SAP is emitting a dizzying flow of news from its Sapphire users conference in Copenhagen this week as it partners with giants in the tech world: IBM, Siemens, Microsoft and Macromedia. At this rate, analysts say, Oracle better learn how to partner like its arch rival, lest it wind up the wallflower at the enterprise applications dance.
To wit: On Tuesday, SAP AG announced that it will jointly develop software with Microsoft Corp., combining SAPs business applications and Microsofts Office desktop applications.
SAP capabilities such as time management, budget monitoring, organizational management, and travel and expense management will hook directly into immensely popular desktop applications such as Excel, Outlook and Word—a combination that analysts say will set the bar for Oracle Corp., whose productivity tools have to compete with the popular Office software, and IBM, which could stand to integrate its various software offerings better.
The German company also announced on Tuesday a version of IBMs DB2 database optimized for SAP applications—the first time IBM has ever streamlined its database for a particular applications vendor.
IBMs director of DB2 Marketing, Bernie Spang, told Ziff Davis Internet that this move started to ramp up about two years ago—in other words, very close to the time Oracle announced it would attempt to acquire PeopleSoft. Its a move that IBM framed as a direct assault on the 60 percent of SAP customers who run their applications on Oracle databases—in other words, an impressive 44,000 enterprises.
And there was an assault on a third front: SAP is pushing forward to expand its already strong presence in vertical industries, announcing on Tuesday that it is partnering with Siemens AG to offer integrated health care technology and consulting services to improve patient safety and process workflow at health care organizations.
Finally, if all that werent enough, SAP announced on Tuesday that it is extending SAP NetWeaver with the Macromedia Flex application framework—a pairing one analyst called “very, very, very important” when it comes to competing with Microsoft on integrated content, collaboration and communications.
The take-away from all this partnering? SAP has figured out that its got a lot more to gain from cooperating with its enemys enemies than it does from competing with them.
“Here are two companies, ostensibly [SAPs] biggest competitors, and what SAP is doing is saying the value of cooperation is bigger than the value of competition,” said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif.
“Exact numbers are hard to come by, but its pretty obvious to me that the amount of business Microsoft and SAP do together far exceeds the total revenue of Microsoft Business Solutions. And over in IBM, the amount of joint business between IBM and SAP exceeds the value of Websphere … as well.
“So what you really have is competition thats not on the same scale as cooperation,” Greenbaum said. “I think these two agreements are a recognition that by working together, rather than fighting together, well, the enemy of my enemy is my friend. I wouldnt say its a deliberate attempt to isolate Oracle per se, but it really shows how isolated Oracle could become if they dont start to build up their partnership model as well.”
Market Consolidation Benefits Customers
SAPs partnering agreements also indicate that, as the U.S. Department of Justice warned would happen, the post-PeopleSoft-acquisition market is, clearly, consolidating.
“As weve seen Siebel slip and slide away, both in terms of earnings and compelling value of product, it really is becoming somewhat of a two-horse race,” said William Hurley, an analyst at Enterprise Strategy Group. “To my mind, it underwrites the concerns the DOJ had about consolidation in the industry. Were really talking about heavyweights, really the only ones who have the gravity to unlock customers from these complex and critical enterprise applications.”
But is consolidation such a bad thing? If the news from Sapphire is any indication, the answer is no. “[The DOJ] didnt have a clue what they were up to,” Greenbaum said.
“The entire process showed they were just missing the whole boat. What were seeing now is the result of healthy competition. … A duopoly is more beneficial to customers than a broader, more messy competitive environment can be. Look at Boeing and Airbus, theyve been after each other for years. These two companies compete bitterly and innovate like crazy,” Greenbaum said.
“Were seeing this duopoly effect as being very beneficial to customers,” he said. “Everything in these announcements from SAP on one hand takes a swing at Oracle but more directly benefits joint customers in a very direct way.”
Mike Zeleniak, information systems manager at the mining company Teck Cominco Ltd., agrees. His Toronto-based company uses SAP marketing and sales applications that used to run on Oracles 8.0.6 database. Back in October, Teck put out an RFP (request for proposal) with an eye toward migrating off old Alpha servers. Zeleniak said maintenance costs for hardware, software and licensing were also up on the cutting board.
IBM put together a package that chopped tens of thousands of dollars off annual costs for Teck Cominco, just on maintenance. Oracle wasnt interested in repackaging or renegotiating, Zeleniak said, and as a result, he switched to DB2 8.01. Performance is “way up,” he said, with monthly reports that once took 6 hours now running at 20 minutes.
Hes not even running the SAP-optimized DB2, which is Version 8.2.2, but that ones looking pretty good, too. Zeleniak said, “The fact that it self-tunes and looks after some of the mundane things a DBA [database administrator] would have to do, thats great.
“Being a small shop, we only have [five] people here who support SAP. If we have a person who doesnt have to worry about the health of the system and who can manage the health of the system and other business-related things, thats good.”
Oracle May Lose Customers
Zeleniak said he is also looking forward to the products that will result from the partnership between Microsoft and SAP. One product of that development partnership, due out in 2006 and code-named Mendocino, will offer his SAP users quite a different world from the spreadsheet and flat-file input theyre dealing with now. “Any way you can get information in and out of SAP in a user-friendly environment is good,” he said.
Given the efforts SAP and IBM are making to woo customers off of Oracle databases, and given SAPs strong presence in vertical industries, Oracle has a long way to go when it comes to retaining SAP users.
“I dont think anything else in the marketplace, in terms of functionality and ability, compares to SAP,” Zeleniak said. Although the company runs JDE in its production plant, for example, the marketing and sales group decided not to deploy it after evaluating it as a potential solution for its sales requirements.
Zeleniak said, “I tell you, JDE was very painful as an installation: very limited functionality, limited flexibility. … SAP has targeted certain industries and modified their core enterprise system to work for those industries.
“We have [SAPs mining software]. We are implementing it for some sales and marketing functionality. Because, well, nobody else can do the complex pricing and the invoicing thats required for a mining product called concentrate [preprocessed ore made into dirt that goes to a refinery which processes it into metal ore]. … These industry solutions are very, very important, and you know what? Oracle doesnt have them, PeopleSoft doesnt have them and JDE doesnt have them.”
Oracle did not respond to a request for comment by the time this article was posted.
Editors Note: This story was updated to clarify comments by Mike Zeleniak regarding JDE usage, Mendocino and the number of personnel who support SAP applications.
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