Intelligent Enterprise

It's been an interesting week for the two giants slugging it out in the business software marketplace.

First Oracle filed suit against SAP for intellectual property intrusions into its Internet-based repository of product support information. Not to put too fine a point on it, Oracle accused SAP of wide-scale theft. Of course, this will play out over time, and ultimately, I expect, something like the true story will emerge.
I deliberately framed that last sentence loosely. Each company has tens of thousands of employees (almost 40,000 for SAP, more than 55,000 for Oracle), making it a considerable challenge to monitor and control their actions. Also, given those numbers, at any time more than few people are in the process of moving – from Oracle to SAP, say, or among the partner community. Since it's impossible to make sure all knowledge stays behind, it's tough to ensure that individuals do not cross the legal line protecting proprietary information.

Of course, it's also not hard to monitor and track the online retrieval of documents and data through log files recording source IP addresses and log-in data. Oracle searched and found what it alleges are SAP downloads of its intellectual property; of course, SAP can easily audit its systems to see whether their files have been downloaded as well, which likely has happened by now. Related to this lawsuit was the acquisition of TomorrowNow by SAP during the Oracle acquisition of PeopleSoft, as that third-party maintenance company had deep knowledge of PeopleSoft implementations along with access to information not appropriately held once it became part of SAP. Many of TomorrowNow's customers have shifted over to SAP for support and have not stayed with Oracle.

The larger point here is that the competitive market for business software is not a very nice environment. Competition in this space is as intense as any I've ever seen, and I've worked for both Oracle and SAP. Behind the scenes there also are a large number of executives who have left Oracle and its acquired companies to work at SAP in Silicon Valley. Even the Oracle alumni newsgroup is managed by a current employed SAP executive. At a recent SAP industry analyst summit that was supposed to be closed-door, in fact, I found computers broadcasting Oracle WiFi. Analysts? Or maybe Oracle employees? Who knows.

Also this week, supposedly unrelated to the lawsuit, came the resignation of Shai Agassi, the president of SAP's product and technology group. It was hardly a surprise. Agassi was widely perceived as the next CEO of SAP to succeed Henning Kagermann, but his ascension was delayed by two years as the board extended Henning's contract to the end of 2009. SAP reports attribute Shai's departure to a desire to pursue other interests in alternative energy and the company's inability to lock him into a long-term agreement as the CEO, which has been the historical path that the SAP board has taken in working with its key executives. And, of course, there undoubtedly was much more in the way of executive management politics concerning the direction of the company.

There's lots of information to suggest that Shai's abrupt departure from SAP is linked to both internal politics and external market activities. Despite the company's reputation, it's obvious to many that its dominance of the ERP, CRM and Supply Chain Management applications market is eroding, and SAP has not been as aggressive as most would expect in tapping into new market opportunities in BI and Performance Management.

External market issues include Microsoft's maneuvering around its Microsoft Office and applications strategy and its work with SAP on its Duet initiative. Then there was the recent gambit by Oracle to acquire Hyperion. SAP, not known for making large acquisitions, has tough decisions to make on its product direction in BI and Performance Management for Finance if it is to make convincing moves to address this market. Unfortunately for SAP's management, internal work to rebuild existing products will not be sufficient and acquisitions of larger companies like Cognos and even France-based Cartesis might not be politically and culturally acceptable.

On the other side of the aisle, Oracle, with final SEC approval to acquire Hyperion, is gaining on SAP's standing with the CFO and SAP still does not have a good roadmap to deliver value to finance organizations with respect to financial management applications.

These are all critical product and strategy issues that now, with Shai's departure, will fall to a group of executives who will have to protect their base while needing to invest significantly in markets, new or existing, not well-penetrated by or even addressed in SAP's current offerings. But gaining agreement inside an organization like SAP on any strategic direction is not easy, and surely Shai's departure is related to this challenge.

What's next? With what appears to be both a lack of momentum in the key areas of BI and Performance Management for Finance, SAP's future roadmap is uncertain. All we know is that Shai Agassi won't be the person developing that map, and some of the company's energy is going to have to go into jousting with Oracle in court as well as in the marketplace.

For now, all I can say is that SAP is going to be an interesting company to watch. I'm sure Larry Ellison would agree.

Let me know your thoughts.

E-MAIL | FOLLOW US