Ballmer Moves to Quiet SAP Buyout Talk

We told you yesterday that Microsoft is issuing its first bond offering, but what we didn't speculate on was how Redmond might spend the money it raises. Well, no surprise, somebody else did. The scuttlebutt was that Microsoft might look to buy SAP, the German software vendor and king of the enterprise resource planning mountain. Steve Ballmer moved quickly to...well, to not say much, really, except that the SAP thing is just a rumor.

At this point, of course, it is. And so was the rumor, dismissed many times in many places (including here), that Microsoft would at some point try to buy Yahoo. Well, we all know how that turned out (or didn't turn out, as the case may be). The rumor was true, but the acquisition attempt was unsuccessful.

A Microsoft-SAP hookup, though, is a tasty proposition in some ways and a scary one in others. Aside from the regulatory troubles it could bring (which is why we suspect it'll never happen), the merging of two fairly large companies with dissimilar cultures across an ocean sounds like a beast of a chore for Microsoft, which is currently trying to make users forget Vista by wowing them with Windows 7 and is also endeavoring to stave off the netbook craze that's eating away at Windows profit margins.

Then there's Dynamics, Microsoft's own ERP and CRM offering. What on earth would happen to the four Dynamics ERP suites plus Dynamics CRM if Microsoft snapped up SAP? Would they disappear? That's our guess, actually, given that Dynamics' momentum is slowing a bit and that we're hearing second-hand reports of gloom and doom from Dynamics partners. Then again, gloom and doom aren't exactly in short supply right now.

Or, would Dynamics get folded into SAP's offerings, thereby destroying Microsoft's whole proposition of selling ERP software that's cheaper and easier to implement than what Redmond's bigger competitors offer? And, given SAP's hybrid channel-direct selling model, who would be in line for the lucrative business of selling into the SAP installed base (which is how SAP makes a lot of its revenue), SAP direct-sales folks or Microsoft partners? Or, heaven forbid, both? And what about the notion that Microsoft could buy SAP, continue with Dynamics and compete against itself?

Those are enormous questions not easily answered, and the resolution to them offers the potential for conflict, to say the least. Then again, SAP isn't the ERP leader for nothing. Although we've heard here and there that the company's hosted ERP offering is struggling big time (and we mean big time), SAP still has the lion's share of big corporate ERP accounts. And, the occasional horror story notwithstanding, it does have some great technology that could be a boon for Microsoft's Dynamics channel.

Of course, it's all the stuff of rumors at this point, but with attendance and news at this week's Tech-Ed show both underwhelming, we figure it's OK to speculate a little bit, no matter what Steve Ballmer says.

Send your take on a Microsoft-SAP marriage to [email protected].

Posted by Lee Pender on May 13, 2009