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Who's Afraid Of Oracle? Not SAP

By Tom Steinert-Threlkeld  |  Posted 2003-07-17 Print this article Print

Baseline exclusive: Henning Kagermann said the database giant has stalled in the enterprise applications market and doubts a PeopleSoft acquisition will jumpstart it.

NEW YORK—With or without the acquisition of PeopleSoft, Oracle is "not a competitor which really could hurt" SAP AG, said the chief executive of SAP, the largest supplier of software that helps large enterprises manage their operations.

Oracle has not increased its share of the enterprise applications market in the past two years, said SAP CEO Henning Kagermann, in an interview with Baseline at SAP offices in lower Manhattan. He said SAP also is more focused on applications than is Oracle, which built its business on sophisticated databases that supply information to applications.

SAP Thursday said its share of the worldwide market for enterprise software reached 55 percent in the second quarter of 2003, up from 54 percent at the end of the first quarter and 45 percent a year ago. SAP made its calculation by totaling up the most recent four quarters of software revenue for itself and competitors Oracle, PeopleSoft, J.D. Edwards, i2 Technologies and Siebel Systems.

In the United States, SAP now claimed a 31% share. A year ago, its method of calculating the market put SAP and Oracle in a dead heat, at 21% share. Now, Oracle has a 19% share, according to SAP.

Kagermann looks at Oracle's potential acquisition of PeopleSoft as an opportunity to increase its market share further. Even if Oracle "would be a larger Number Two, I still believe it is more in favor of SAP," he said.

The reason: Oracle will spend considerable time and effort integrating PeopleSoft. for which it has made a $6.3 billion hostile bid to acquire control.

"It will take a significant time to consolidate and integrate those companies," he said. "It sounds easy from the outside," but the two companies have different products and cultures, which will require considerable management attention to merge.

"It's not an easy task; therefore I believe we can use this time and strengthen our position," he said.

SAP has launched an advertising campaign in the United States to woo "confused" customers away from PeopleSoft and Oracle; and its sales force is using the themes of stability, reliability and predictability to win away companies who want reassurance that there will be no major changes in the structure or direction of the supplier whose software will be running or monitoring much of their businesses.

Long-term, Kagermann said he was more worried by Bill Gates, the chief software architect of Microsoft, than Larry Ellison, the chief executive of Oracle.

What moves Microsoft and Gates will make in the enterprise software market can't be predicted, Kagermann said. But Microsoft is the most highly capitalized company in the software business and has a huge cash hoard. That alone makes it a threat, he indicated.

By contrast, Oracle doesn't worry him. "We have competed successfully against Oracle for 10 years," he said. Instead, he believes Ellison has inflicted "short-term damage" on the industry with his unsolicited and disruptive attempt to buy PeopleSoft, which has rejected his overtures. At one point, Ellison said he would buy PeopleSoft and force all its customers to switch to Oracle software.

"The way it was handled was not very professional," he said, later Thursday, in announcing SAP's second-quarter financial results.

Tom was editor-in-chief of Interactive Week, from 1995 to 2000, leading a team that created the Internet industry's first newspaper and won numerous awards for the publication. He also has been an award-winning technology journalist for the Dallas Morning News and Fort Worth Star-Telegram. He is a graduate of the Harvard Business School and the University of Missouri School of Journalism.
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