It’s one of the many bizarre aspects of the eternal dual between software giants SAP and Oracle.
On Thursday evening, SAP announced its biggest takeover to date. And what did Oracle founder and chief Larry Ellison do?
He resigned at the same time and stole the limelight from SAP. Part of it, at least.
With that move though the two arch rivals find themselves in a similar boat, as they both have the same enormous challenges ahead of them: They have to prove that their buying spree is sustainable. Employees as well as investors are watching.
For many years SAP has mocked Mr. Ellison’s strategy of buying up innumerable companies concerned with SAP’s core business of making enterprise software to manage operations.
But for some time now, SAP, which is based in Walldorf in central Germany, has been following the same strategy. The company has been digging deep into its pockets in order to become competitive in the cloud computing sector.
SAP has offered $8.3 billion (€6.5 billion) for Concur, a business travel software provider. It’s a deal that poses questions. Can Concur move SAP decisively forward on the technology front? That is doubtful.
What the software leader is getting is a lot of cloud customers. That’s a good thing, provided the company can sell more SAP products. Only 30 percent of Concur’s customers now use SAP systems. But the rest first want to be convinced of SAP’s advantages. A true synergy doesn’t look that way.
SAP managers will not have an easy time integrating the new company into the SAP world.
SAP managers will not have an easy time integrating the new company into the SAP world. As it stands today, Concur is a truly colorful patchwork of widely varying products put together under one roof over years of buy-outs.
This situation poses the age-old question: Are takeovers in the software industry really the right way to go?
Fact: Acquisitions in this sector result in special challenges. Most computer programs are based entirely on their own technologies and are not readily compatible with others. Deep changes are required to make a new, unified product.
But that is easier said than done because many long-term customers expect that their systems will, in an ideal world, not be affected, and that they will continue to profit from new technologies. The result: The software has to become more complex.
Oracle has demonstrated just how difficult a real integration of software acquisitions can be. The company has expended a lot of energy over the years to offer a completely new solution based on its purchases.
But you still can’t say that the result has been a real winner. Mr. Ellison is leaving his two successors with a company whose growth has disappointed investors. SAP investors are also noticeably skeptical. Why, otherwise, did the SAP stock react to the recent takeover with a drop in share price?
It is an enormous bet that both rivals have started. But at some point, every bet has to be cashed out.
Jens Koenen is Handelsblatt’s Frankfurt bureau chief. To contact the author: email@example.com