 4 | A. Okay. | 5 | Q. Now, there's -- there's several | 6 | characters on the page that look like little "U's" | 7 | on the left-hand side. Do you see that? | 8 | A. Yes. | 9 | Q. And for the third "U" it says, "SAP was | 10 | compared to Oracle and People Soft due to the fact | 11 | that they are the only other viable vendors for | 12 | global HR and payroll solution." | 13 | A. Okay. | 14 | Q. Do you know what that -- what that | 15 | means in terms of what -- what the analysis of | 16 | this document... | 17 | A. was considering whether or not REDACTED | 18 | they should use SAP or they should investigate | 19 | whether or not to go with an alternative solution | 20 | set. Their internal perception of viable | 21 | candidates, to my knowledge, only included Oracle | 22 | and People Soft as alternatives. |
00237 | 1 | Q. Okay. And is that the conclusion that | 2 | Bechtel had reached? Or is that the conclusion | 3 | that Deloitte reached? | 4 | A. My understanding, that was 's REDACTED | 5 | conclusion, and we reflected that in a document. | 6 | MR. BROWN: Now I would like to mark | 7 | for you -- well, I want to talk about an | 8 | exhibit that will be marked as Government | 9 | Exhibit 103. | | | | | | | | | | | | | | | | | | | | | | | | | | |
00238 | | | | | 3 | (MR. BROWN DISPLAYING | 4 | ELECTRONIC DOCUMENT VIA | 5 | ON-SCREEN DEMONSTRATION) | 6 | BY MR. BROWN: | 7 | Q. Now, Government Exhibit 103 is a | 8 | three-page spreadsheet that was produced by | 9 | Deloitte in response to a subpoena issued in this | 10 | investigation. | 11 | This is the second page of the | 12 | spreadsheet. It says "U.S. work region." | 13 | A. Uh-huh. | 14 | Q. And I think that the first page is U.S. | 15 | summary. | 16 | And the third page is the CA-Latin | 17 | America work region. | 18 | A. Uh-huh. | 19 | Q. Have you seen this spreadsheet before? | 20 | A. I have. | 21 | Q. Okay. And I want to ask you, during | 22 | the course of the government's investigation of |
00239 | 1 | Oracle's proposed acquisition, do you know whether | 2 | Deloitte produced another spreadsheet to the | 3 | government on about January 12th, 2004, in | 4 | response to a Civil Investigative Demand? | 5 | A. There was production at that time. | 6 | Q. Uh-huh. And did you provide a | 7 | declaration relating to that spreadsheet that was | 8 | produced at that time? | 9 | A. I did. Yes, I did. | 10 | MR. BROWN: I'd like to mark as | 11 | Government Exhibit 104 ... | 12 | (DEPOSITION EXHIBIT 104 | 13 | MARKED FOR IDENTIFICATION) | 14 | BY MR. BROWN: | 15 | Q. Is this a copy of the declaration that | 16 | you produced to the government in connection with | 17 | the spreadsheet that was provided to the | 18 | government by Deloitte on January 12th, 2004? | 19 | A. Yes, it is. | 20 | Q. And that spreadsheet was produced in | 21 | response to a Civil Investigative Demand 22613. | 22 | A. Yes, it was. |
00240 | 1 | Q. And your declaration was produced in | 2 | response to another Civil Investigative Demand | 3 | 22614; is that correct? | 4 | A. Yes. | 5 | Q. Now, is the spreadsheet for -- I want | 6 | to turn to "Work Region." Is the spreadsheet for | 7 | U.S. work region that is in Government Exhibit 103 | 8 | the same as the spreadsheet for the U.S. work | 9 | region in Government Exhibit January 12th, 2004, | 10 | with one additional fact? And that is that there | 11 | are client -- the client and the client group has | 12 | been listed? | 13 | A. Yes. That's my understanding. Yes. | 14 | Q. Okay. | 15 | A. That was the difference. | 16 | Q. Other than that, the spreadsheet is the | 17 | same as the spreadsheet for which you produced the | 18 | declaration that's Government Exhibit 104? | 19 | A. Yes. | 20 | Q. Okay. And I just want to ask you: | 21 | Does this spreadsheet list -- list all of | 22 | Deloitte's ERP-related work, and for ERP, that |
