Oracle, SAP slug it out in Asia

Tension is escalating between the two software giants in the Asia-Pacific region, as both claim to have outperformed the other.

The battle for the king of the hill in the business applications space has seen escalating tensions between Oracle and SAP in recent months.

In the Asia-Pacific region, Oracle has claimed to have outperformed its competitors, with license revenues from business applications growing by 80 percent in the fourth quarter this year compared to the same period last year. The software giant also claims to have excelled in specific vertical industries like financial services and communications where, for example, Oracle CRM (customer relationship management) software sales grew by 272 percent.

To stay ahead of the game, Oracle has restructured itself around vertical industries such as financial services, manufacturing and communications. "We've reorganized our sales force, consulting and technical organizations to fit into this (new) structure," said Mark Gibbs, senior vice president for applications at Oracle Asia-Pacific.

This reorganization, Gibbs added, was a contributing factor to Oracle's "spectacular growth" in its business applications. "Undeniably, we are growing at least three times faster than SAP in Asia, and significantly higher than the market average," he claimed.

Rival SAP, which reported 22 percent growth in the region during the second quarter this year, has in turn asserted that Oracle has been growing through acquisitions, not organically.

Citing analyst remarks from Merrill Lynch, Colin Sampson, SAP's senior vice president and chief operating officer for Asia-Pacific, said his company is continuing to gain market share, and "growing significantly faster than the rest of the industry".

"If they (Oracle) are growing three times faster than us, then how can we be increasing market share? The arithmetic doesn't work out. Something must be wrong with the math," Sampson said.

"The analysts also expect Oracle to lose market share in the coming years. The growth they are reporting is (due to) their acquisitions instead of organic growth. If you strip away the acquisition growth, their (net) growth would be negative," he claimed.

Alan Tong, IDC's research manager for enterprise applications, does not rule out organic growth within Oracle. After all, he said, the company has seen 300 percent growth for Oracle E-Business Suite Special Edition targeted at SMBs in the fourth quarter last year.

Tong added that while there is no doubt the PeopleSoft acquisition has contributed to Oracle's performance numbers, the company's growth in vertical industries like financial services has been significant as well.

To wrestle customers away from each other, both Oracle and SAP have dangled carrots, including attractive licensing payment plans, free consulting and discounts on maintenance costs.

Oracle's OFF SAP program targets SAP R/3 customers faced with having to re-license and re-implement their applications in their upgrade to mySAP ERP or mySAP Business Suite. It hopes to migrate them to the Oracle E-Business Suite.

SAP R/3, based on the proprietary ABAP programming language, is the German software company's integrated platform for business applications, while the newer mySAP platform runs on open Web services standards.

When contacted by ZDNet Asia, Oracle was not able to provide cases where SAP customers have been successfully poached over, but Gibbs revealed that the program has drawn customer enquiries. He said that 31 percent of the respondents to the OFF SAP program were from the Asia-Pacific. "They've come back asking for interviews and meetings with Oracle," he said.

Criticizing SAP's recent announcements on its customer wins for its Safe Passage program, Gibbs said: "They came up with three customers, and that was nonsense. They weren't Oracle customers. They are falsely representing (the wins), and we certainly won't be doing that."

SAP's Sampson noted that only time will tell if its rival's customers will jump ship, and acknowledged that not everybody will walk over from Oracle. "It's a safe passage, but that's not saying we will capture all (Oracle) customers immediately."

"If they want to migrate to SAP now, we have a rollout strategy for them. We give them credits for their investments. If they don't, we can maintain what they have now for a number of years at 50 percent of the maintenance (cost) they're paying now."

Kristian Steenstrup, research vice president of Gartner, noted that "both companies will have some success with OFF SAP and Safe Passage, but it will only involve a small minority of each other's customers".

"What customers must look at are the terms and conditions, particularly in replacement licenses, because in the world of software, nothing is free," he cautioned.

It's still early days to crown the winner of this ongoing battle, given that Oracle and SAP have their own strengths and weaknesses, he said.

Whose technology is better?
One of the criticisms leveled at SAP, Gibbs said, is his competitor's belief that "information architecture doesn't matter. Anybody who says that doesn't understand the business".

"We've seen our competition try to play with some technology that's not panning out--multiple data models, proprietary language, not standards-based--which is what Oracle has moved away from," he noted.

"We are clearly trying to put in standards-driven information architectures, and we believe we are unique in the fact that we own the database, middle-tier and business application layers."

SAP's Sampson had strong words for his counterparts at Oracle, too. "When I heard them say that only Oracle is building next-generation applications compliant with J2EE, we knew that it was not really a fair comment," he said.

"The other comment is that only Oracle's information architecture allows customers to run one global model and instance. When I read that, I nearly fell off my chair!"

Sampson said SAP itself is its best testimonial. "Forget about our customers--SAP itself has been running one instance worldwide. We've done that for 12 years," he said.

It appears that Oracle's recent shopping spree may have led some to question its strength in business applications.

Gartner's Steenstrup acknowledged Oracle's technology strengths, particularly in databases, but felt that SAP has a stronger applications portfolio. "It (SAP) has traditionally built applications on its own, compared to Oracle, which has been building their portfolio through acquisitions," he said.

In terms of vertical industry coverage, Steenstrup said: "The challenge is for Oracle to grow their application stack." He noted that many verticals such as retail and the public sector have been dominated by SAP.

Steenstrup also noted Oracle's interest in products that are targeted at vertical industry needs and designing its software for Web services, and added that "SAP has done the same by wrapping their applications as Web services, and there is nothing wrong with that (approach)".

But Netweaver, SAP's application integration platform, needs to be stronger, he noted, adding that "it's not very widely used for now", especially in Asia.

Tong attributed the low take-up of Netweaver, with the exception of the more mature markets like Singapore, Korea and Australia, to the Asian businesses' short term view of technology adoption. "They want their ROI (return on investments) as soon as possible, sometimes within 12 months," he said.

"Netweaver is still an unknown technology to most (of these companies), and the challenge for SAP is to build awareness for it to gain acceptance in Asia," Tong added.

Commenting on Oracle, Steenstrup said the software company's key strength lies with its database technology. He said Oracle can easily design applications to suit the databases, although he conceded that there could be constraints in the portability of other databases to Oracle applications.

"Project Fusion is meant to overcome such constraints, but will it run on other databases? Oracle only embraced other databases because of its acquisitions of other applications from PeopleSoft and J.D. Edwards," he noted.

Project Fusion, codename for Oracle's next-generation applications, integration and architecture solutions, is scheduled for release in 2008.

Tong said Project Fusion was borne out of Oracle's need to assure PeopleSoft and J.D. Edwards customers that their investments are safe, and to address their concerns about being forced onto a single Oracle platform.

"So, it will be a disadvantage to them, if they do not support non-Oracle databases, and they might risk losing market share."

Gibbs clarified that Oracle will continue to support alternative platforms of its customers, so that "the investment that people have is protected".

"But we will explain the value proposition of the Oracle platform to customers. If they are interested in moving, we will assist them in migration. We won't force them," he added.

In any case, business customers have reason to smile in the face of the ongoing rivalry. "I think the competition will benefit end-users, in pricing and service levels," Tong said.