It’s been the million dollar question — why didn’t SAP buy IDS Scheer?
All the signs pointed to the beginning of a beautiful friendship — consistent rumors that SAP may make a play for IDS Scheer, the long-time partnership, the 60% overlap in customers. When I started covering SAP more than a year ago, “keeping an eye” on IDS Scheer was one of the first things my boss told me to do.
The truth is — I don’t know why SAP didn’t buy them. SAP didn’t want to comment on the deal when I asked.
The past being the past, let’s pose the next relevant question. We talk a lot on this blog about consolidation in the ERP space. But as Forrester Research analyst Ray Wang said when I spoke to him about the Software AG/IDS Scheer deal, this bodes more consolidation in the middleware market.
To that end, what are the consequences of continued consolidation in the middleware market — and what’s SAP’s next move?
“SAP’s Supply Chain Management Strategy and Offerings,” the topic of a recent report by Gartner Research’s Andrew White, brought to mind a question that was batted around the blogosphere last month.
Can the big vendors drive software innovation?
For its part, SAP has a strong supply chain management vision, White said. Partnering with supply chain management vendors like i2 early on and jumping on the RFID trend have proved beneficial.
Plus, SAP sells some innovative, out-of-the-box supply chain management products, White said. Take, for instance, SAP’s supply network collaboration software. It’s completely independent of the ERP backbone — it has its own database. It grew out of procurement capabilities and acts as a hub for manufacturers to communicate better with suppliers. Customers are using it to better coordinate sales, supply and even to integrate different ERP systems.
But for a company that bleeds supply chain management, can SAP’s software really be considered innovative?
“SAP will stick to software,” was the headline from SAP CEO Leo Apotheker’s interview in the Wall Street Journal last week.
I don’t think anybody’s really speculated that SAP will do anything but stick to selling software. It seems unlikely that they’d target this “one stop-shopping” approach Oracle is pushing (Sun acquisition) when the partnership approach SAP’s taken to infrastructure has worked so well over the last few years.
However, SAP’s also been very open in the past year that in terms of selling software, it knows it can no longer develop everything organically that it needs to stay competitive.
With Oracle’s less than stellar earnings announcement this week, there’s been a lot of back-and-forth on whether Oracle is taking market share from SAP.
Figures from Gartner Research’s most recent North American ERP market share report — which ranks the vendors through 2008 — show that doesn’t seem to be the case.
SAP’s share of the North American ERP market decreased from 28.3% in 2007 to 26.8% in 2008. In turn, Oracle’s decreased from 12.9% in 2007 to 12.7% in 2008.
SAP and Oracle are still one and two, respectively, in the North American enterprise software market by a wide margin. But in looking at these numbers, the more interesting question is, who’s taking market share from them?
If you haven’t seen ComputerWeekly’s reporting on what we’ll call a “difficult” SAP implementation for the Somerset County Council in the United Kingdom, it’s a worthy read.
The long and short of it is this – a more than a year long, costly SAP implementation with less than ideal go-live and upset staff members.
In fact, employees are so unnerved, they’re being offered workshops in managing excessive pressure within teams, coping strategies for abnormally high workloads and dealing with difficult situations/conversations, according to the ComputerWeekly reports.
We’ve been down this route before on SAP Watch — are go-live problems the software’s fault or the businesses’ and systems integrators’ fault?
On the day SAP announced its on-demand strategy, NetSuite’s CEO Zach Nelson, the ever-present thorn in SAP’s side, graciously took me on a walk down memory lane.
Larry Ellison, he recalled, once told him that what really helped Oracle take off was IBM announcing it was working on a relational database.
At the time, Oracle had the best database technology, and IBM acknowledging that relational databases were a big deal simply elevated Oracle’s profile, Nelson said.
And, as his story goes, Ellison said, “Someday, SAP or Microsoft will do the same thing. They’ll start talking about the importance of what you do, but won’t be able to deliver on it yet.”
SAP’s announcement of its on-demand strategy is “another IBM moment for us,” Nelson said. “The opportunity in front of us is huge. With SAP’s announcement today, everyone realizes [SaaS] is the future of software.”
And, he said, customers aren’t going to wait around for SAP to get it right.