00241 | 1 | means work that involves solutions that involve | 2 | financial management and HR Management Solutions | 3 | for the period FY01 through FY04, approximately | 4 | November? | 5 | A. Yes. | 6 | Q. Or approximately October 10th. | 7 | A. October 10th. | 8 | Q. 2003. | 9 | A. Yes. | 10 | Q. And do you know where the information | 11 | for this spreadsheet was taken from? | 12 | A. Yes, I do. It was taken from our | 13 | system -- internal system named Target which is a | 14 | Siebel application that we use to manage our sales | 15 | pipeline. | 16 | Q. And is information about Deloitte's | 17 | ERP-related projects capped and maintained in the | 18 | ordinary course of business in the Target system | 19 | at Deloitte Consulting? | 20 | A. Yes, it is. | 21 | Q. And is the information -- and is that | 22 | information with respect to the ERP-related |
00242 | 1 | projects that Deloitte Consulting does, entered | 2 | into the system at about the time that it becomes | 3 | relevant to Deloitte Consulting? | 4 | A. It's -- it's entered as soon as we know | 5 | that it is a qualified lead. | 6 | Q. So it's entered soon. | 7 | A. Which would be -- yes, upon | 8 | identification. | 9 | Q. And does Deloitte Consulting use the | 10 | information in the Target -- in the Target | 11 | application for its business purposes? | 12 | A. Yes, it does. | 13 | Q. Okay. Now, I want to focus in on some | 14 | of the columns in this spreadsheet, which are | 15 | listed as A through ... and I forget the end of | 16 | them, so ... (manipulating the screen) ... A | 17 | through Y. | 18 | And now, with respect to the columns, | 19 | or the rows beginning on row 6, does each row | 20 | provide information about a separate project that | 21 | was entered into the Target application? | 22 | A. That's correct. |
00243 | 1 | Q. And does the first column, column A, | 2 | identify the -- who the vendor is that was the | 3 | vendor of the ERP project -- of the ERP software | 4 | involved in the project? | 5 | A. Yes. | 6 | Q. Okay. Now, if you -- if you - I push | 7 | this, it appears that, on this column, there | 8 | are -- there are several vendors listed: | 9 | J.D. Edwards, Oracle, PeopleSoft, Retek, and SAP. | 10 | Are those all the vendors that were | 11 | listed in this column when you looked at it? | 12 | A. Yes. | 13 | MS. SABO: And just let the record | 14 | reflect Mr. Brown was pushing what's referred | 15 | to as a drop-down key for column A. | 16 | MR. BROWN: Okay. | 17 | BY MR. BROWN: | 18 | Q. Okay. Do you know of any other vendors | 19 | that are listed in this column, in column A? | 20 | A. No. | 21 | Q. Okay. And in fact, if you look in | 22 | Government Exhibit 104, in paragraph 10, it says, |
00244 | 1 | "There are five firms listed as vendors in the | 2 | selected package column. SAP, Oracle, PeopleSoft, | 3 | J.D. Edwards, now owned by PeopleSoft, and Retek." | 4 | And so that's all the firms that were | 5 | listed in the selected package column that were | 6 | listed as ERP vendors in this database; is that | 7 | correct? | 8 | A. Yes. | 9 | Q. Okay. Also -- now, I'd like to refer | 10 | you to paragraph 11 of your declaration. In that | 11 | declaration, paragraph 11-- and I just want to | 12 | read this to put it in perspective: | 13 | "Of the five listed vendors in the | 14 | suspected package column, only SAP, Oracle and | 15 | PeopleSoft/J.D. Edwards provide financial | 16 | management and human resource management ERP | 17 | software solutions. Retek, listed as the vendor | 18 | in only a few project lines, provides | 19 | merchandising, inventory, supply chain, space | 20 | management and point of sale solutions for the | 21 | retail industry. However, Retek does not provide | 22 | ERP functionality that includes financial or human |
00245 | 1 | resource Management Solutions. Rather, Retek | 2 | customers use Retek's software, together with | 3 | financial management and human resource management | 4 | ERP solutions provided by other vendors." | 5 | Does -- does Retek supply software that | 6 | is used together with the financial and HR | 7 | applications provided by Oracle, PeopleSoft and | 8 | SAP? | 9 | A. Typically Retek supplies that software, | 10 | and more often the case is that it's used together | 11 | with Oracle software than the other providers. Or | 12 | it may be used with other legacy systems. | 13 | Q. But for the situations involving Retek | 14 | on Deloitte [sic] Exhibit 103, is the Retek | 15 | solution used with Oracle or SAP or PeopleSoft? | 16 | A. Not necessarily. It can be a | 17 | standalone. | 18 | Q. Okay. I'm going to sort to Retek, | 19 | using the drop down menu. And there are, on this | 20 | column, it says, at the bottom, do you see where | 21 | it says there are seven instances on the left-hand | 22 | side? |
