News Stay informed about the latest enterprise technology news and product updates.

Sapphire preview: Oracle-SAP battle rages on in 2005

Oracle, fresh off a bidding war victory over ERP rival SAP, looks to keep the heat on in 2005, while SAP wants to capitalize on PeopleSoft customers' insecurities.

Taking shots at the competition and then burying them is something Oracle has been used to in the past, with competitors like Siebel Systems Inc., but it is the latest battle with SAP AG that has generated the most colorful headlines.

Could the PeopleSoft battle have simply been batting practice for this slugger of the software industry?

After the acquisition of PeopleSoft earlier this year, Oracle officially became a player on SAP's turf, so it was fitting when No.1 contender SAP and No. 2 Oracle engaged in a heated back-and-forth bidding war over Retek, a comparatively diminutive retail software provider in Redwood Shores, Calif.

SAP executives will be sending a message that SAP is the most stable and flexible enterprise resource planning (ERP) software vendor at its Sapphire user conference May 17-19 in Boston. While Oracle looks to integrate the software it acquired and the ERP market continues its consolidation trend, SAP is painting itself as the safe bet, according to analysts.

Oracle won the bidding war for Retek after two weeks of offers and counteroffers in April that eventually ended when Oracle upped the ante, and offer that was too rich for the blood of SAP brass.

If the battle started between these two giants with PeopleSoft, then the Retek deal only intensified, making what is sure to be a year (and beyond) of intense competition.

SAP strategy

Already it would appear as though SAP has devised a strategy for maintaining its sizable lead over Oracle, which according to Boston-based AMR Research Inc. said stands at a commanding 45% of the market, compared to Oracle's 19%.

In Germany this month, SAP CEO Henning Kagermann announced at the SAP annual shareholder's meeting that "the competition is trying to regain lost ground through acquisitions" and that the protracted legal battle with PeopleSoft had created a "strong sense of insecurity in the market."

Joshua Greenbaum, principal consultant at Berkeley, Calif.-based Enterprise Applications Consulting, sees SAP building out an ecosystem that will feature agreements with key Oracle competitors like IBM and Microsoft, which recently penned two deals with SAP involving DB2 version 8.2.2 and a linking product for business software, respectively.

However, Greenbaum was still optimistic of Oracle's chances, saying: "I think at this point Oracle is a very, very strong competitor, and what matters the most in the competitive mindset in SAP is that it remain aggressive."

Boston-based Yankee Group released a report in March that was optimistic about Oracle's chances of securing nearly all the PeopleSoft customers it had acquired in the takeover; customers that SAP will seek to siphon away using software discounts in 2005 and beyond.

The survey, conducted by Yankee analyst Phil Fersht, polled 193 PeopleSoft customers during December and January for their pre- and post-merger reactions and found an average of 46% were "demonstrating a propensity toward switching away from their current applications, while 31% were undecided.

"On the surface, this appears like stunningly great news for [competitors] SAP, Siebel and Microsoft," Fersht said. "However, when we actually look at preferred alternative enterprise resource planning products, Oracle is the No. 1 alternative.

"A lot of PeopleSoft customers will switch, but many of them will switch to Oracle," Fersht said.

Regardless, there are three choices facing PeopleSoft customers: They can switch to Oracle's Fusion product development road map; jump ship to Oracle nemesis and technology leader SAP and the NetWeaver platform; or sit tight and play the waiting game as the two vendors battle for the industry lead, Fersht said.

Global domination

Even as Greenbaum said he believes SAP must remain an aggressive competitor, more than that may be necessary, at least as far as the world outside of North America, is concerned.

Financial reports from Oracle in Asia-Pacific (APAC) applications market for 2004 were nearly double that of SAP, leading Oracle APAC senior vice president Mark Gibbs to tell reporters this week at a press conference that his company has reached an "unbeatable combination of critical mass and momentum" in its quest to unseat its latest opponent.

And as far as that much ballyhooed and much debunked SAP/Oracle merger rumor, you can just forget all about it.

Said Greenbaum: "An Oracle and SAP combo? That would never pass the regulatory muster."

Dig Deeper on SAP trends, strategy and ERP market share

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.