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GCN Home > 10/22/07 issue

Enterprise software field is shrinking

Oracle, SAP plan major acquisitions but promise customers continued support

By Joab Jackson

Earlier this month, Oracle announced it was planning to acquire BEA Systems, offering $6.6 billion for the company. BEA has thus far turned down the offer, though talks are ongoing. A week earlier, fellow enterprise resource planning software provider SAP announced it was acquiring business intelligence software vendor Business Objects for $6.8 billion.

And, last week, perhaps in response to Oracle’s BEA announcement, SAP announced that it is acquiring the privately held Yasu Technologies. Like BEA, Yasu offers Business Process Management software, or software that allows users to automate routine organizational processes.

At first glance, such multibillion purchases might appear to be similar — two competitors locked in an arms race of software acquisition. Yet Oracle and SAP are actually operating with different agendas, according to Bart Narter, a senior analyst at Celent, a financial research and consulting firm.

While Oracle has been buying companies aggressively and purchasing large companies — such as PeopleSoft, Siebel Systems and Hyperion — SAP has been a lot more selective about purchasing companies, seeming to prefer developing technologies internally. Both, however, speak to changes in the enterprise software market.

Speaking a day before Oracle’s announcement, Oracle President Charles Phillips said that acquisitions are important because it allows the company to fill out its product portfolio and offer a broad, integrated stack of applications for customers.

Oracle’s customers “want us to provide integration off the shelf now. This is maturation of the industry, one that would reduce complexity,” Phillips said. “Five years ago, they were thinking they wanted more suppliers, [They wanted to purchase a product from] whatever the hot start-up, more complexity. We made a mess we’re now cleaning up.”

Industry observers note that BEA, if purchased, would fill some valuable gaps in Oracle’s portfolio. BEA offers WebLogic, one of the most widely used application servers on the market. Oracle’s own offering, OC4J, hasn’t attracted as many customers.

“Oracle OC4J doesn’t have a very good technical reputation. WebLogic is a much better product,” e-mailed Marc Fleury, who co-created another application server, the JBoss open-source application server.

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