The Hindu Business Line : Fight for turf

One is fresh out of a string of successful acquisitions and the other is trying to take advantage of the `stormy sea of uncertainty' created by the same acquisitions.

As Oracle and SAP slug it out for each other's customers, it is certainly no David versus Goliath battle for the Enterprise Resource Planning (ERP) market that is valued at $25 billion per annum.

After completing the acquisitions of PeopleSoft-JD Edwards and Retek last year, Oracle announced an `Oracle Fusion For SAP' or Off-SAP programme in June that aims to wean away existing SAP customers. It is banking on its leadership in the relational database management space to bolster its case.

The company's consulting arm has offered a free SAP Migration Insight Offer, which includes a discovery workshop for SAP R/3 customers under which they would get a `clear understanding' of the migration process and benefits.

To back up the offer, Oracle Financing is also offering a two-year payment plan for the application licence and support fees with no interest and a moratorium on payment for six months. Oracle claims that SAP customers who switch will `quickly begin receiving value' from their Oracle applications, mapping payments to benefits over two years.

Claims and counters

"As many as 94 per cent of Oracle E-Business Suite customers are running the latest and the greatest applications - Release 11i. We believe that SAP requires customers to re-license their applications to upgrade. Till June, only 6 per cent of SAP's customers had upgraded to mySAP ERP, according to a leading research firm. We are offering them a cheaper alternative with Off SAP," says Murali Subramanian, Vice-President (E-Business Development) for India.

In addition, Oracle claims that SAP customers are faced with complexities, fragmented data, difficult and expensive upgrades and managing the legacy the ABAP language. Over 40 customers have switched from SAP to Oracle applications to take advantage of Oracle's standards-based applications and easy upgrades.

But SAP executives rubbish that contention. "First, we have to understand that it is Oracle that is responding to the market challenge of SAP and not the other way round. Oracle has committed $11 billion to meet the SAP leadership challenge. While we have always viewed Oracle as a strong competitor, they remain a distant second mover in this (ERP) market," says the SAP India Director (Marketing), Nagaraj Bhargava.

SAP had come out with its `Safe Passage' programme anticipating market uncertainties after Oracle acquired the PeopleSoft-JD Edwards combine and Retek, a niche company focusing on the fast-growing retail segment.

"Customers of Oracle, which now includes PeopleSoft, JDE and Retek solutions, face enormous uncertainties about the future of their solutions," says Bhargava.

Oracle has said that all the existing solutions would reach the end of their life between 2008 and 2013 and would be replaced by Project Fusion.

"Oracle says that Fusion will have new development tools, a new platform and all new applications. But they will have to figure out how to deliver all of these new products while integrating more than $11 billion in acquisitions. In contrast, SAP offers proven products that are available today, and not three or six years down the line," he says.

But Oracle is quick to respond. "We have always supported products much beyond their life-cycle and all our customers can rest assured on that count. While we will continue to service the clients of existing solutions till 2013, we are confident that the alternatives we offer will be welcomed by our customers," says Subramanian of Oracle.

SAP also defends its upgrade programme. "Our customers enjoy the very best migration path to market leading products. While our customers have benefited from significant functionality improvements as they move to mySAP ERP, mySAP Business suite or any of our other solutions, Oracle customers have had to rapidly upgrade from very buggy versions of applications to maintain stability," says Bhargava.

Moreover, SAP says there has to be a strong reason for forcing customers to upgrade. "We understand that customers choose to upgrade on their schedules, based on their individual business imperatives. Our rivals have a revolutionary rip-and-replace approach. But we have always believed in the evolutionary approach, meaning that all that the customer has invested earlier should be the basis for the next upgrade," he says.

Gartner analysts say that Fusion is a smart move on the part of Oracle and would get value to both Oracle as well as its customers from synergy from multiple code bases. The first product will be a Fusion middleware, which will eventually underlie all its applications. Due out in limited release at the end of the year, Fusion middleware will be Java-based and have a service-oriented architecture so its components can be easily broken out.

While the plan sounds good, Oracle would have to get its act together to pull it off. Analysts say that Oracle will have to `make Fusion real' in order to succeed. The effort to rationalise huge code bases from disparate environments is a huge task. Plus, it remains to be seen whether customers would be willing to wait that long, given that project Fusion is a long way off.

The Oracle CEO, Larry Ellison, had himself created doubts in the minds of customers when he began his quest for PeopleSoft by stating that Oracle's efforts would be to migrate customers to its applications.

Of course, now Oracle has backed off that stance and has promised to continue enhancements on the current releases of PeopleSoft and J.D. Edwards applications.

The ambit of Project Fusion goes much beyond a simple blueprint for merging Oracle and PeopleSoft technologies. It includes middleware components that are designed to connect Oracle's recently acquired applications to the company's flagship database products.

SAP, meanwhile, is challenging Oracle in the middleware realm with its NetWeaver application-integration platform. NetWeaver makes it easier to modify or cobble together parts of SAP's applications or build a composite application with new code and parts of old applications.

Gaining or losing?

But in the last few months, who has been gaining or losing? SAP claims that its `Safe Passage' programme has been well received by the market. "There is no question that SAP was able to leverage the uncertainties facing Oracle, PeopleSoft, JD Edwards and Retek customers to its advantage. During this period of market consolidation, SAP was able to position itself as the safe harbour in a stormy sea of uncertainty," says Bhargava.

According to an AMR Research report titled `Market Analytix Report', SAP has been able to grow its revenues 17 per cent from $8 billion in 2004 to $17 billion last year. Based on software licence revenues, SAP grew 20 per cent in the period.

Oracle claims equally impressive growth figures. Globally, Oracle revenues climbed to $11.8 billion, up 17 per cent. In the last quarter of 2004, Oracle registered a 52 per cent increase in application licence revenues while for the entire year, the growth figure was 28 per cent.

SAP's position is unique because unlike Oracle, it grew its business without making any major acquisitions. It also benefited from Oracle's protracted takeover of the assets of PeopleSoft and JD Edwards, the report says.

Consensus on one issue

But is there any one common ground between the two? Surprising though it may sound, both agree on the way to go forward. Both say that open standards is the future.

"We do not merely talk about open standards. We have demonstrated results. Since the introduction of SAP NetWeaver platform in 2003, we have defined a new category of solution platforms that combine applications and infrastructure technologies open to both the .Net and Java worlds," says Bhargava.

Subramanian of Oracle echoes a similar sentiment. "We are now talking about the information age applications that are information-driven, standards-driven and industry-driven. More than 50 per cent of our products are already on Java and not on proprietary software," he says.

Both companies agree that standards translate into better talent availability as engineers need not be trained in proprietary software. "But at the same time, it is important to have domain expertise. Products need to have industry focus for them to have more relevance," says Subramanian.

Even as Oracle and SAP slug it out in the ERP market space, a different dimension to this battle focusing on domain expertise is also opening up. For instance, over the past six months, Oracle has been on an acquisition spree, with i-flex solutions being its latest prize catch in the banking and financial services space. But prior to this, Oracle had snapped Retek in a bidding war with SAP to strengthen its hold in the retail domain.

Sooner or later, as this latest round of ERP battle fades, solution-focussed enterprise sales will be the next call to arms for these two enterprise giants. But that is a battle to be fought and a story for another day. Stay tuned.

eworld@thehindu.co.in

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