SAP: No Longer an ERP Company? by Jon Hansen

When I was speaking before what I can only describe as being a great audience at Virginia’s Forum 2013 earlier this week – it has to be something in the water there because these people are remarkable in terms of their enthusiasm for procurement and desire for information – I touched on the decline of the traditional ERP model and the fortunes of its providers.

After all, it wasn’t that long ago that industry analysts were predicting the demise of SAP (Analyst’s pessimistic prediction regarding SAP prompts the question . . . Are ERP Vendors down for the count?!, November 18th, 2010).

Timing of course is everything, so it was interesting to see that on the heels of my session, an October 29th Web Enterprise Architecture article  proclaim that partnering is now in SAP’s “DNA,” and that the company’s brain trust now believes that “companies are forced to innovate or risk becoming irrelevant.” I guess standing on that precipice of irrelevance will has we used to say in the corporate boardroom “create a come to Jesus” urgency to make changes.

To SAP’s credit, and unlike Oracle – about whom I will talk shortly – they put a meaningful action plan in place.

For example, and as demonstrated by my series of radio interviews with senior SAP executives regarding the company’s mobile app strategy (SAP Mobile App Strategy demonstrates a forethought of intent that reflects a collaboration with versus a reaction to a changing market), the vendor showed a level of service humility that had long been absent from the ERP world.  Specifically, the desire to provide a meaningful solution as opposed to imposing a self-serving will on the market.  I can still remember when I was researching potential partners for a critical procurement application back in late 1998 being told by an Oracle sales representative that the company doesn’t even consider getting out of bed in the morning for any project that is less than $1 million “to start.”  I think that this is when my distaste for Oracle and in particular Larry Ellison originated.

The seriousness of SAP’s commitment to making this monumental shift is clearly demonstrated by the disclosure that “40% of SAP’s current revenue comes from its partners, compared to approximately 6% a decade ago.”

“We’ve gone from a product that was really focused on ERP [enterprise resource planning] with a handful of partners,” stressed one senior SAP executive, “to a very broad portfolio of products, which means the engagement model with our partners has to be different.”

Once again the survival of the company was based on their ability to adapt to a new market reality.  To their credit, at least to this point in time, SAP has shown that they have the ability to adapt and willingness to change focus to meet the needs of their clients.

I am not so sure that the same can be said for Ellison’s Oracle.

According to a just released Forrester report, “the software market has changed in the last few years, and Oracle is starting to face some challenging new headwinds.”

Let’s put aside for the moment the fact that Forrester is just now beginning to tune into the “changing market” (I guess they didn’t see the 2000 white paper titled “Strategic Backgrounder: Software as a Service” from the Software & Information Industry Association’s “SIIA” eBusiness Division), and focus on their assessment of why Oracle might be headed for rough seas.

According to the report’s overview, “Disappointing financial results, burgeoning third-party support offerings, the advent of SAP’s HANA DB, and a long-delayed Fusion strategy could be the perfect storm that takes the wind out of Oracle’s sails.”

The million (or multimillion) dollar question is whether Oracle has the capacity for change to the same extent as SAP?

Even though the Forrester report promises to examine “these changes to see what they might mean for Oracle’s customers,” as well as provide direction in terms of “what actions savvy software buyers are taking to adapt to Oracle’s changing market position,” the veracity of their insights is still up for debate depending on whether they are writing the report from an Oracle perspective or from an end-client perspective.  If it is the former – which unfortunately is what we have come to expect from  traditional analysts – then it will be little more than a Oracle promotion piece meant to help the company keep clients “in line” as opposed to empowering them.

Stay tuned as I will be writing a post on this latter story in the near future.

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