Australia: SAP vs Oracle

This month, Geraldine McBride, SAP Australia and New Zealand managing director and Leigh Warren, Oracle managing director for Australia and New Zealand tackle varied issues plaguing the enterprise software market.Editor's note: This report was first published in Technology and Business magazine prior to Oracle's US$10.



This month, Geraldine McBride, SAP Australia and New Zealand managing director and Leigh Warren, Oracle managing director for Australia and New Zealand tackle varied issues plaguing the enterprise software market.

Editor's note: This report was first published in Technology and Business magazine prior to Oracle's US$10.3 billion acquisition of PeopleSoft.

WARREN: What are the biggest challenges facing SAP in 2005?
MCBRIDE: Like any applications vendor, our biggest challenge is also our greatest opportunity -- ensuring that we continue to engage strongly with existing and new customers. It is also about clearly differentiating our product offering and different price points to different business segments. SAP's business success, with double-digit growth in a market averaging three percent growth year on year, is based on a very simple premise, that we deliver the most effective and efficient business solutions through long-term partnerships with our customers. To maintain our strong mid-market growth, particularly in the SMB sector, we aim to engage more strongly with our partners to drive awareness of the proven benefits of our solutions. Thankfully, we have many customers who are happy to talk about their successful implementations.

MCBRIDE: What are the major challenges you are facing in your new role?
WARREN: I'm very fortunate to be moving into the role of managing director at a time when Oracle's business is expanding rapidly.

Leigh Warren, managing director, Australia & New Zealand

About Oracle
Oracle Corporation Australia is a wholly-owned subsidiary of the world's largest enterprise software company, Oracle Corporation. Oracle Australia was established in 1986 and is headquartered in Sydney with additional offices in Melbourne, Perth, Adelaide, Brisbane, and Canberra. The company supplies technology and e-business solutions to more than 4000 Australian organisations of all sizes, across a wide range of industries.

Firstly, we are looking to extend our position of technology leadership, in particular by demonstrating the benefits of Grid Computing on Linux. Furthermore, we will be continuing to grow our applications business by focusing on industry-specific business solutions and utilising a concept we call the Oracle Information Architecture. Finally, we will focus on increasing the value of our partnerships to extend our reach both into the enterprise and into the mid-market arena.

If I have to single out one area where I think there is huge opportunity for growth, it would be in our applications business.

WARREN: Oracle has development centres in Melbourne and Brisbane. What degree of R&D commitment does SAP have in Australia?
MCBRIDE: We're very proud of our commitment to research in Australia. While seven SAP R&D labs exist around the world, one is in Brisbane, Queensland. This Corporate Research Centre (CRC) was opened in 2001 and partners with local universities such as Queensland University of Technology (QUT).

CRC is primarily focused on enabling research into business process technology, RFID, Web services, eLearning, and mobile computing.

Several global R&D projects are being led from Brisbane, putting the CRC at the centre of our worldwide technology development program. The centre has been a huge success for us: in 2003 it developed a CRM program designed to take the flexibility of call centres to the next level. This was so successful that it has been incorporated into SAP's underlying workflow technology.

This year, the Brisbane CRC won a contract to support the development of SAP Portals in Israel, now the primary IT solutions provider for the Israeli Government.

MCBRIDE: How has the PeopleSoft take-over issue impacted your ability to meet the needs of SMEs who are looking for ERP solutions?
WARREN: For Oracle, it has been business as usual. We have a goal of expanding Oracle's presence in the mid-market by offering applications and technologies that deliver enterprise-class functionality at SME price-points.

Oracle represents a great value proposition for SME customers. The Oracle E-Business Suite Special Edition, which includes comprehensive ERP functionality, allows smaller organisations to join the e-business economy quickly and easily, using exactly the same software as their larger counterparts.

Geraldine McBride, managing director, Australia & New Zealand

About SAP
SAP Australia & New Zealand employs more than 300 people and the comapny has over 370 customers across major industries including the public sector, manufacturing, mining, retail & CPG, utilities & telecommunications, and financial services.

With an installation time of just 10-40 days and a low total cost of ownership, the Oracle E-Business Suite Special Edition is SME-friendly. This is an area of growing strength for us in Asia-Pacific with SMEs making up at least 40 percent of Oracle's applications customer base.

Oracle's renewed focus on the channel has also been a major factor in our growing success in the mid-market. Oracle's partners play an ever more important role in the Oracle economy and over the past year, we have strengthened relationships with our partners and also engaged some new partners with specific expertise in the SME sector.

