I’ve been meaning to write about this – SAP’s $5.8B acquisition of Sybase that is. There’s been a good bit written about it – excellent and relevant comments as well. Look at the excerpts:
Forrester: “With Sybase Unwired, the mobile apps can be written once and deployed on multiple mobile platforms.” This “…gives SAP the opportunity to develop new types of business applications for mobile devices… .”
Yankee: “…the fusion of cloud computing, application mobility and social media to transform the enterprise mobility space.”
A Software Insider’s Point of View: SAP “…also gains access to the financial services and public sector markets. On the geographic front, Sybase has strong presence in the China market, an area where SAP sees future growth.”
Forbes: “Sybase is not enough to make SAP entirely relevant in scope and scale (and it goes without saying that in this land of giants, Sybase was not large enough to survive on its own). But it picks up a solid asset, with businesses in financial modeling and mobile databases that are essential for SAP to stay in the game.”
Good stuff – very relevant and right on the mark from my perspective.
I have another theory. I’m sure all of the above is true, but an interesting side thought occurred to me. I kept thinking about the Oracle lawsuit against SAP involving the alleged inappropriate downloading of Oracle proprietary data by SAP. I took a glance at the Oracle complaint. It’s amazing. Take a look at some of the allegations:
“This case is about corporate theft on a grand scale…”
“Oracle brings this lawsuit after discovering that SAP is engaged in systematic, illegal access to…Oracle’s computerized customer support systems.”
“Through this scheme, SAP has stolen thousands of proprietary, copyrighted software products and other confidential materials that Oracle developed to service its own support customers.”
“In late November 2006, there occurred unusually heavy download activity on Oracle’s password-protected customer support website. …The access and download activity Oracle observed on its systems…did not resemble the authorized, limited access to which its customers were entitled. …SAP employees using the log-in credentials of Oracle customers with expired or soon-to-expire rights had, in a matter of a few days or less, accessed and copied thousands of individual Software and Support Materials.”
“…using one customer’s credentials, SAP suddenly downloaded an average of over 1,800 items per day for four days straight (compared to that customer’s normal downloads averaging 20 per month.”
“Other purported customers hit the Oracle site and harvested Software and Support Materials after they had canceled all their support with Oracle in favor of SAP TN (TomorrowNow).”
“…a user on an SAP TN computer signed on as Oracle customer Honeywell International…to access Oracle’s support system and copy literally thousands of Oracle’s Software and Support Materials in virtually every product library in every line of business.”
“…Oracle to date has indentified more than 10,000 unauthorized downloads of Software and Support Materials relating to hundreds of different software programs.”
“…some users logged in with user names of “xx” “ss” “User” and “NULL”. Others used phony email addresses like test@testyomama.com…”
“…one user…appears to have logged in using the credentials of seven different customers in a span of just 15 days – all from SAP computers in Bryan, Texas. All of these customers whose IDs SAP appropriated had one critical fact in common: they were, or were just about to become, new customers of SAP TN – SAP AG’s and SAP America’s software support subsidiary whose sole purpose is to compete with Oracle.”
WOW! This is heavy duty. I’m not a lawyer. I don’t know if all or any of this is true or accurate, but it would seem that if there were even a small degree of accuracy, it would be a big problem for SAP. We do know however that as a result, SAP announced in mid 2008 that it would shut down its TomorrowNow division.
I find this really interesting. SAP requires access to Oracle products and code to develop their products. SAP is actually Oracle’s biggest ISV. SAP Business Apps drag a lot of Oracle DB along with it. So SAP needs access to the Oracle Database Technical Reference material to build its product. A division of SAP, Business Objects, needs access to Oracle Applications to build their products. You can’t build worthwhile SAP BusinessObjects Rapid Marts without knowing intimately, at a programmatic level, what the Oracle Application is doing.
Think about this as well. A year ago or so you could go to the Oracle Partner Network site and see SAP and Business Objects products listed. If you go to that site today you see products from other companies like Teradata and IBM/Cognos that compete with Oracle but you do not see SAP or Business Objects.
If you’re SAP and you’re dealing with a major lawsuit alleging inappropriate and illegal access to proprietary data and you need access to Oracle to build your products, what do you do? Well – perhaps two things:
Plan A) You work with Oracle and try to negotiate some limited access agreement. After all, Oracle does make a ton of money, probably close to a billion a year, from SAP apps customers that use the Oracle database.
Plan B) You have to have a Plan B and it better be better than plan A. Is it possible that Plan B is figuring out how to no longer rely on the Oracle database? That’s what I’d be doing. You acquire Sybase. You embed it in your cloud offerings. It’s the store for mobile applications. You sell it to every new customer. You bundle it in SMB and mid-market channel sales. You try like hell to convert Oracle database customers (impossible for a ton of technical reasons, performance concerns, and the conversion expense mountain you have to overcome, but nonetheless a noble effort that will rest on the shoulders of some unknowing SAP sales exec who will get shot in less than 12 months.)
I think this $5.8B Sybase acquisition was a great idea. SAP needs this to survive, but it’s not enough to win. I also think it was worth paying the huge premium.
Total cost of the TomorrowNow acquisition: TomorrowNow acquisition cost + $5.8B for Sybase + $.25B to $1B to settle illegal access suit = about $6.2-$7B.
From that perspective what is the big deal in SAP spending a quarter billion to a billion or so to overcome this issue? The problem is gone. They further cut, or limit, their reliance on Oracle, they access and open new markets and revenue streams, and most importantly they make themselves more attractive as an acquisition target to IBM, whose mutual mission in life is to kick Oracle’s ass. This is two mints in one – a great idea and a dream come true!
I hope to blog again…
…and, I would really like your thoughts on this theory.
PS: My personal opinion of SAP: SAP is a good company. They didn’t, and wouldn’t, engage in the activities alleged by Oracle. However, the company they acquired, TomorrowNow, would. Unfortunately for SAP, they own TN and the liability and potential consequences of the poor judgment on the part of TN.
