With the Sybase deal, SAP’s new management has shown a welcome display of strategic intent, but SAP has a number of questions to answer with respect to its role in the changing IT environment by Virat Bahri
Be it their love for 99.9999% quality in everything they buy, their passion for cleanliness, their preference for pre-planned programs or their steadfast belief in the superiority of their institutions; Germans have numerous interesting & peculiar cultural traits.
If there could be two words to personify SAP (based on most of its corporate history), they have to be – quintessentially German! A high regard for stability, integrity and best in class product offerings have been characteristic of this company. But its major drawback has been its relative apathy in accepting and adapting to the changes in the marketplace; and its steadfast commitment to the organic route for growing its product suite. The same is said for its enterprise software application as well, stable, reliable, but harder to customise for organisations in today’s fast-paced world.
And the player that took the greatest advantage of this was Oracle; led by a highly aggressive, no holds barred Larry Ellison, who unleashed a massive acquisition spree over the past decade to take Oracle from a database company to an ERP giant that is now a serious competitor to SAP, in a rivalry that is ‘to the headlines born’. The recent $5.8 billion acquisition of Sybase by SAP is seen as an attempt to change the status quo. Interestingly, investors don’t seem to realize the deal’s potential yet. SAP’s share price closed at €36.05 on May 12 and had dropped to €34.39 by May 21. Yet, this is a very interesting move for SAP’s future.
In February this year, Leo Apotheker resigned from his fairly short stint as SAP CEO (appointed in May 2009) after a humbling year for SAP, with revenues at €10.67 billion, a drop by 8% yoy and profits at €1.7 billion, down by 5.3% yoy, the first annual revenue drop since 2003. “Apotheker ruffled feathers with partners, customers and employees in his tenure, and had the misfortune to make those missteps at a time of punishing global economic conditions,” comments Warren Wilson, Senior Analyst, Ovum Inc. Moreover, according to the Gartner report for 2009, SAP remained the leader in the Business Intelligence (BI), Analytics and Performance Management space, but its market share dropped from 23.4% to 22.4% yoy; while, IBM, Oracle and Microsoft made some gains. New co-CEOs Bill McDermott & Jim Hagemann Snabe promised while declaring the annual results, “We will leverage the latest technologies, such as virtualization, cloud & in-memory to ensure that our business solutions are easy to implement, use, and seamlessly integrate...” But analysts lament that SAP’s vision for the emerging IT landscape isn’t up to the mark.
Be it their love for 99.9999% quality in everything they buy, their passion for cleanliness, their preference for pre-planned programs or their steadfast belief in the superiority of their institutions; Germans have numerous interesting & peculiar cultural traits.
If there could be two words to personify SAP (based on most of its corporate history), they have to be – quintessentially German! A high regard for stability, integrity and best in class product offerings have been characteristic of this company. But its major drawback has been its relative apathy in accepting and adapting to the changes in the marketplace; and its steadfast commitment to the organic route for growing its product suite. The same is said for its enterprise software application as well, stable, reliable, but harder to customise for organisations in today’s fast-paced world.
And the player that took the greatest advantage of this was Oracle; led by a highly aggressive, no holds barred Larry Ellison, who unleashed a massive acquisition spree over the past decade to take Oracle from a database company to an ERP giant that is now a serious competitor to SAP, in a rivalry that is ‘to the headlines born’. The recent $5.8 billion acquisition of Sybase by SAP is seen as an attempt to change the status quo. Interestingly, investors don’t seem to realize the deal’s potential yet. SAP’s share price closed at €36.05 on May 12 and had dropped to €34.39 by May 21. Yet, this is a very interesting move for SAP’s future.
In February this year, Leo Apotheker resigned from his fairly short stint as SAP CEO (appointed in May 2009) after a humbling year for SAP, with revenues at €10.67 billion, a drop by 8% yoy and profits at €1.7 billion, down by 5.3% yoy, the first annual revenue drop since 2003. “Apotheker ruffled feathers with partners, customers and employees in his tenure, and had the misfortune to make those missteps at a time of punishing global economic conditions,” comments Warren Wilson, Senior Analyst, Ovum Inc. Moreover, according to the Gartner report for 2009, SAP remained the leader in the Business Intelligence (BI), Analytics and Performance Management space, but its market share dropped from 23.4% to 22.4% yoy; while, IBM, Oracle and Microsoft made some gains. New co-CEOs Bill McDermott & Jim Hagemann Snabe promised while declaring the annual results, “We will leverage the latest technologies, such as virtualization, cloud & in-memory to ensure that our business solutions are easy to implement, use, and seamlessly integrate...” But analysts lament that SAP’s vision for the emerging IT landscape isn’t up to the mark.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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