In-Depth

SAP Strikes Back in ERP Wars

SAP last week expanded its ERP Cold War against Oracle, announcing partnerships with IBM and Microsoft

• By Stephen Swoyer
• 05/03/2005

It's clear Oracle Corp. is gunning for SAP. First there was Oracle’s quixotic and unyielding pursuit of the former PeopleSoft Inc., which many industry watchers said would give Oracle the potential, if not the means, to challenge SAP for ERP supremacy.

Last month, Oracle and SAP entered a bidding war over Retek. SAP agreed to acquire the Minneapolis, Minn.-based retail software vendor in late February for $8.50 a share; Oracle countered with a $9 offer, SAP upped the ante to $11.00, and Oracle countered with $11.25, at which point SAP dropped out of the bidding.

At its annual Sapphire user conference, held last week in Copenhagen, Denmark, SAP struck back—big time. The German ERP giant unveiled a slew of partnerships with big name ISVs—including IBM, Macromedia, Microsoft, and Siemens. Call it the expansion of a long-crackling ERP Cold War.

The Microsoft accord was probably the biggest news to come out of this year’s Sapphire conference. SAP and Microsoft agreed to jointly develop Mendecino, the code name for a product that will combine SAP’s proven business software with Microsoft’s proven Office productivity software. The idea, officials say, is to expose SAP features like time management and travel and expense management within the context of Word, Excel, and other Office applications.

Elsewhere, SAP and IBM announced a new version of Big Blue’s DB2 database specifically tailored for SAP’s ERP application stack. Although SAP can run on a variety of relational database platforms, a significant number of customers choose to run it on top of Oracle. The company’s partnership with IBM is designed to dislodge those customers from the competitor’s flagship product.

Similarly, SAP announced a software and services partnership with Siemens designed for the health care vertical.

SAP and Macromedia notched an agreement to build bridges between SAP’s NetWeaver application framework and Macromedia’s Flex framework for Rich Internet Applications.

To some extent, SAP’s moves serve to heighten the contradictions between it and Oracle, which—for obvious reasons—couldn’t enter into similar partnerships with either IBM or Microsoft. Ironically, however, both IBM and Microsoft are nominal SAP competitors, the former with its WebSphere Business Integration (WBI) application integration middleware, the latter with its own Microsoft Business Solutions ERP stack.

“What does it say about how all of these [companies] view Oracle that they’re able to put aside their differences and do [these partnerships?]” asks Mike Schiff, an Oracle veteran and principal with data warehousing consultancy MAS Strategies. Schiff says SAP’s high-powered accords with IBM and Microsoft, especially, could help to cultivate a perception among current or potential customers of Oracle as “isolated.”

PeopleSoft, J.D. Edwards Users in Play

SAP is taking the fight to Oracle in other ways, too. Almost from the moment Oracle announced its pursuit of PeopleSoft, SAP and other ERP vendors tried to dislodge anxious users of PeopleSoft or J.D. Edwards software. Now that Oracle has completed its acquisition, the ERP giant has kicked its efforts into high gear, offering migration programs and other enticements to lure concerned, disillusioned or just plain disgruntled users.

In January, for example, SAP acquired TomorrowNow Inc., a maintenance solutions provider for PeopleSoft applications. Also in January, SAP unveiled its Safe Harbor migration program that is designed primarily for customers with existing (if minimal) investments in SAP and J.D. Edwards or PeopleSoft technologies. SAP’s strategy—while still coalescing—is clear: Offer customers a viable, if not compelling, alternative to what Oracle outlined in its own Project Fusion vision.

“Victory” in the ERP Cold War may be determined by how well Oracle executes on Project Fusion. That’s Oracle’s plan to integrate, meld, or reconcile the PeopleSoft and J.D. Edwards application stacks with its own ERP applications.

The bulk of PeopleSoft and J.D. Edwards users are expected to stay put, for the time being, now that they’re received assurances that Oracle will, in fact, provide support over the next eight years. “I may not, as a PeopleSoft owner, defect at this point because I know I’m going to be supported, so no matter what SAP’s offering me, it may not be worth it,” says Robert Kugel, a vice-president and research director with consultancy Ventana Research.

He stresses, however, that this doesn’t translate into a bonanza for Oracle, outside of lucrative maintenance revenues. “But I certainly in most cases I’m going to scale back whatever [PeopleSoft] upgrade work or expansion work I might have had in mind, until I’ve got a clearer idea of what Fusion’s going to look like.”

Oracle’s ability to deliver a full-featured Project Fusion will almost certainly make or break its success as an ERP vendor—but could a failure to execute on Project Fusion sink Oracle as a database vendor, too?

Not likely, according to Kugel. “No, it’s not enough to sink them. Do they have to execute on 100 percent of the objectives that exist today and still have this be successful? I think the answer’s clearly 'no.'"

At the same time, Kugel stresses, Oracle has little room for error, especially with SAP able to offer users a compelling alternative. “They have to have a relatively high batting average to expect people to make the migration to the new platform, that’s certainly true.”

Although some PeopleSoft and J.D. Edwards users are warming up to Oracle, particularly in light of the database giant’s published support roadmap and audacious Project Fusion plans, others have an Anyone-But-Oracle mentality, thanks in large part to the company’s acrimonious takeover gambit.

Larry Jones, a PeopleSoft EnterpriseOne professional with a manufacturer of aluminum casting solutions, for example. downplays Oracle’s talk of synergies between the two platforms, and suggests that Oracle made its move solely to eliminate a viable competitor.

“There can be no synergy between major ERP platforms that are based on their own proprietary architectures,” he argues. “Such ideas and phrases spring from the minds of mind-altered marketing executives and from top executives desperate for rationalizations of stupid and/or predatory mergers.”