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Microsoft and SAP: Oracle in the Crosshairs

At first glance, this almost seems a little unfair. The ERP market leader and the market leader in almost everything else -- two companies that aren't always the best of friends -- are teaming up to attack Oracle. But Microsoft and SAP have their reasons for getting together.

Oracle is a major ERP player these days and a threat to SAP's market-leading position in the space. (Microsoft wants to be an ERP player, too, but we'll get to that later.) Microsoft, of course, wants to cut into Oracle's massive share of the market for database software. So, Microsoft and SAP have come together in what is essentially a business-intelligence play in which Microsoft -- and its channel, presumably -- will recommend and implement SAP's BusinessObjects BI software for Microsoft customers...with that software running, of course, on Microsoft's database applications. There will also be some cross-sales and cross-promotion-type stuff.

There are a lot of entanglements here, and we wonder at first blush whether Microsoft and SAP are trying too hard to torpedo Captain Larry Ellison's Good Ship Oracle. (Larry's an avid sailor, you know.) First off, what does Microsoft embracing BO (a common abbreviation for BusinessObjects among company insiders -- and, yes, your editor did briefly work there in Paris almost a decade ago) say about Microsoft's own efforts to create a BI platform?

Although the concept for it has never seemed to have much structure, Microsoft has tried to lump together its own BI offering and has even made a few acquisitions over the last few years with development of BI in mind. Is this, then, the end of the Microsoft's half-cooked BI experiment?

Redmond has always talked about baking BI tools into a Microsoft stack rather than offering them as something of a separate entity; there's not really such a thing as "Microsoft BI" (although it would make a good name for a detective show set in Hawai'i). SAP, on the other hand, sells BI software as more of a separate commodity and has given BO some level of autonomy post-acquisition. (The BO name survives, anyway, as do many of BO's employees, who are now on the SAP payroll.)

If Microsoft really is going to send partners into accounts touting BO as Redmond's "preferred" BI software, there seems to be somewhere in that decision an admission that cobbling together BI capabilities has been more difficult and not as profitable as Microsoft thought it would be.

And speaking of things that are cobbled together, what does this agreement mean for Microsoft's Dynamics ERP suites, at least a couple of which feature Microsoft's own BI capabilities already? Does Microsoft now ask its channel members to go into Dynamics accounts pushing BO, at the risk of exposing those companies to SAP on the ERP side? And what of SAP -- which, by the way, uses a hybrid channel and direct sales model -- going on sales calls with representatives of a company that wants to eat away at its position as ERP market leader?

This isn't, of course, the first time that Microsoft and SAP have hooked up, and rumors of Microsoft's desire to buy SAP have persisted for years; only a few months ago, Steve Ballmer was busy quashing them again. Plus, there seems to be little doubt (albeit from biased observers in some cases) that this deal really could take a chunk out of Oracle's two primary business lines.

But at what cost? And why? "Coopetition" is a delicate balance. It should offer more benefit than risk, although there will always be a bit of both involved. The obvious benefit here is that Microsoft and SAP have an excellent opportunity to carve up and conquer Oracle, a frankly brash and unlikeable company (according to RCPU) that, in many ways, embodies the attitude of its CEO.

But in slicing and dicing Oracle, how often will Microsoft and SAP slip and cut each other and themselves? How will they and their partner bases avoid conflicts and stepping on each other's toes? And do the ERP titan and the world's most powerful software company really need to take all these risks to pick on Oracle at this point? We're not so sure. This deal seems to bring Microsoft and SAP too close. So close, in fact, that it might be time to dust off that Microsoft-SAP acquisition rumor again. Just for fun, anyway.

Are Microsoft and SAP going too far to attack Oracle? Sound off at lpender@rcpmag.com.

Posted by Lee Pender on November 19, 2009 at 11:55 AM


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