With Oracle Corp.'s acquisition of PeopleSoft Inc. looking more certain every day, let's consider what SAP and
its customers will face when the deal is finally sealed. While the protracted takeover has helped solidify SAP's position at the top the market, no one should assume that SAP's position will be unchallenged for very long. And when SAP is finally challenged in full force, the result should be very positive -- at least in the long run -- for customers of both SAP and Oracle.
Why? Because SAP versus Oracle will constitute a classic duopoly at the top end of the enterprise software market, and duopolies, particularly those selling big-ticket items to relatively few customers, can be very customer-friendly. Duopolies let customers play one competitor against the other and, in return, receive very advantageous pricing and a steady stream of leap-frog innovation.
The best example of how a duopoly favors customers can be seen in the feud between Boeing and Airbus. While both vendors' profitability has declined in the face of continuous price-cutting, airlines worldwide have been able to save hundreds of millions of dollars, while taking delivery of some of the most technologically advanced manufactured goods in the world.
Expect a similar effect in SAP versus Oracle, particularly for the products and functionality that are emerging commodities -- human resources and finance -- or are relatively hard to distinguish from one vendor to the next -- such as data warehouse, EAI, portal and other important but less-than-strategic technologies.
This duopoly effect will also significantly raise the bar on innovation, with the expected positive result for customers. This is also happening in the Boeing/Airbus dogfight: Airbus is out on an innovation limb with its forthcoming 600-seat A380, betting that transporting more passengers is what the future of aviation needs. Boeing is betting that the greater fuel efficiency of its much smaller 7E7 will win the day. Meanwhile, both companies are spending tens of billions of dollars investing in value -- and quality -- for their customers.
The coming SAP/Oracle duopoly should yield a similar "more for less effect" that ought to put a smile on every chief financial officer's face. There won't be any free lunches -- duopoly does not mean charity -- but there will be a shift that can only benefit the customer.
At least until Microsoft shows up to spoil the party.
Joshua Greenbaum is principal analyst at Berkeley, Calif.-based Enterprise Applications Consulting and a contributor to SearchSAP.com