Software strategies and more…

Woke up to read (amongst a weekend worth of posts) the following article from Information Week’s Global CIO: Oracle’s Larry Ellison Declares War On IBM And SAP.

I must admit it hasn’t been a secret that Oracle has been marshaling for this battle, after all any company that spends approximately $25 Billion in acquisitions since 2005 (source) must start making money back at some point. The ‘billion dollar’ question in my opinion is whether the promised fusion of all its applications really works?

Having worked for a company that at one time stated an intent to unify its ERP code across all of its disparate applications only to find that neither customers or partners wanted this – not to mention the engineering pitfalls that become readily apparent – I doubt whether the current plans for fusion can be met in a way that will appease all the stakeholders Oracle needs to oust IBM or SAP as the respective market leaders in high-end servers and business applications.

In the Global CIO article, “Ellison promised that the second half of 2010 will be a momentous one for not only Oracle but also the entire IT industry and its enterprise customers because that’s when Oracle will roll out its completely reengineered Fusion software lineup along with more integrated and optimized Oracle-Sun systems, along the lines of the wildly successful Exadata 2.” Given this promise happened during the Oracle earnings calls, I cannot see how this is much more than a rally cry to sales that he hopes to the Wall Street will echo in an increase of stock price.

By the way Oracle’s stock price, much like Larry’s bid to win the America’s Cup back for many years prior to this one, has been stuck in the doldrums - neither rising or falling much over the past several years – recently it has grown at market average but still trailed SAP, IBM and Microsoft’s growth. A reflection that while Oracle has been busy amalgamating and consolidating many IT players there has not been an overwhelming belief that will pan out for Oracle or its customers.

One important aspect of fusion that Oracle promises, but again trails some of its immediate rivals, is that Oracle promises many of its fusion application can be run either on-premise or via the cloud. SAP realized the need for this hybrid strategy when it attempted in 2007 to launch Business By Design and Microsoft has been working on this since 2005 with its Software+Services strategy. And IBM has been driving its ability to deliver infrastructure as a service and many of its applications as a service for the past several years as well – these have culminated into its Smarter Planet initiative. So Oracle is far from being a thought leader here.

Personally, I think the most telling quote is at the end of the article, Larry says, “So we’ll be delivering those applications both by selling the software directly, kinda the old way of doing it, which is still the most popular, by the way; we’ll be selling the Fusion applications integrated with our hardware—our servers and our storage and our networks; and we’ll be selling it on the cloud.” He later added, “our cloud or somebody else’s”.

This is worth noting if you read the article on Oracle sniffing (original post by Dennis Howlett). Might one conjecture that by acquiring SUN and (especially)  JAVA that Oracle will start charging customers relentlessly for access to any products Oracle deems ‘fused’ thus boosting revenues at the potential expense of customer privacy and satisfaction? Will customers stand for this (thus allowing Oracle to achieve the stated path of dominating IBM and SAP in their respective markets?) or might their customers seek out comparable solutions from IBM, SAP and others for database, BI, ERP, CRM, etc during their next refresh?

Time will tell.

SAP’s non-renewing of Leo Apotheker’s contract and subsequent replacement with the appointed of Bill McDermott, head of field organization; and Jim Hagemann Snabe, head of product development has raised many questions about SAP, it’s future and impact this might have on customers.

While I don’t pretend to have all of the answers, I do feel this is a positive move for the company, its shareholders and the market in general. Why?

Well as for Mr. Apotheker, he was a great contributor to SAP’s growth for over fifteen years and was key to developing the company into its leadership as a world-class enterprise business applications provider.  It’s most recent focus on sustainability was overshadowed by the controversy of raising maintenance fees and the delays in SAP’s Business By Design SaaS ERP offering. Nonetheless my experiences hearing Leo articulate strategy and his focus on growth never led me to doubt that SAP would continue to grow with him at the helm. I wish him well.

Nonetheless, the markets have changed. The global recession hit everyone hard, but especially the global manufacturing and supply chain sectors. Also known as SAP’s bread and butter. While I have seen SAP successfully win share from Oracle (and others) in finance and energy sectors, they have only begun to grow in the midmarket and lag in areas of collaboration tools and partnerships.

Enter the two rising stars. Since the departure of Shai Agassi in 2007, Bill McDermott and Jim Snabe have both been on everyone’s radar as the heir apparent. Both of these two gentlemen have incredible talents in growing the business (McDermott) and with the new technology trends of the current decade (Snabe).

Given SAP’s focus on competing with Oracle, Infor, Microsoft, and others, having a person like McDermott at the helm promises a very competition and customer savvy change that SAP may very well need – at least in the eyes of many of its customers and stakeholders – in order to remain independent and continue to attract new business. Combine this with Snabe’s technology savvy skills that are crucial to leading SAP’s charge into both hosted line of business offerings for large and midsized organizations – and you may very well have a company ready (once again) to engage its competition with teeth barred.

In my opinion, the real question is the role Hasso Plattner will play in grooming, developing and allowing these two leaders to co-exist and grow the organization.

It’s my opinion to get SAP re-engaged in the eyes of the market that these two leaders must show a unified front, play to one another’s strengths, and manage the corporate culture change that will ensue. Ensuring that top talent continues to grow at SAP all the while being more aggressive in seeking innovation from outside rather than defaulting to home grown whenever possible will be key. SAP must boost its education efforts which have lagged and work to attract more engineers to its platform and promote further integration with industry and role-based technologies.

If I were a customer of SAP, I would not worry about the investments you’ve made. Rather I would look forward to a re-invigorated competitor with two very capable helmsmen. (After all this has worked for Oracle for quite some time.) SAP will be out to prove its business value its software brings, bring new hosted solutions to mid and large organizations so that deployment becomes more timely and effective in helping get the job done, and work more collectively with other market leads in adjacent sectors (collaboration, CRM, unified communications, etc) to give business assurance that interoperability and standards will make it easier for them to deploy and grow.