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SAP has Edge in Battle with Oracle

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To say that SAP and Oracle are locked in an increasingly bitter competition is, at a minimum, the understatement of the year.

How each company is dealing with the opportunity to snipe and swipe at each other says a lot about their relative strengths as their competition continues to heat up. And based on what we’ve been seeing and hearing, the advantage coming into 2006 is very much SAP’s.

Oracle’s latest position against SAP is in the grand tradition of FUD — fear, uncertainty, and doubt. Oracle is running ads touting the number of its customers that have made the upgrade to its E-Business Suite 11i, and comparing that rather large number to the relatively few SAP customers currently running the latest version of MySAP Business Suite.

Of course, the fact that Oracle’s 11i has been out for more than five years, and was DOA, as in massively bug-ridden, for the first several revisions of its life are largely forgotten in the Oracle FUD campaign. Also forgotten is the fact that, once the software was basically bug-free and ready to be installed without risk, Oracle announced a two-year de-support window for its previous version, 10.7. Oracle customers, rightly so, pushed the panic button and started fast-tracking their upgrades.

It’s also safe to say that if SAP wants to know what its own FUD campaign could look like circa 2008, it only needs to keep copies of the current Oracle ad campaign on file. The likelihood that Oracle will be able to convert massive numbers of customers to Oracle Fusion when version 1.0 first comes out is low. Those Oracle upgrade ads are going to look pretty embarrassing once the shoe is on the other foot.

Meanwhile, SAP is trying hard to stake out the high ground. At a recent two-day analyst summit in Las Vegas, SAP further described the business process-driven future it is pushing for the industry. It’s a near-term vision that SAP shares with Oracle, but with one important difference. SAP has been spending literally half its R&D dollars on ‘decomposing’ its software into business processes. These business processes will form the core of what, by 2007, will be a 30,000-strong business process platform that will fundamentally redefine how enterprise software serves the needs of business — for the better.

The difference between SAP and Oracle (and IBM, for that matter) is that SAP’s business process platform will be built from a solid understanding of how real businesses in real industries accomplish their day-to-day tasks. That understanding is currently embedded in SAP R/3 and MySAP, and comes from literally decades of deep vertical industry experience. Exposing those underlying processes and making them available as building blocks in a service-oriented architecture like NetWeaver is the gist of SAP’s game plan going forward. The fact that no other competitor has this wealth of existing industry knowledge already embedded in their software makes the business process platform a powerful competitive wedge.

Of course, Oracle’s acquisition strategy is very much targeted at acquiring this vertical knowledge, but so far most of that is a future capability based on future acquisitions, whereas the SAP processes are already in place, and only need to be converted to fully-formed services. Conversion is not a trivial task, but it’s not rocket science either. And it’s certainly better to be working on converting known assets than promising to deliver on assets that have yet to be acquired.

In the end, FUD is a short-term strategy, and one that Oracle will only be able to take so far. As long as the dialogue is about the wrong issues — like the apples to oranges comparison of when upgrades in two vastly different customer bases and under vastly different economic and technological conditions take place — FUD will work. But Oracle will have a problem combating the business process surge that SAP is planning for 2006.

And all the FUD in the world won’t count when SAP can demonstrate functional leadership in the software it sells today, while Oracle customers have to wait for Fusion. Oracle needs to counter SAP with its own business process strategy, or get out the way. The business process train is about the leave the station.

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