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

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

Summary: SAP's 3rd quarter earnings call was peppered with jabs at Oracle. Are we seeing the start of a 'bring it on' campaign by SAP, fed up of Oracle's bully boy tactics?

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TOPICS: Banking, Oracle, SAP
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Today's SAP thirds quarter earnings call was peppered with implied and direct jabs at Oracle. The contrast between Oracle's CEO Larry Ellison and his street fighter style with that of SAP co-CEO's Bill McDermott and Jim Snabe could not be more striking.

As Larry Dignan points out in his op-ed on Mr Ellison's latest statement in the TomorrowNow case, it is not so much about SAP but about trying to derail HP's new CEO, Leo Apothéker - former CEO SAP - from doing his job. The threat could not be more transparent: 'Turn up at HP HQ and we'll subpoena you...so stay away.' From what I know of Mr Apothéker, he's not one to run away from a good scrap but the courtroom is not his chosen battleground. And neither is it the battleground that SAP more generally chooses. Instead and as was made clear on the earnings call, SAP prefers to fight it out where it matters: through the hearts and minds of customers.

"...you are basically seeing two trends there. Some companies were consolidating and they want to own the whole stack, and that is their strategy. Then you have innovators, who said I stay focused on my part, but then I run faster, I innovate faster. We believe that is a superior strategy. And for that to work you need strong partnerships so you still get the end-to-end stack to the customer." said Mr Snabe.

"We look forward to the day that they [Oracle] 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. When we are at that table in 25 industries and all geographies and market segments around the world, my money is on SAP." said Mr McDermott. Mine is too.

While Oracle is well known for parachuting Mr Ellison into large deals, his tactics of almost giving away the application in order to sell the database have not always worked. Customers don't like to think they're in a Turkish souk style haggle even though there is always an element of that in enterprise deals. There is genuine doubt whether the Oracle stack play will fare better.

For all the bravado coming out of Redwood Shores, I suspect much of it is based on a false hope. Consolidating the industry has been good for Oracle's share price but it is questionable whether it has really been good for customers or whether it is sustainable. Increasingly we see a company that is attempting to make the courtroom look like 'business as usual' when it should be considered the last resort in any dispute. The US is only one market on the global stage and while lawsuits are common, other markets look askance at such tactics.

SAP for its part spent the last week milking its ecosystem of enthusiastic developers for all its worth. Video slots talking up different aspects of SAP were counterbalanced by nuanced critique that enrich the debate about where SAP is going and what the strategy elements mean for customers. Contrast that with complaints that Oracle is trying to control the Java community.

We are entering an interesting period in enterprise applications. All the major players have much to lose as more organizations look to the cloud and the promise of lowered cost. Both Oracle and SAP are placing big bets, Oracle with the yet to be released Fusion and Exalogic, SAP with Business ByDesign, mobile and in-memory. Today, it is SAP that looks to have the more broad based and industry inclusive strategy. If SAP can become the center of gravity espoused by Messrs McDermott and Snabe, Oracle could quickly find itself marginalized. And in that situation no amount of street fighting trash talk will help it.

All of which brings me to a quote from one of Larry Ellison's favorite authors: Sun Tzu and his Art of War: 'When you're weak, look strong.' Is that what we're really seeing from Oracle? Or is it more like: 'Never will those who wage war tire of deception.' Or has Mr McDermott read it right and what he is really saying is more like 'Bring it on?'

Updated for quote accuracy.

Topics: Banking, Oracle, SAP

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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12 comments
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  • Good

    Very nice post.

    http://www.imperiousseo.com
    Search Engine Optimization USA
  • NIce paper Mr Howlett

    Especially the part --Oracle could quickly find itself marginalized.---

    Oracle played with fire and time this time they may burn them self
    Quebec-french
  • RE: SAP's McDermott to Oracle's Ellison: bring it on

    Good job Dennis, as always.
    Thanks for your perspective.

    Leo
    lfrancisconi
  • RE: SAP's McDermott to Oracle's Ellison: bring it on

    CEO posturing and head-line grabbing might be nice for investors, analysts, and market traders, but it doesn't really change the underlying stack.

    Both SAP and Oracle have both invested vast amounts in trying to make their core engines more CA/SOA friendly over the last few years, with variable levels of success, but the recent spat does nothing except make soap-opera style entertainment
    Nic Harvard
  • RE: SAP's McDermott to Oracle's Ellison: bring it on

    Dennis, usually your (great) pieces are not biased. What's happening? I can understand the resentment towards Oracle (I'm neither an Oracle nor SAP stockholder), but you've got to give them (Oracle) that: They do own the stack, and what stack!!! Even IBM wants to be friends with big O. It looks like SAP has become an endangered species. Too bad. And by the way, there's no such a thing as "Fusion", it has to be Fusion "something", so maybe you're alluding to Fusion Applications, which run on Fusion Middleware, which will really compete even better with SAP. Now put Fusion Applications on Exalogic and you have a real winner (adding high performance to pretty amazing functionality and integration). So, yeah, I'd say "bring it on", but for different reasons...
    Eleutherios
    • RE: SAP's McDermott to Oracle's Ellison: bring it on