00246 | 1 | A. Right. | 2 | Q. And I'd like you to look at these, if | 3 | you know. | 4 | Do you know what financial management, | 5 | or back office software Retek has used with, in | 6 | ? REDACTED | 7 | A. No, I don't. | 8 | Q. ? REDACTED | 9 | A. No. | 10 | Q. Was that BSAP at , or do you REDACTED | 11 | know? | 12 | A. I don't know. | 13 | Q. Okay. ? REDACTED | 14 | A. I'm not positive. I thought they were | 15 | an Oracle financial shop. | 16 | Q. Okay. How about ? REDACTED | 17 | A. I don't know. | 18 | Q. And how about the U.S. Postal Service? | 19 | A. U.S. Postal Service uses some Oracle | 20 | applications. | 21 | Q. For financial management? | 22 | A. For financial management. Primarily |
00247 | 1 | general ledger. | 2 | Q. Okay. Okay. I'm using the drop-down | 3 | menu to return to the original screen now. | 4 | Now, in this -- in this exhibit, do | 5 | some of the projects that are listed in this | 6 | exhibit involve situations where the software that | 7 | is being installed is a point solution that is | 8 | being used with the ERP solution? | 9 | A. Yes. | 10 | Q. Such as, perhaps, a CRM solution, or | 11 | a -- or maybe a consolidating solution? | 12 | MR.YATES: Objection. Vague. | 13 | Compound. | 14 | A. CRM or perhaps a -- SCM, I might say. | 15 | I don't know necessarily a consolidation. | 16 | BY MR. BROWN: | 17 | Q. So there might be -- so, for example, | 18 | where -- if the -- for a situation that lists | 19 | Arriba, that would be a supply chain management | 20 | solution? | 21 | A. Yes. | 22 | Q. That would be consolidated or joined |
00248 | 1 | with the ERP solution that's listed in column A? | 2 | A. That's correct. | 3 | Q. Okay. Now, in column A, there are -- | 4 | there are several -- there are several categories. | 5 | One is called "NA/Other." | 6 | Do you know what that stands for? | 7 | A. That would be products other than the | 8 | named products that might be involved in the scope | 9 | of the implementation. | 10 | Q. Okay. Now, in your declaration, did | 11 | you -- if you look at 13, did you talk about that | 12 | NA/Other category? | 13 | A. Yes. | 14 | Q. Okay. And in -- and did you say in | 15 | paragraph 14 of your declaration that some of | 16 | these projects involve work for a company that | 17 | does not yet have an ERP solution? | 18 | MR. YATES: Objection. | 19 | Mischaracterizes. | | | 21 | Q. Well, let me just read paragraph 14. | 22 | "For some of the projects in which no vendor is |
00249 | 1 | identified in the suspected package column, no | 2 | vendor could be identified, because the project | 3 | involved work for a client that did not yet have | 4 | an ERP vendor. This type of client engagement can | 5 | often be identified from the information provided | 6 | about the project in the opportunity and | 7 | description columns." | 8 | So in some of these NA/Other columns, | 9 | do some of these NA/Others -- do some of the rows | 10 | with NA/Other, and the suspected package column | 11 | involve projects for companies that did not yet | 12 | have an ERP solution? | 13 | MR. YATES: Overbroad. Lacks | 14 | foundation. | 15 | A. That may be the case. | 16 | BY MR. BROWN: | 17 | Q. And is that what you said in paragraph | 18 | 14 of your declaration, Exhibit 104? | 19 | A. Yes. | 20 | Q. And are there some entries where | 21 | NA/Other is listed where there just was | 22 | insufficient information in the Target application |
