PARIS
We, independent consultants/advisors, like to exaggerate our importance and claim a prescience mere mortals rarely display. I try not to fall in this trap (at least not too often) but I cannot avoid remembering a discussion I had with an SAP executive a couple of weeks ago. To counter Oracle's rise in the enterprise-software business, I asked her, what was SAP waiting to give the Redwood Shores-based competitor what we French call "la réponse du berger à la bergère" and move into the database business. She shook her head saying that SAP liked to focus on its strengths and would remain happy to be the #1 business-software vendor, nothing more.
As if to prove her wrong (maybe she knew but wouldn't say, or maybe she wasn't in the loop - a distinct possibility), SAP has just announced it was buying Sybase for $5.8 billion. Officially this move is not aimed at Oracle but means to increase innnovation and extend SAP's access to mobile users. But in reality it is a defensive move against Oracle which has been treading on SAP's corporate-software toes since 2005 when it initiated its strategy of acquiring large software vendors. SAP's claims that its organic growth would be sufficient to counter Oracle's strengthening position soon sounded hollow and the Walldorf-based giant, taking a leaf from Larry Ellison's book, decided to go on the acquisition path by buying Business Objects in 2007. That move was too timid as Oracle swallowed one big company after another and the product-maintenance confusion followed by the leadership shakeup, as Leo Apotheker left after barely one year as sole CEO, didn't help SAP's fortunes.
Things took a turn for the worse, from a competitive standpoint, when the German company's nemesis, Oracle, made a bold move by acquiring Sun, thus entering an entirely new market: hardware. Playing the ostrich was no longer a viable option and the Sybase acquisition will help rebalance the field a little bit as SAP will now compete directly against Oracle in more than just one market segment. It is clear that IT vendors' game is to branch into different segments of the IT business to become a Swiss-knife company able to provide its customers with software, hardware and services. It is clear that we are entering an increasingly ferocious stack war.
So far, Oracle still has a headstart over SAP and, if the past is any indication to go by, we can expect some shrewd moves from Larry Ellison, probably in the services space. So expect some strategic decision to be made by the SAP side next year or in 2012 at the latest. What I think would make sense would be for SAP and IBM to merge: IBM is strong in services/consulting, SAP (created by former IBM'ers, let's not forget) created the corporate-software business; both are actually close partners. Sure, now the two of them compete in the database space but that should not be an issue since (a) IBM's DB2 business is more of a legacy one, the only one IBM retained when it decided to exit the enterprise-software business and focus on services; (b) Sybase and its mobile footprint make a more cutting-edge complement than a competitor (even if overall Sybase is considered a bit dusty); (c) since in the database league tables Sybase ranks a distant fourth after Oracle, IBM and Microsoft, a merger of SAP and IBM should not raise serious objections from anti-trust regulators; (d) the two will compete more effectively against Oracle which, with its acquisition of Sun has become a serious competitor to IBM which therefore need to make a move soon.
Yes, the more I think about it, the more an IBM-SAP linkup makes sense. If it happens, you read it here first.
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