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

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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

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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