00250 | 1 | to identify the vendor of the ERP solution? | 2 | A. Yes. | 3 | Q. And is that what you said in paragraph | 4 | 15 of your declaration? | 5 | A. Yes. | 6 | Q. And now, to the best of your | 7 | information, are there any other -- are there any | 8 | other vendors, ERP vendors, that should be -- | 9 | should have been included in this Target | 10 | application printout of your ERP projects? | 11 | A. No. | 12 | Q. Okay. Now, I just want to go through | 13 | some of the columns. It says, in column D it says | 14 | "client." | 15 | Is that the name of the customer? | 16 | A. Yes, it is. | 17 | Q. And in client E, it says "client | 18 | group"? | 19 | A. Uh-huh. | 20 | Q. Is that the -- what does that mean? | 21 | A. Column D, "Client," could be a business | 22 | unit within the larger corporation, which would be |
00251 | 1 | reflected in column E, client group. | 2 | Q. Okay. | 3 | A. So it could be a business unit, a | 4 | division, a subdivision, where we're doing | 5 | business directly at that level which could be | 6 | part of a larger conglomerate. | 7 | Q. So client E could be -- could be a | 8 | parent company, perhaps? | 9 | A. Yes. Yes. | 10 | Q. Okay. Now, were these -- are the -- | 11 | are the projects listed in the U.S. Work Region, | 12 | do these involve work for clients that is taking | 13 | place in the U.S.? | 14 | A. Yes. That's the case. | 15 | Q. Okay. And the -- and I -- let me open, | 16 | just for a moment here, the CA-LAM [sic] work | 17 | region, and ask you a question about this. | 18 | Is this a similar spreadsheet that | 19 | shows for the same time period, or for FY01 | 20 | through FY03, the ERP work that Deloitte | 21 | Consulting has done for Canadian and Latin | 22 | American clients? |
00252 | 1 | A. Yes, it does. | 2 | Q. Now, would these clients now be covered | 3 | by, after December 27th, 2003, would these clients | 4 | now be covered by a different entity in the | 5 | Deloitte Touche Tohmatsu corporation? | 6 | A. Could you explained "covered"? | 7 | Q. Well, if they're outside the United | 8 | States, would another entity other than Deloitte | 9 | Consulting be responsible for dealing with them? | 10 | A. Not necessarily. Deloitte Consulting | 11 | may still support that particular pursuit, or | 12 | there could be a consulting operation in country, | 13 | that potentially could support that group. | 14 | Q. Okay. Now, is it true that many of the | 15 | companies that are listed in the Canadian/Latin | 16 | American work region spreadsheet have work | 17 | requirements in the U.S.? | 18 | MR. YATES: Objection. Overbroad. | 19 | Lacks foundation. | 20 | A. That may be the case. | 21 | BY MR. BROWN: | 22 | Q. Uh-huh. I'd like to refer you to |
00253 | 1 | paragraph 6 of your declaration, where you say, | 2 | "Information has been grouped on separate pages of | 3 | spreadsheets for ERP-related projects for U.S. | 4 | customers and ERP-related projects for other | 5 | customers. Most of the non-U.S. customers for | 6 | which we've listed projects are multinational | 7 | organizations with operations in the U.S., | 8 | although it was not possible to determine from the | 9 | information in our CRM application and database | 10 | exactly which U.S. customers have U.S. | 11 | operations." | 12 | Does that refresh your recollection as | 13 | to whether most of the companies listed on the | 14 | CA-Latin American work region probably have work | 15 | requirements in the U.S. for these projects? | | | | | 18 | A. The answer is yes. | 19 | BY MR. BROWN: | 20 | Q. And what is your refreshed | 21 | recollection? | 22 | A. Each of those companies do have U.S. |
00254 | 1 | operations. The scope of our involvement in those | 2 | operations may vary, based on what work was taking | 3 | place, how the pursuit was being organized, where | 4 | the skill sets reside that would support that | 5 | pursuit. | 6 | So you may have exclusive U.S. teams; | 7 | you may have combination teams of U.S. and other | 8 | resources. | 9 | Q. Okay. | 10 | A. And some of these companies may have | 11 | based the location of that pursuit, since these | 12 | are all sales opportunities, pursuit versus | 13 | project. They may have based that pursuit either | 14 | in the United States, or in some of their other | 15 | operations. | 16 | Q. Okay. I want to turn back now to the | 17 | U.S. Work Region. And I want to ask you about | 18 | column C. There's some abbreviations in column C. | 19 | One is IES. Do you know what that stands for? | 20 | A. I do. That's Integrated Enterprise | 21 | Solutions. | 22 | Q. Now, is that your ERP-related work? |