      Oracle Has no chance. Sorry dude. The largest seller of Oracle licenses has been SAP. No dispute in that. The SAP customers are slowly discovering that Oracle "tax" is unnecessary to operate world class systems. Same with Sun Micro hardware. This was the demise of Sun Micro and will be the demise of Oracle as SAP customers move to other database platforms. The problem Oracle has is that database in itself is worthless. You need an application to collect and later on dissiminate the data through. The issue Oracle has is that its applications are just horrible. That is why Oracle needed to buy all of these companies, because individually the applications do not work that great for a company greater than $100M or so. Oracle is actually confirming it by giving away the application and collecting the fees on the database. The larger customers, with big $$$ to spend, want database indenpendency so right there all Oracle offerings are a "no go." Now, let's look at this Exalogic thing. Most companies in this world can use cheap hardware with a little of software to put together a platform that is just as reliable and capable as Exalogic. SAP is actually a good example. 75% of world's business transactions go through an SAP platform at one point or another, but SAP is yet to certify Exalogic. The reason is that customers do not need it. It is interesting that corporations like Nike, P&G, Colgate, Deer, GDF Suez, Nestle and EDF can do fine without Exalogic running their business. These companies put together do more than a $1T of revenue a year. This tells it loud and clear that Oracle is becoming a marginal player. All I can say dealing with Oracle -> Good Riddance Sleaze Bags!
      mikies
      • RE: SAP's McDermott to Oracle's Ellison: bring it on

        @mikies - catch me on dahowlett@gmail.com - interested in your POV but likely needs to be in a private environment.
        dahowlett
      • RE: SAP's McDermott to Oracle's Ellison: bring it on

        @mikies What a load of old tosh. Frankly I find it hard to believe that Dennis even takes you seriously in his attached note to your little rant. Marginal player? Didn't I just read that SAP missed by 20%
        JoKingNow
      • RE: SAP's McDermott to Oracle's Ellison: bring it on

        @JoKingNow<br><br>I am sorry to say but you just have your information incorrect. What does SAP miss have to do with Oracle being a marginal player? Oracle attempts to play in many more markets than SAP can and probably every will. Oracle is and has been a one trick pony and that is its database. Many enterprises who have standardized on Oracle pay nothing more than maintenance. Many companies who run SAP have bought their Oracle license through SAP and that price is way way way lower than if they had bought it from Oracle direct. Oracle has therefore no choice but to figure out a way to sell more database licenses and hence come all the application company purchases. As has been shown in Oracle Open World, when it comes to Oracle applications (JDE, Peoplesoft etc.) the direction is clear -> Larry and his team leave the room, because they don't care. On the hardware side, we know that the Sun Micro boxes are pretty much end of life. The nehalem architecture from Intel is just killing SPARC, be it the SPARC that goes to M series boxes or the T series CPUs. Either way, Sun Micro is toast. Open sourcing Java is cute, but does not pay the bills. This leaves Oracle where it was 20 years ago, which is just database. One trick pony. The database is great, I am not saying it is not, but what happens when companies who run applications sitting on Oracle all of a sudden switch to Amazon cloud? Amazon cloud is powered by enterprise license from Oracle (my guess based on material from Oracle available on line) which will not increase Amazon's payments to Oracle for maintenance as more customers come on line. Yet, the corporations that migrate to Amazon's cloud stop paying their maintenance because they no longer need Oracle licenses, because it is all "built in" within their Amazon cloud bill. The answer is clear -> Oracle is in trouble.
        mikies
    • RE: SAP's McDermott to Oracle's Ellison: bring it on

      @Eleutherios There are hundreds of peeps I absolutely respect at #ORCL but Larry is setting a tone I believe is dangerous for all parts of its ecosystem. I would go as far as to worry whether he has 'left the reservation.' If so then this is deeply worrying. Fact is ORCL doesn't allow critics like myself access to people who can tell Oracle's story. We have to use other methods that deny Oracle a right of reply. That's not good for Oracle, its customers or partners.
      dahowlett
  • Biased?

    Dennis, do you claim to be a neutral observer of these two organizations? I read your column because of the occasional insightful post on the SaaS market, and it's become pretty clear to me that you are emotionally biased towards SAP. Here's what I've seen:
    -you criticize Larry for his dramatic comments, but consistently provide him a forum for them
    -your Oracle posts are often full of innuendo, and the points you make are rarely backed up by data. For example, where is the data that Oracle applications are typically given away to support DB sales? This hasn't been the case in the hundred or so Oracle apps sales I've seen.
    -you typically espouse a philosophy of ethics that seems to serve only analysts and bloggers. Because you don't get what you want it's bad for the rest of the world?

    It just seems like you are a grumpy SAP alumnus that doesn't like some of the valid contributions Oracle is making to the enterprise apps marketplace.
    dfresh67
  • RE: SAP's McDermott to Oracle's Ellison: bring it on

    Two points are missing:
    1. The stock market speaks - clearly in favor of O.
    2. McDermott and the rest are no where in the same league as Ellison - when it comes to creating Share Holder Value and a rock star life for himself.
    1GreatSoul