SAP's McDermott: Oracle Fusion upgrade could mean it's poaching time

Summary:Oracle is expected to roll out its Fusion apps early in 2011 and SAP sees an opportunity to poach a few customers as IT buyers pit the two companies against each other for leverage.

Oracle and SAP will be duking it out in court next week over the TomorrowNow lawsuit, but the real fireworks for IT buyers will come next year.

Why? Oracle is expected to roll out its Fusion apps early in 2011. As previously noted, Oracle is expecting half of its customer base to upgrade to Fusion applications within 5 years.

The big question is whether Oracle customers---notably all of those folks on Siebel, PeopleSoft and JD Edwards---will use the Fusion product cycle to go shopping for alternatives.

That's where SAP comes in. On Wednesday's third quarter conference call, SAP CEO Bill McDermott welcomed Oracle's Fusion product cycle. That positioning could be dismissed as bravado, but here's how the enterprise resource planning buying cycle plays out:

  • You eye an upgrade from Oracle or SAP;
  • You evaluate both;
  • And you extract concessions from one of the two vendors as you make a choice.

McDermott knows this game well. He realizes that every Fusion upgrade may be an opportunity to pry away an Oracle customer. McDermott said:

First of all, in relation to the competitor bringing in a new product to market, considering it is several years late now, it still remains to be seen if it won't yet be another year late. So let's see if they are continuing to be late.

The fact of the matter is they don't do very well in generation one releases, which is why I think they have watered down the messaging to basically sort of beta'ering and testing with some customers on "their new product".

We look forward to the day that they may have some kind of a new product or a new release level, because that will then put all those customers in their existing installed base of all the rollouts that they have done on the M&A front in a buying mode.

They will have to make a decision. They will have to make a decision to keep the legacy and the maintenance on that or they will have to make a decision to switch. If they consider switching to a new platform or a new application from Oracle, you and I and everyone else on this call know that they're going to shop it against SAP, if for no other reason than just to keep Oracle honest on price. Which means we come to the table in a buying decision with a customer.

In other words, the IT buyer can play SAP and Oracle off each other for a few years to come.

Related: SAP's McDermott to Oracle's Ellison: bring it on

Topics: SAP, Banking, CXO, Oracle

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.