SAP Watch

May 19 2009   7:45PM GMT

Could Oracle be making an entrance into SAP’s SMB market with Virtual Iron?

CourtneyBjorlin Courtney Bjorlin Profile: CourtneyBjorlin

At Sapphire, I had the chance to speak with Rob Enslin, SAP’s new North American president. We got onto the topic of the small and medium-sized enterprise market, where SAP has been successful in winning more customers than Oracle, according to analysts.

But the financial crisis in September slashed spending by SMBs, sank SAP’s earnings and sparked hundreds of millions in cost cutting measures across the organization.

So I wondered how SAP would spur sales in this segment again. Selling software to small and medium-sized business remains one of the main legs of SAP’s strategy, Enslin said. He said, in general, the industries SAP is selling well into now include the public sector, financial services, retail and utilities. Plus, Business ByDesign, its on-demand ERP, is still coming — though he couldn’t say when.

Moreover, SAP will be “flexible” in terms of how it sells software to these customers.

“We’ve got a big financing [program] on right now. We would do different commercial models today how we sold to these customers,” he said. “It’s not one commercial model, up-front. It’s whatever suits the customer.”

But Oracle, which has been pretty absent in this segment, may have signaled its entrance by purchasing Virtual Iron, which makes server virtualization management software.

Virtual Iron was nipping at the heels of Citrix, VMware, Xen and Hyper-V, mostly in the SMB market, according to Chris Carter, CTO and CEO of CCI, a Milwaukee-based consulting firm which specializes in SAP virtualization.

What remains to be seen, Carter said, is whether Oracle will take Virtual Iron and make it part of its virtualization software, Oracle VM, to bring to the enterprise market, or whether whether Oracle will take its applications to Virtual Iron, and therefore, the SMB market, Carter said.

In that case, they’d be able to offer SMBs a complete package of hardware [i.e. the Sun acquisition], virtualization software and business software.

SAP’s approach to virtualization – agnostic to what platform its customers use and leaving its execution to partners — has so far served it well, according to analysts. Plus, it has far more to offer in terms of business software — including SAP Business One and SAP Business All-in-One, its flagship ERP software packaged for SMBs.

But does SAP need to do more now that Oracle could be entering one of its major markets?

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