SAP CLAIMS TO BE MOPPING CLIENTS IN WAKE OF ORACLE TAKEOVERS
Software company SAP expects to win many more clients in the coming months as the fallout from the relentless merger activity of rival Oracle filters through to customers. Oracle and SAP supply complex and wide-ranging software that automates the business activities of large corporations.SAP CEO Henning Kagermann says the disruption Oracle has created by buying out numerous rivals and taking over developers of complementary software could play in SAP's favour.
Oracle spent $18bn in a spree that included the $11,1bn hostile takeover of PeopleSoft, which had just bought JD Edwards. Its latest move is a $5,85bn absorption of Siebel Systems. Oracle CEO Larry Ellison says the strategy will grow its sales and more than double its annual revenue to $30bn. His goal is to oust SAP as the world's largest supplier of business applications. Kagermann's job is to thwart him.
The two have entirely different strategies for conquering exactly the same market, but Kagermann believes Oracle's aggressive acquisitions will backfire. "You have to look not at what people are buying, but at their success in the market. SAP has gained market share and Oracle has lost market share," he says. "Some companies need to acquire companies in order to grow. We have enough creativity to grow by ourselves. We outperform the market every year." Kagermann was gleefully exhibiting his favourite charts to existing and potential customers in SA this week to illustrate the effects of the different strategies.
SAP claims 59% of all the sales fought over by SAP, Oracle and Microsoft, up from 55% last year, when Oracle was taking over PeopleSoft. In theory, the combined figures of Oracle and PeopleSoft should have given Oracle more than 30% but it has only 28% -- evidence, says Kagermann, that one plus one equals less than two. The same will apply to its other acquisitions, he argues.
"They have a lot of overlapping products, like three different customer relationship management applications, so they have to consolidate and give answers about which ones they will maintain and how they will integrate them. There is still uncertainty for their customers." As the takeover of PeopleSoft dragged on, SAP sought to steal customers by highlighting its stability. That is continuing, Kagermann says. "We have a pipeline of several hundred customers, who were PeopleSoft and JD Edwards customers."SAP also aims to grow its market by scaling down its applications for small businesses. That is particularly apt for SA. Its software can now be used by a company with just five staff and costs from $10000 instead of $100000.
SAP wants to shift its revenue mix from 70% big business deals and 30% small to a 60:40 split within five years. That is ambitious, says Kagermann, as sales of its smaller suite must grow twice as quickly as the high-end sales.