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Is SAP Making a Deal With "the Devil"?

Unlike some other commentators, we're not big fans here at RCPU of referring to Microsoft as "evil" or "the devil," so let's put the headline of this entry into context. SAP -- the big, German, still mostly dominant enterprise resource planning vendor -- has been snuggling up to Microsoft lately, promising better integration between its ERP applications and Redmond's SQL Server 2005 database.

SAP's motivation for doing this appears to be to keep database giant Oracle and its line of enterprise apps, which compete with those of SAP, at bay. SAP also has a nice product with Microsoft called Duet that ties the familiar Office front-end to SAP's considerable back-end. So, by being buddy-buddy with Microsoft, SAP covers two of its main weaknesses -- database integration and front-end accessibility. All of that sounds pragmatic enough, right?

Well, here's where the context part comes into play. Anybody who has been paying even the faintest attention to the ERP market knows that Microsoft has major ambitions in it along with a complicated -- and increasingly competitive and contentious -- relationship with SAP. All of this, then, leaves us wondering whether SAP has made a deal with its own personal little devil in Redmond (as opposed to a more universal devil, which we don't consider Microsoft to be) in the name of driving a stake into Oracle's heart.

After all, Microsoft plans to attack the ERP market the way it has attacked many of the other markets it now owns -- by preaching native integration of its own applications. Just to spell things out, that means that Microsoft is ready to send its partners to customers with the message that Dynamics, its ERP offering, is simpler (in a good way), cheaper and better (and certainly better integrated) top to bottom than what SAP or Oracle can offer.

And what better way for Microsoft to boost the two quantities it lacks in ERP -- credibility and experience -- than by working closely with the longtime market leader? The pitch almost sells itself: "If you like SAP's enterprise wares with our database and front-end, just imagine how much you'll like cheaper, simpler, easier-to-maintain and more tightly integrated Dynamics playing nicely with your all-Microsoft implementation. Let's get you started switching over now..."

Now, your editor has had considerable experience writing about SAP over the last 10 years or so. We're quite sure that the folks in Walldorf (Germany, where SAP's headquarters are located) know that they're playing with fire. So how do the folks at SAP propose to not get burned?

And here are some other things to ponder. Does Walldorf see any threat to their gigantic market share from Microsoft on the horizon? Do they not believe that Redmond can execute on its ambitious, but still largely nascent, ERP strategy? Does Oracle -- a bigger threat to SAP right now than Microsoft -- just look like the most important dragon to slay?

We suspect that, in part, the answer to those last three questions is "Yes." However, if that's the case, SAP had better know what it's doing. Dynamics is no Windows Live Search or Zune. It's a serious set of business applications from a company that has a hefty presence of its own in the enterprise. The folks in Walldorf have a pretty impressive ERP empire going, but the road is littered with such deals. It's why, we suspect, "the devil" term is used in the first place.

What do you think of SAP's cooperation with Microsoft? How soon do you see Dynamics seriously competing with SAP and Oracle? Let me know at lpender@rcpmag.com.

Posted by Lee Pender on 05/17/2007 at 1:20 PM


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