SAP Drops Oracle, Adds Heat to ERP Rivalry

To anyone who has attended an Oracle Corp. or SAP event, the relationship is obvious: The two consider themselves to be neck-and-neck competitors for leadership in the ERP space. Hasso Plattner, CEO of SAP (, and Larry Ellison, chairman of Oracle (, frequently take swipes at each other in their pronouncements. SAP recently took a major public-relations jab at its rival by jettisoning Oracle as an internal development and production platform, and announcing strengthened partnerships with Microsoft Corp. ( and IBM Corp. (

The impact of this posturing, however, is virtually nil for SAP R/3 customers, says Robert Dorin, vice president of research at Aberdeen Group ( "Given the market share that Oracle has of all SAP installations as the database of choice, I think only a very revolutionary shift in user demand will have a very substantive impact on the market," he notes. "I'm not sure what the real implication of the announcement is, other than SAP trying to take a slap at Oracle."

SAP is planning to replace Oracle with SQL Server 7.0 as the primary database on its internal Windows development and production systems, and make IBM's DB2 the primary database for its IBM, Sun, and Linux platforms. Furthermore, SAP announced that its 200 internal training and customer demonstration and presentation systems will be migrated to SQL Server. SAP and Microsoft also formed an initiative to promote Windows 2000 as an operating system for, SAP's electronic marketplace initiative.

SQL Server has been popular as a database for SAP Windows NT implementations. At the end of the third quarter of 1999, more than 50 percent of new SAP installations on Windows NT in the U.S. were on SQL Server, with about 2,000 Windows NT and SQL Server-based installations worldwide.

Still, Oracle provides the data store for more than two-thirds of SAP’s 22,000 installations, according to published reports. Even on Windows NT, Oracle is estimated to have more than twice as many SAP customers as Microsoft has with SQL Server.

SAP's joint effort with IBM will promote IBM's DB2 Universal Database as an underpinning to SAP solutions. In turn, IBM will market SAP as a solution for Windows NT/2000 on Netfinity servers, RS/6000s, AS/400s, S/390s, Sun Solaris, and Linux. offerings -- such as Workplace server, SAP Business-to-Business Procurement, SAP Customer Relationship Management, SAP Strategic Enterprise Management, and SAP Knowledge Management -- were scheduled to be generally available on all DB2 platforms by December 1999.

This follows on the heels of IBM's declaration that it would be forging close partnerships with leading application software vendors in each horizontal market. IBM has been uncoupling itself from the applications software business, opting for partnerships and offering best-of-breed solutions from ISVs in various disciplines. "The developers and ISVs will be our primary way to propose application software," says Bob Timpson, general manager, solution developer marketing, at IBM.

Aberdeen's Dorin doesn't foresee a great surge in demand for SAP on DB2 as a result of the agreement. "This strikes me as a Hasso-Larry episode," he observes. "The bottom line is SAP users are going to continue to use Oracle databases. I'm not going to even touch the rat's nest of what it would mean to suddenly have DB2 become a dominant player in the SAP market. There's too much invested from an infrastructure perspective at user sites in Oracle and SQL Server. To say that DB2 is going to eat into the Oracle presence in the SAP market is silly. This is just a posturing issue."

That posturing stems from Oracle's growing presence in the ERP space. SAP's market share stands at about 35 percent, with Oracle second at 17 percent, according to GartnerGroup's Dataquest ( unit.

With an emphasis on putting ERP functionality on the Web, Oracle "has been gaining ground significantly," Dorin says. "Oracle had Internet-related initiatives before SAP announced They're head-on competitors in terms of trying to get into the extended enterprise application area."

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