IBM and SAP--not this year

Tom Foremski of SiliconValleyWatcher talked to Ray Lane (who was the Gillmor Gang guest last week) about IBM and SAP. Tom writes:

Mr Lane is convinced that IBM should acquire SAP. "Earlier this year I told Sam [Palmisano] that IBM should acquire SAP," Mr Lane said. But the IBM chief rejected that advice.

I pointed out that IBM makes more money out of SAP than SAP, because about one in ten dollars is spent on license fees, the rest is for implementation--the IT services that forms about one-half of IBM.

But Mr Lane believes that IBM needs applications on top of its middleware stack. I pointed out that IBM was terrible at enterprise applications and abandoned the market in 1999. "Well, Oracle was terrible at apps too," he said.

Tom argues that IBM doesn't need enterpise applications to compete. IBM would rather focus on expanding its WebSphere middleware platform and fuel its massive services/consulting group revenue. That's been IBM's mantra for years, but Ray Lane may be right in the long run. For the legacy players, consolidation is a way to transition from the client/server to the services world in a survival of the fittest mode. At least, that's how Oracle is approaching its future. Maybe Microsoft will take another look at SAP. Windows is the only platform that supports all SAP solutions, according to SAP. But at some point IBM will look for other ways to grow its revenue, and synergies with SAP, NetWeaver and an enterprise services repository could be too hard to pass up...