WARREN: Oracle is a firm believer in low-cost computing. Does SAP have any customers running on Linux and Intel in Australia?
MCBRIDE: SAP pioneered the movement away from large and expensive centralised Unix database servers to low-cost platforms in early '94, when SAP led the industry by porting to Windows NT running on Compaq Intel servers. With the availability of this low-cost commodity platform, we saw an upsurge in the number of customers deploying not only their Business Warehouses but also their core transaction systems on lower-cost databases such as Microsoft SQL server. This initial trend has turned into a flood within a few years with now over 57 percent of our customer base running on these lower cost platforms.

SAP supports all market standards evenly and promoted open sourced operating systems as early as Christmas of 1999 -- when it shipped its first version of R/3 on Linux. However, in the key markets for ERP systems such as Small and Medium Business or large mission-critical deployments in global companies, the demand for open systems deployment is yet to materialise.

mySAP Business Suite on Linux is currently shipping on Redhat and SuSE and supporting Intel hardware from Bull, Dell, Fujitsu-Siemens, HP, IBM, and Sun Microsystems, including both 32-bit and 64-bit architecture. We are in negotiations with other hardware vendors and expect to increase our supported platforms for the SAP base.

MCBRIDE: To what degree is the realignment of the business in ANZ changing how you operate with customers?
WARREN: The rationale behind our go-to-market model is to strengthen customer relationships by having the right expertise available at the right time for our customers. We have restructured our businesses in Australia and New Zealand to align with Oracle's global organisation in three key areas: industries, technologies, and applications. We can now work more closely with customers, partners, and governments by combining local knowledge with regional expertise to deliver greater value and foster long-term partnerships.

Our business has grown significantly in our key vertical market segments -- communications, media, utilities, retail, manufacturing, travel and transportation, engineering and construction, government, education, healthcare, and financial services. This success has been a direct result of Oracle's strategy to build deep, industry-specific solutions that integrate seamlessly with our horizontal business applications and technology platform.

WARREN: In the midst of significant marketplace consolidation in the enterprise software industry, what is SAP's next move?
MCBRIDE: Speaking from my position, running Australia and New Zealand, our customers know who we are and what we stand for, and in a rapidly changing enterprise software market, this is particularly important. We are a solid foundation on which our customers build their businesses and we will continue to engage strongly with our customers and partners. Moving forward, SAP is committed to its SMB channel partners and will extend its channel network and introduce new programs, support and solutions into this segment of the market.

Less than two years ago I set the company several goals, one being that we would double the organisation's revenue within three years, and another to grow our market share significantly faster than the norm. Today, we're on our way to achieving these business goals.

MCBRIDE: Oracle has identified that it will extend its reach through organic growth and acquisition -- can you explain which areas of your business and what type of companies you will target?
WARREN: We see tremendous opportunities for organic growth, not just in Australia but right across Asia-Pacific, especially in financial services, government, education, and healthcare. The mid-market is also a key growth area for Oracle.

In terms of acquisitions, we have three key selection criteria for identifying potential targets. Firstly, we look for global companies with strong market presence and an extensive customer base. Secondly, we look for companies that have a unique presence in a local market or a commanding position in countries of strategic interest to Oracle. Finally, we look to acquire functionality that adds value to our current product portfolio. The acquisition of Collaxa earlier this year is a case in point. Collaxa enabled Oracle to strengthen its Application Server offering by adding market leading business process management technology.

WARREN: There is a lot of confusion in the marketplace surrounding the offerings of Business One and MySAP "All in One". What is SAP doing to better market position these offerings?
MCBRIDE: I don't think there's any confusion in the minds of the more than 70 new SAP Business One customers we signed in the first 10 months of 2004; nor in the minds of the 14 mySAP All-in-One customers. Our Web site has numerous case studies and videos from both sets of customers and they are unqualified in their delight that they can now have a solution that delivers the business benefits they are looking for at a price they can afford. Both products are sold through channel partners that are signing up with SAP every month. In the last 12 months we signed 30 new partners. They have been very pleased with the marketing support they receive from SAP to help them grow their practice.

It is distinctive of SAP's strategy that we believe it is better for smaller customers with less than 250 people in the company to have a solution specifically designed for their unique business needs. SAP Business One is designed specifically for companies with as few as 10 and as many as several hundred employees. It covers the core operations necessary to run successful businesses in a single software solution, including embedded CRM, accounting/reporting, sales and distribution, MRP, purchasing, warehouse, and partner management.