00255 | 1 | A. That was the predecessor acronym for | 2 | what is today termed the EA, Enterprise | 3 | Applications Practice. It's the same reference to | 4 | the ERP practice, per se. | 5 | Q. Okay. And that -- and that -- I just | 6 | want to focus in on a couple lines here. For | 7 | example, line 10. There's a -- if you look where | 8 | I've highlighted it up on the top, in the browser | 9 | window. | 10 | A. Right. | 11 | Q. It says "TI 50 percent, IES 50 | 12 | percent." | 13 | Most of the other lines say 100 | 14 | percent. | 15 | What does "TI 50 percent" mean? | 16 | A. E-TI is e-Technology Integration. It's | 17 | another service area of the firm which houses | 18 | staff that have different skill sets than ERP | 19 | skill sets. | 20 | In this particular case, this job would | 21 | include services that requires skill sets from | 22 | both our IES or packages practice, and our e-TI or |
00256 | 1 | integrated technology integration practice. | 2 | So we would leverage a combination of | 3 | staff who possess different skill sets to meet the | 4 | client requirements. | 5 | Q. And are the percentages an allocation | 6 | of the work across those two organizations? | 7 | A. An estimation, yes. | 8 | Q. An estimation? | 9 | A. Yes. | 10 | Q. Okay. Now, I'm using the drop-down | 11 | menu on column B, and I just want to show that | 12 | there's several different categories. And I'm | 13 | going to -- and I'm going to sort out to the | 14 | category that uses customer -- or custom -- oops, | 15 | excuse me, I'm not going to do that. | 16 | (LAUGHTER) | 17 | Q. Okay. This category which is line 905 | 18 | to sort out shows "change (50 percent) IES, 5 | 19 | percent." What does "change" mean? | 20 | A. Change infers changed leadership which | 21 | has to do with the organizational and people | 22 | requirements that correspond to ERP |
00257 | 1 | implementations. | 2 | Q. So that would mean that different | 3 | people were allocated to the project? | 4 | A. Correct. Again, a combination of | 5 | skills. People with -- we talk about our people | 6 | competency. "People that may be more oriented | 7 | towards changed management, changed leadership | 8 | requirements, sometimes E-learning requirements, | 9 | and skills of that nature." | 10 | Q. Okay. Now, in client -- we've talked | 11 | about columns D and E. This is the client, and | 12 | the client group. | 13 | A. Uh-huh. | 14 | Q. And I only want to ask you column F and | 15 | G. | 16 | One says "opportunity," and client | 17 | column F. And column G says "description." | 18 | Do these two columns provide | 19 | descriptive information about the project? | 20 | A. Yes. | 21 | Q. And do you -- one -- there's an | 22 | abbreviation that I see in the first column that |
00258 | 1 | says, "SII money movement implementation." | 2 | Do you know what SII stands for? | 3 | A. No, I do not. | 4 | Q. Now, are the -- are the columns -- are | 5 | the fields in columns F and G, are those free text | 6 | fields for the person who enters a description of | 7 | the project? | 8 | A. Yes. | 9 | Q. Okay. Now, there's a -- column H is a | 10 | column that says, "Current phase amount, USD." | 11 | Does that mean that this is the amount | 12 | that Deloitte expects to obtain for this project | 13 | in United States dollars, or is that different? | 14 | A. No. You -- how you stated it, it is | 15 | correct, Kent. | 16 | Q. Okay. Then what does the total | 17 | opportunity in U.S. dollars mean in the next | 18 | column? | 19 | A. There might be perceived follow-on, or | 20 | downstream sales activities that might relate to | 21 | potential revenue that the firm could be involved | 22 | with at these particular pursuits. |
