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Sunday, June 25, 2006

Clash of the Titans

11:36 AM Posted by Deepak Nayal No comments
Oracle has been on a buying spree for more than a year now and has acquired 21 companies between January 2005 and June 2006. Till now the company has been going as per its plan to be the number one business software company in the world, a title currently sitting with SAP, a German software company. However, what the world has witnessed till now has been the high-profile and flashy part of these acquisitions. The real work of integrating the code of almost six-dozen different packages into a product suite is still far from over and the hardest part of actually selling the enterprise suite, aptly named Fusion, to the customers hasn’t even started yet.

Oracle Corporation, the second largest software company in the world, has been trying to leverage its position as the leader in databases to lead the way in the enterprise applications market for a long time now. Its Java application server has not been able to make the kind of dent in the market as the company wanted it to; market share wise it is still way behind the leaders, BEA and IBM. But its ERP package, Oracle Applications, has helped the company put a strong foot in the enterprise applications market. However, Oracle Apps has often been criticized to have lacked the deep vertical functionality that its rival products have had. It was this lack of depth in vertical integration (along with other business related reasons) that pushed Oracle to use its huge cash reserve to buy almost two dozen companies, each with a strong hold in its domain. The database major has plans to tightly integrate its acquired companies’ products with its own ERP package, Oracle Apps, and its flagship database product, Oracle.

SAP AG, the world’s biggest enterprise software company, has been the 800 pound gorilla of the business applications industry for a long time now. Before Oracle’s shopping spree, SAP was the only dominant player in this arena. Though, even after the acquisitions Oracle is still way behind SAP, former has now got the potential to throw off the reigning king off its throne. Where on one hand SAP’s enterprise software has always been acclaimed for its in-depth vertical functionality, on the other hand it has been criticized for its TCO. Though similar to Oracle, SAP also has monumental development task ahead of it, unlike Oracle, it has a big advantage of developing from a single code-base of software that the company has spent 20-plus years developing. SAP has experience in 28 verticals, which is considered one of its biggest strengths.

Right now Oracle is walking on a very fine line; it has put a lot of money and prestige on stake with project Fusion. If the company successfully rolls out the enterprise suite then it has a fair chance to be the number one business software company in the world. However, if it fails to do so it will surely lose not only the money and prestige but also a lot of customers to SAP. Nevertheless, Oracle has been very aggressive in selling itself to the customers. It started a “OFF SAP” campaign back in June 2005; under the new program it has been offering SAP R/3 customers an alternative to move to Oracle E-Business suite and going as far as giving 100% license credit to switch from SAP to Oracle Applications. SAP, on the other hand, hasn’t been sitting quite either and has known to have broken into Oracle’s customer base. In fact, Oracle’s much hype acquisitions have been the biggest factor for some its customers leaving for SAP lately. Experts claim that this has been so because SAP is a much stable company compared to Oracle, both business plans and product wise.

Oracle has silenced everyone for now with its June 15 announcement of better than expected fourth-quarter results piggybacking on the new software license revenue, which rose 32 percent. Battle for supremacy, however, is far over with both companies putting in all their efforts to upgrade their enterprise software suites. No matter which company wins this battle it will be the customer who will gain from it, with enhanced product capabilities, lower TCO and higher ROI. As for now we can just wait for the year 2008 when Oracle will launch the much-hyped Fusion.