IT Weekly Middle East Newsletter 29th May 2005

Nobody could ever have described the situation between Oracle and SAP as a phoney war — there has never been anything phoney about it — but it has clearly stepped up a gear since the former’s purchase of rival PeopleSoft.

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By  Peter Branton Published  May 29, 2005

Going head to head|~||~||~|Nobody could ever have described the situation between Oracle and SAP as a phoney war — there has never been anything phoney about it — but it has clearly stepped up a gear since the former’s purchase of rival PeopleSoft. That purchase signalled the end of the old, almost cosey JBOPS club, as we journalists referred to the leading enterprise software players back in the 1990s. JBOPS stood for JD Edwards, Baan, Oracle, PeopleSoft and SAP. With JD Edwards being bought by PeopleSoft, Oracle now has half of the initials, if not half the market. Actually, the JBOPS term has been out of fashion for some time now as the leading players status has all shifted somewhat. For instance, Baan has endured problems of its own. The Dutch company, which harbored ambitions of its own to take on SAP, ended up in all sorts of trouble, changing hands several times and being left a shadow of its former self. One of its problems was a string of acquisitions it found hard to handle, which should be a lesson for Oracle. If it is, it should be one its boss, chairman and chief executive Larry Ellison doesn’t need. Isn’t Larry the same man that once said that the sure sign of a struggling software company is one that starts writing checks instead of software? The US$10 billion capture of PeopleSoft certainly required a pretty hefty cheque, and Oracle has yet to show any signs that its managed to write software because of it. Indeed, it followed the PeopleSoft buy by getting involved in a bidding war with SAP for an obscure retail software maker, Retek, which it bought earlier this year for US$650 million (see IT Weekly, 26 March - 1 April 2005). Ellison firmly defended that acquisition as being about nothing more than defending its turf: “Oracle has the largest applications business in North America and we intend to expand that leadership position,” he said at the time. Unfortunately for him, and for other Oracle shareholders, it looks like the company is going to fail in that ambition this year. Analyst firm AMR Research reckons the Retek buy is not going to help Oracle much, it is predicting that SAP will take the number one position in the US business software market this year. This is despite the fact that the combined US revenues of Oracle and PeopleSoft in 2004 were greater than SAP’s: “In software mergers, one plus one often results in a number less than two,” AMR Research pointed out. One of the problems for Oracle is that SAP (and also rival Microsoft) has been targeting former PeopleSoft and JD Edwards customers, offering them attractive deals to switch software platforms. A bigger problem is that some of them may go. Mergers in the IT industry have always been hazardous, customers don’t like the uncertainty of not knowing if their products will continue to be supported or developed, and they certainly don’t want to have to pay more for support or licences. Oracle has been trying hard to allay these sort of fears, with senior executives regularly meeting customers. Oracle has ambitious plans for a merged product line, dubbed Fusion, which it aims to deliver by 2008. The idea is it will take the best of the various product lines and deliver one ‘super’ product. SAP has another strategy, which it has been developing for some time now. It wants to work more closely with industry partners, such as Microsoft, Computer Associates and IBM, to allow them to link their products more closely to its own. It is not basing its strategy on hostile takeovers but on being closer to people: a more softly-softly approach if you like. Time — and the market — will decide which is the more successful approach. ||**||

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