Coalition of the unwilling

commentary "Change is good -- when you can capitalise on new opportunities, and drive innovation throughout your organisation."It's hard to miss these words of wisdom emblazoned across SAP's Web site.
Written by Fran Foo, Contributor on
commentary "Change is good -- when you can capitalise on new opportunities, and drive innovation throughout your organisation."

It's hard to miss these words of wisdom emblazoned across SAP's Web site. The company certainly practises what it preaches as evidenced in its attempt to merge with software behemoth, Microsoft.

Late last year, Microsoft broached the subject of a union with the German software maker during an ongoing dialogue about a Web services joint development program.

Revelations of the proposed venture surfaced late Monday ahead of court discussions as the US Justice Department attempts to block Oracle's hostile takeover of PeopleSoft.

But talks ended in deadlock several months later "due to the complexity of the potential transaction and subsequent integration," Microsoft said in a statement. The companies instead chose to enter into a Web services partnership and an intellectual property cross-licensing agreement, which was announced last month. Both parties have no intention of resuming buyout discussions.

Henning Kagermann, SAP's chief executive officer, was quite blasé in his interpretation of the foiled transaction.

-SAP, like all publicly held corporations, routinely evaluates potential opportunities to strengthen its leading position in the enterprise software market, and the disclosure made today should be interpreted this way," Kagermann said in a statement.

-SAP is committed to continue working together with Microsoft to make effective use of Web services technology and to provide continued value to our customers," he added.

"The potential merger of the two giants would have meant a dramatic restructuring of the information technology landscape, combining a near ubiquitous desktop presence with one of the leading packaged apps provider," Steven O'Grady, an analyst at RedMonk, told CNET News.com.

O'Grady said the resulting ripple effect would have had a dramatic impact on IT vendors up and down the platform-to-application continuum, and would likely attract significant interest from governments on two continents.

While the news reverberated across the globe overnight, Microsoft's move is hardly surprising -- SAP has always been a threat.

In fact, Gartner's Betsy Burton told a conference in Sydney last year that after open-source, the second most threatening company or element to Microsoft was SAP.

Where the business applications market is concerned, SAP would fit snugly for Microsoft -- it has the small- and medium-size enterprise (SME) space covered as a result of its Great Plains and Navision acquisitions.

It's no secret that Microsoft has long harboured desires to be one of the "big boys" of enterprise-class software, and has taken steps to deepen its emphasis on the business applications market -- albeit focusing on SMEs -- with a management reshuffle.

Doug Burgum, senior vice president for Microsoft Business Solutions, now reports directly to Microsoft CEO Steve Ballmer. In the next five years, the company will be investing US$2 billion per year in sales, marketing and development efforts specific to the SME market, Burgum said.

Microsoft is determined to complete its enterprise software stack, with or without SAP. How the story eventually unfolds for the German software maker is anyone's guess but one thing's for sure -- SAP is definitely up for sale.

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