00259 | 1 | Q. Okay. So that would require -- to take | 2 | advantage of the additional opportunity would | 3 | require -- would require you to be selected for | 4 | another project; is that correct? | 5 | A. Subsequent effort. | 6 | Q. Would that also take into account a | 7 | situation where this might be the third project | 8 | out of many? Would it take into account the | 9 | earlier projects? The total opportunity? | 10 | A. The third project made sense. The | 11 | earlier projects, no. So it would just be a | 12 | prospective looking. | 13 | Q. Prospective -- | 14 | A. If we had already done a million | 15 | dollars worth of work you wouldn't expect to see | 16 | an incremental one million. That should be | 17 | further up in historical data. | 18 | Q. And that one million would be | 19 | eliminated from the total opportunity? | 20 | A. Right. This would be the opportunity | 21 | looking forward from this particular vantage | 22 | point. |
00260 | 1 | Q. Okay. Now, in the column J work area, | 2 | or work region, it says "AM-West." Is that for | 3 | western United States? | 4 | A. Yes. America's western region. | 5 | Q. And for "AM-East," that's the eastern | 6 | United States? | 7 | A. Correct. There were three regions, | 8 | east, central and west United States. | 9 | Q. Now, the next columns, K and L. In | 10 | this column K says it's an "industry," and L is | 11 | "Industry Segment." | 12 | Can you describe what those two columns | 13 | mean? | 14 | A. We spoke earlier about seven different | 15 | industries that Deloitte focuses its practice on. | 16 | Within each of those industries is terminology | 17 | referring to industry segment. And it is a | 18 | further breakdown by industry specialty of a | 19 | market segment that is related to the overall | 20 | industry. | 21 | Q. So the seven industries are listed in | 22 | column K? |
00261 | 1 | A. That's right. | 2 | Q. And then a further breakdown within | 3 | that industry is listed in column L? | 4 | A. That's right. | 5 | Q. And what is column M? "Competencies"? | 6 | A. We categorize our staff into three | 7 | different competencies, or general categories of | 8 | skill sets. | 9 | There's technology, there are strategy | 10 | and operations, and there are people competencies. | 11 | So our staff are, again, categorized | 12 | into those three areas, and recognized to have | 13 | that kind of capability; therefore, they practice | 14 | in that particular area. So all of our EA staff | 15 | are categorized as technology staff. | 16 | The changed leadership staff that we | 17 | talked about earlier would be people competency, | 18 | because they deal with cultural change, or change | 19 | of leadership type of issues. So we leverage | 20 | different categories of skill sets at these | 21 | pursuits. And there is a lead competency that's | 22 | designated in this. |
00262 | 1 | Q. Now, I want to ask, column N is W-L-A | 2 | system date. What does that mean? | 3 | A. That's win, loss, or abandon. And | 4 | that's the date that that particular designation | 5 | was put on to that pursuit. | 6 | Q. Now, since these are -- are all the | 7 | projects in this sheet projects that were awarded | 8 | to Deloitte? | 9 | A. No. Not necessarily. These could | 10 | be -- there could be losses in here as well. | 11 | Remember that these are pursuits. So if we win, | 12 | of course, then it gets a W designation. | 13 | Q. On the top of the page does it say this | 14 | is "EA wins"? | 15 | A. It does say that. | 16 | Q. And does that refresh your recollection | 17 | as to whether all of these are -- the projects in | 18 | here are just projects that were awarded to | 19 | Deloitte? | 20 | A. That suggests, yeah, that this is sort | 21 | of what's in the system on an overall basis, that | 22 | this does reflect the wins. |
00263 | 1 | Q. Okay. And also if you take a look at | 2 | paragraph 4 of your declaration, paragraph 4, the | 3 | second sentence reads, "the spreadsheets provide | 4 | information about the Enterprise Resource | 5 | Planning-related projects in North and South | 6 | America for which Deloitte Consulting was retained | 7 | in its fiscal years 2002/2003." | 8 | Does that mean that -- does that | 9 | refresh your recollection? | 10 | A. That does reflect the wins designation | 11 | on the top of the spreadsheet. | 12 | Q. Okay. Now, there's a -- in column P, | 13 | it says, "Lead Partner Region." | 14 | Is that the area of the U.S. where the | 15 | lead partner has his offices? His or her offices? | 16 | A. That's right. | 17 | Q. And then column Q is "Opportunity ID." | 18 | Is that just a specific designation that's | 19 | assigned to that project? | 20 | A. It's a unique identifier. | 21 | Q. Not for the firm but for the project; | 22 | is that correct? |