MCBRIDE: How do you see Microsoft's entry into the marketplace impacting your business?
WARREN: Microsoft is entering the market for business applications in much the same way that it previously entered the markets for database and application server software, starting with low-end products and seeking to improve its capabilities over time. This strategy assumes that vendors already offering high-end solutions will not be able to scale them down to meet the needs of more budget-conscious customers.

Historically, this was a valid assumption, but with new technology Oracle is now able to repackage and repurpose its offerings to appeal to most sectors of the market. It will take Microsoft a long time to create business functionality that is competitive with Oracle and technically, Microsoft's applications are built in the proprietary .NET environment that only runs on Windows. Oracle applications offer world-class functionality right now, they are built in Java and run on Unix, Windows, or Linux. I'm not losing any sleep over Microsoft's applications strategy!

WARREN: Is SAP able to provide a single global solution for customers to manage their global operations?
MCBRIDE: Most global SAP customers run no more than two to three datacentres around the globe. In fact, SAP AG is a prime example of this. We run all modules of SAP software, including mySAP CRM, at a single datacentre. This has not changed in 30 years as our platform has supported client/server architecture and more recently Web services. SAP has always believed in non-proliferation of distributed servers, preferring to develop market-leading technology, starting with three tier client/server first released in the early '90s. Unlike other vendors, that promoted the deployment of instances of mission critical applications in each country where there was a main office, SAP's has always helped customers keep the datacentres to a minimum (two to three) to consolidate information and keep down costs.

MCBRIDE: Your company has stated that grid computing and its Linux offerings have contributed to your revenue growth -- can you expand on this?
WARREN: When it comes to Linux, our industry statistics tell the story. Ninety percent of new sales of the Oracle E-Business Suite over the past year in Australia and New Zealand have been on Linux. In 2003, Oracle had above-market growth in the global Linux database market of 361 percent and the largest global Linux market share at 69.1 percent, according to a May 2004 Gartner report.

In my previous role at Oracle I was responsible for championing Linux across the Asia-Pacific region, so I have first-hand experience of how excited customers are by this technology. Oracle's commitment to and investment in Linux is encouraging businesses of all sizes to make Linux their platform of choice for low-cost computing. Customers running the Oracle E-Business Suite on Linux in Australia include Qantas Airways, Virgin Blue Airlines, University of Technology Sydney, Cairns City Council, and Waterwerks. Most of these customers are running Oracle applications on clusters of low cost Linux servers using a Grid Computing architecture.

The arrival earlier this year of the Oracle 10g software platform marked a major milestone in the delivery of Oracle's Grid Computing strategy. Oracle has engineered Grid Computing features into both Oracle Database 10g and Oracle Application Server 10g, creating a new platform for enterprise computing. The Oracle Grid turns many small computers into a virtual mainframe that acts as a shared resource, running many applications at once and reallocating its internal resources in response to changing demands. The Oracle Grid delivers capacity on demand, allocating high performance, low-cost hardware elements from a pool to meet business needs as they arise.

Oracle believes Enterprise Grid Computing on Linux will be the standard architecture for the next generation of IT solutions. We are already seeing strong take-up in Australia and New Zealand, nations which are leading the way across Asia-Pacific.

WARREN: What are some of your personal hopes and dreams for the next five years?
MCBRIDE: I have many hopes and dreams. Firstly to continue the success of SAP and more than double the business size over the next few years. I hope to continue to create the environment where our people can be successful and grow, and to be the company that our customers and our partners want to do business with.

On the personal front, I hope to continue to enjoy life at both the professional and personal level. Being happily married for the past 20 years and having a daughter entering her teens, I love spending time with my family in our hobbies which include horses, biking, hiking, and enjoying the great outdoors.

MCBRIDE: We have both lived in New Zealand. How do you find the lifestyle here compared to across the Tasman?
WARREN: Actually, we have both lived in South Africa as well so there is quite a common trend emerging here and I'm sure we could debate our sports allegiances! I had a great time in New Zealand and really enjoyed the harbour lifestyle in Auckland. That said, I am now settled in Australia and have taken up citizenship. I have a weekender at the coast, or "batch" in New Zealand terms, and make the most of that whenever possible.

From a business perspective, Australia is a very mature technology market and one of the most advanced in the world. Customers have clear expectations of what they want from their technology partners -- relationships built on trust and mutual understanding, as well as the assurance that we are able to deliver on our promises. At Oracle we take the utmost care to maintain and build on that trust for the long term.

This article was first published in Technology & Business magazine.
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