So is SAP too late to the game? It’s no secret that SAP has struggled to get an on-demand strategy off-the-ground. Business ByDesign still isn’t fully to market yet.
The news that Tibco is offering cloud computing tools caught my attention this morning.
The middleware leader is getting ready to deliver a tool — Tibco Silver — for building enterprise grade applications of top of a public cloud infrastructure, according to SearchSOA.com. The applications will run on Amazon EC2 for now, but they’re planning on supporting other cloud providers in the future.
Back when Oracle bought BEA Systems, there was lots of talk about SAP perhaps buying Tibco. Bloggers and analysts engaged in loads of commentary on what SAP needed to boost its own middleware – NetWeaver — and why Tibco would make an excellent acquisition. Much of this is summed up well in this 2007 blog by ZDNet’s Dennis Howlett.
In turn, a recent Forrester Research report ranked Oracle’s Fusion middleware ahead of SAP NetWeaver, touting its broader set of tools, and better support for openness and standards.
Tibco’s still available — could it bolster SAP’s middleware?
Add to that scenario the benefit to SAP’s cloud computing strategy, and Tibco’s looking good. SAP has said repeatedly that it’s trying to find a way to accommodate enterprise customers in the cloud. That’s a governance challenge that Tibco is going to tackle with Silver, Tibco’s Rourke McNamara, head of product marketing, told SearchSOA.com:
“We have been looking for a way to make the cloud useful to enterprise customers, and have talked to them about stumbling blocks such as the lack of governance, lack of portability of skill sets and code, and security.”
According to the article, Silver also features integration as a service, built on Tibco’s core service bus technology, which simplifies the process of sending and receiving data with other enterprise applications like SAP, Oracle Financials, and Siebel.
Plus, the product sounds as though it’ll be platform agnostic — the direction SAP is indicating they want to go with the cloud.
Might Tibco make a nice 2009 acquisition for SAP?
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?
Having just returned from my first up-front exposure of the SAP world at Sapphire this week, I’m left to sort though all of the sessions and news announcements to see what I thought was the most interesting. At first thought, I’d have to say it was the company’s approach to sustainability.
The idea of “going green” is nothing new for the company; late last year, SAP said it wanted to help its customers drive corporate sustainability with its ERP software. But it was SAP’s approach, which leans more towards the business benefits of sustainability rather than the environmental, that grabbed my interest during a roundtable session Wednesday.
Business ByDesign, SAP’s on-demand ERP, didn’t get too much play at Sapphire this year. With the product still under construction, there wasn’t too much to announce.
The big problem seems to be delivering on-demand software in a “profitable” way. This InformationWeek article offers a great behind the scenes look at what’s going on with Business ByDesign, including what types of “major reconstructive surgery,” it may need before it can be profitable enough to make generally available.
Cloud computing is the “OctoMom” of the technology news industry. And it’s tempting to think that because SAP doesn’t have an on-demand ERP in the market, it’s, as this Reuters article states, “being left behind” as other vendors sell the software.
But just because Business ByDesign isn’t on the market yet, does it mean SAP’s behind in cloud computing?
I spoke with many customers at Sapphire about what types of projects they’re working on this year, and what their strategies are for the future. Few mentioned any cloud-based projects.
Some still weren’t exactly sure what is indeed meant by the term “the cloud.”
In turn, SAP certainly wasn’t trying to hide Business ByDesign, or the company’s on-demand efforts — which include delivering on-demand expense management and human capital management “soon.” Apotheker pointed out that SAP sells CRM, procurement and sourcing and SAP BusinessObjects software on demand.
CEO Leo Apotheker included, albeit briefly, Business ByDesign in his keynote and invited attendees to demo it themselves to “kill a rumor” at one of the booths on the show floor. It’s something analyst Joshua Greenbaum did and said in his blog it “looked and acted pretty robust.”
And Apotheker certainly didn’t discount “the cloud” as a very important delivery model. In fact, most of his keynote focused on how SAP would make its software easier to deploy, lowering the total cost of ownership for its customers.
“I firmly believe that cloud computing is coming down to earth,” Apotheker said in his keynote. “Private clouds are becoming a totally feasible possibility.”
What do you think?