00264 | 1 | A. That's correct. | 2 | Q. Now, there's two columns listed here, R | 3 | and S. One says "Fiscal Year," and one says | 4 | "Calender Year." | 5 | Column R, Fiscal Year, is that the year | 6 | in which the project was awarded? | 7 | A. Yes. | 8 | Q. And similarly, for column S, that that | 9 | would be a reflection of the calender year in | 10 | which the project was awarded? | 11 | A. Yes. | 12 | Q. Now, for columns T through X, was this | 13 | information that was added to this spreadsheet, | 14 | based on questions that the Department of Justice | 15 | posed? | 16 | A. Yes, it was. | 17 | Q. And so you don't have a company's list | 18 | in your spread -- in your database; is that | 19 | correct? | 20 | A. That is correct. | 21 | Q. And does column T -- was -- did you | 22 | designate on column T as to whether the project |
00265 | 1 | was with a client that was included among a list | 2 | of companies provided by the government? | 3 | A. Yes, that is the case. | 4 | Q. And this was done at a time in the | 5 | initial spreadsheet, when the government was | 6 | trying to help Deloitte avoid identifying all the | 7 | clients; is that correct? | 8 | A. That is the case. | 9 | Q. And we were trying to help -- we were | 10 | trying to get some information about the -- about | 11 | the projects but without having to identify | 12 | everything. | 13 | A. That's correct. That's why the Xs are | 14 | on. And then if a company was not on the list | 15 | that the government provided, we did identify that | 16 | company within column T. | 17 | Q. Uh-huh. And for column U, is -- did | 18 | the same thing occur but with respect to a list of | 19 | higher education institutions provided by the | 20 | government? | 21 | A. Yes. | 22 | Q. And with respect to column V, was the |
00266 | 1 | same work done but with respect to a list of | 2 | federal agencies provided by the government? | 3 | A. Yes. | 4 | Q. And with respect to column W, was the | 5 | same work done but with respect to the states and | 6 | Puerto Rico, and the District of Columbia? | 7 | A. Yes. | 8 | Q. And finally with respect to column X | 9 | was the same work done but with respect to a list | 10 | of cities and counties provided by the government? | 11 | A. Yes. | 12 | Q. Now, column Y, the last column, is | 13 | this -- in this column, does -- did -- does | 14 | Deloitte indicate what was the type of work done | 15 | on the project? | 16 | A. Yes. That is the case. | 17 | Q. Uh-huh. And there is a note that | 18 | occurs to help explain how Deloitte made those | 19 | designations; is that correct? | 20 | A. Yes. | 21 | Q. Okay. I just want to go quickly to the | 22 | first page of the spreadsheet, which is titled |
00267 | 1 | "U.S. Summary." | 2 | Is this a -- this page was not included | 3 | with the document that you originally produced on | 4 | January 12th; is that correct? | 5 | A. That's right. | 6 | Q. Is this a document -- so this is a | 7 | document that was added since that time; is that | 8 | correct? | 9 | A. Yes. | 10 | Q. And does spreadsheet for U.S. -- for | 11 | U.S. companies basically list the companies that | 12 | are on the U.S. Work Region spreadsheet? And then | 13 | indicate how many projects each company has for | 14 | each of the calender years covered by the | 15 | spreadsheet? | 16 | A. That's right. | 17 | Q. And at the end of the -- at the bottom | 18 | of the spreadsheet, are the project numbers summed | 19 | for the total number of projects? I'm almost | 20 | there. | 21 | A. Yes. | 22 | Q. And altogether on the U.S. Work Region |
00268 | 1 | spreadsheet, there were 1,108 listed projects? | 2 | A. Right. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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