SAP Takes Swipe at Oracle

Says it will not emulate its software archrival by going on an M&A feeding frenzy

August 11, 2005

3 Min Read
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The president of U.S. operations for German software giant SAP AG (NYSE/Frankfurt: SAP) says the company will not copy its archrival Oracle Corp. (Nasdaq: ORCL) by snapping up a slew of other vendors.

At a conference of financial analysts today, Bill McDermott said SAP will opt for organic growth rather than go on an M&A tear. "Were not interested in acquisitions to gain market share.”

However, the exec would not rule out the possibility of what he described as “smart,” or “fill-in,” acquisitions, but he said they would only be made where "it makes sense” for the company.

McDermott did not say which areas these are likely to be in, although SAP has been in the market for specialized retail software, recently losing out to Oracle in a bidding war for Retek (see Sap Comments on Its Retek Offer, Oracle Acquires Retek, and Oracle Gets German OK for Retek).

SAP, which sells a range of business software, from enterprise resource planning to supply chain and asset management, is clearly circling its wagons ahead of a renewed assault from Oracle.Larry Ellison's firm, which is hardly a stranger to corporate trash talk, recently boasted of customer wins in SAP’s own backyard, and it's once again on the lookout for new blood (see Oracle's on the Prowl and Oracle Spends $900M for i-flex Stake).

But with Oracle spending mega-bucks and fighting an 18-month war of attrition to take control of PeopleSoft Inc. (Nasdaq: PSFT), McDermott contends that the coming months may not be so easy for the software giant (see Oracle Takes Control of PeopleSoft and SAP Sidles Up to PeopleSoft Users). The exec pointed to the $11 billion cost of the acquisition, and “lots of people going the other way,” hinting that disgruntled customers are moving over to SAP. “It’s making this a very risky endeavor for [Oracle] indeed,” he added.

Warming to his theme, McDermott said that Oracle is also coming under pressure from rival database vendors. “IBM and Microsoft have both got databases,” he said, suggesting that this will lead to pricing pressure in the market. “That’s going to add another level of complexity."

McDermott also took a thinly veiled dig at Oracle’s Project Fusion, a set of applications scheduled for launch in 2008, which will merge the Oracle and PeopleSoft product lines. ”We’re not talking about fusing solutions -- we’re not talking about 2008. We’re ready to execute now.”

But the exec was not particularly forthcoming about SAP’s own product roadmap, although partnerships were a recurring theme throughout his presentation. In particular, he highlighted SAP’s work with Microsoft Corp. (Nasdaq: MSFT) on a project entitled Mendocino, targeted at the 16 million Microsoft users within the SAP installed base. “We will enable them to seamlessly interoperate with SAP business applications without leaving Office."McDermott added that SAP has also been working with Adobe on interactive forms. “We’re very partner-friendly and continue to be."

Oracle spokesman Bob Wynne denied the suggestion that the company has been rocked by its PeopleSoft acquisition. "The PeopleSoft acquisition has gone very well," he said. "There have been very few customers falling off."

— James Rogers, Site Editor, Next-Gen Data Center Forum

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