There are a couple of lessons to be learned from the recent battle over Retek between SAP and Oracle, all of which mean that that these two rivals will continue to let their increasingly public competition be played out in the M&A market.
The first major lesson is that Oracle is clearly determined to do anything it takes in the financial markets to gain an edge against SAP, including taking on SAP in a bidding war for Retek. The PeopleSoft acquisition was clearly intended to further Oracle's competitive profile against SAP, and the Retek bid is further proof that SAP is the bulls-eye at the center of Oracle's strategic ambitions.
The second lesson is that Oracle's timing is a little off, and that lack of timing is hurting the company's plans. Oracle claims it too was thinking about buying Retek, and only launched its bid after SAP got in the game. This is exactly where Oracle found itself in June 2003: jumping in to buy PeopleSoft only after PeopleSoft had already launched its friendly takeover of J.D. Edwards. The TomorrowNow acquisition by SAP – bringing in-house a company that can take over PeopleSoft maintenance contracts and thereby undercut one of the main financial premises of Oracle's acquisition of PeopleSoft – also caught Oracle, and everyone else, completely by surprise.
These two facts lead me to believe that the Retek counter-bid is hardly Oracle's last swipe at SAP. On the contrary, I expect Oracle to act as preemptively as possible in its battles against SAP in the coming months. The lack of timing that Oracle has shown in the M&A business must be galling to Larry Ellison – this is a man who owns some of the fastest racing boats and cars in the world, and tried, and failed, to import one of the fastest jet fighters in the world as well. Speed is a raison d'etre to Captain Ellison, and he truly hates to be outmaneuvered, whether on his America's Cup-class boat or at the helm of his software company.
So what's next for Oracle vs. SAP? I'd put my money on the mid-market. This is one of the battlegrounds where neither company is achieving its potential, and where a couple of relatively successful rivals – Microsoft and SSA – are lurking, anxious to play the spoiler for Oracle's and SAP's ambitions. It could be a consulting/reseller acquisition – a company that has deep experience in the mid-market and can bring Oracle in contact with mid-market customers in a way that its direct salesforce can't. Or it could be a vendor with a big mid-market customer base. Either way, the Retek battle is setting a precedent for what will be a long-term fight for the future of enterprise software. May the vendor with the deepest pockets and strongest intestinal fortitude win.
