An Oracle-PeopleSoft merger would actually boost competition in the ERP market, according to a completely biased SAP executive.

"We anticipate a greater amount of competitiveness," said Richard Knowles, VP of SAP America. Knowles was called in federal court by Oracle, which is challenging the U.S. government's attempt to block its $7.7 billion hostile bid for rival PeopleSoft.

The Department of Justice's case is built on the assertion that there are only three main vendors of ERP software - Oracle, PeopleSoft and SAP - and so a merger of two of them would reduce competition and see prices raises with less choice.

Even if Oracle's claim that there are numerous other companies able to effectively compete in the market is accepted, SAP stands to gain from any merger going ahead, especially if it can subsequently come to some agreement with Oracle.

During questioning by Oracle, Knowles also said all SAP buyers have high functional needs and that SAP competes against numerous vendors, not just PeopleSoft and Oracle. In the US, SAP currently holds 34 percent of the enterprise application market, Knowles testified. If the acquisition of PeopleSoft by Oracle goes through, Oracle would have 38 percent market share, leaping SAP.

"Oracle would become the number one provider in the US, and would do anything to keep that position. We, from an SAP position, think that would be highly competitive for us," Knowles testified. "We're going to see more sales people being marshaled into a position competing against us." However, asked if SAP has a position on the merger, he claimed it was "neutral."

The answer appeared to surprise Judge Vaughn Walker, who oversees the case. The direct question if SAP would mind if one large competitor was eliminated because it was folded into another was not asked.

The DoJ doesn't see Knowles' testimony hurting its case, said Thomas Barnett, deputy assistant attorney general, speaking during a break in Knowles' testimony. "The notion that two competitors are going to be better than three competitors does not follow," Barnett said. "Customers have consistently testified that they would prefer three options, rather than two. I put more weight on the customers."

The DoJ has yet to cross-examine Knowles.