Acquire Me! Oracle's and SAP's Next Likely Targets

CIO — Oracle and SAP have not been shy about making strategic and expensive acquisitions during the past several years. The numerous deals have been both big and small—some costing billions, others millions—and have filled out specific vertical-industry product offerings that allowed the enterprise software vendors to present a more all-encompassing, horizontal set of goods and services. The buys have also granted access to vast, new customer bases.

Oracle's hostile takeover of PeopleSoft six years ago signaled that Larry Ellison & Co. were less interested in growing their own crops, so to speak, than gleefully picking and choosing the best fruits and vegetables from the farm stand. And have they ever. The $23 billion database and software vendor has aggressively targeted and snatched up many former competitors that have been woven into Oracle's vast product set.

SAP, which had 2008 revenues of $17 billion and prefers to be viewed as the diligent farmer cultivating his own crops, has on occasion made trips to the farm stand: Its nearly $7 billion purchase of BusinessObjects in 2007 displayed a willingness to open the checkbook for a prize.

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A recent report from technology analyst firm The 451 Group notes that, somewhat surprisingly, the archrivals don't often butt heads over potential acquisition targets, at least publicly, anyway, with the exception of their feud over Retek in 2005 (which Oracle won). But there are similarities in their acquisition strategies, writes analyst China Martens in the September report, "Where Might Old Foes Oracle and SAP Each Look Next to Stave Off Apps Hunger Pangs?" (subscription required).

"Often, Oracle or SAP will make one purchase in a specific technology area, integrate it with its own products, do some in-house development, and then return to that field at a later date to buy another player in the field, either a direct rival or the supplier of related applications," Martens writes. "The other trend we note is that once Oracle or SAP has made an acquisition in a particular sector, the other company may make a similar move at a later date."

Who's Acquisition-Worthy

So which growing vendors are likely in the crosshairs of Oracle and SAP right now? In the report, Martens contends that "there is a wealth of possibilities" for the vendors in the apps market, "whether to expand their enterprise presence or to make a splash in the SMB arena."

For SAP, industry partners may be up first as likely acquisitions, Martens writes, "specifically, we'd point to talent management software vendor Nakisa and life sciences vendor ArisGlobal."

It may be high time that SAP makes a splashy purchase in the enterprise content management arena and buys what Martens calls the last independent vendor in that space—SAP partner Open Text. "Top of mind to both firms are compliance and driving business processes, which could make for an interesting marriage," Martens adds. "Oracle has made moves in content management with its acquisitions of Stellent and more recently Skywire."

For Oracle, Martens sees a buy among the SaaS players in the human capital management (HCM) market. "Would [Oracle] make a move there to both eliminate some competition and add more on-demand offerings alongside its own burgeoning SaaS HCM plans, perhaps acquiring SuccessFactors or Taleo?" she speculates.

Acquiring a partner might also be in the plans: Oracle may want to pick up one of its SaaS partners to bolster its CRM On Demand software in an effort to keep up the fight against burgeoning rival Salesforce.com. "In that scenario," Martens writes, "we'd anticipate marketing automation player Eloqua and sales configuration, quoting and proposal management specialist BigMachines being of particular interest in expanding the boundaries of CRM On Demand."

As for any bold "Making a Statement" acquisitions, Martens offers up some intriguing scenarios: Oracle purchases SaaS ERP vendor NetSuite (which shouldn't be too hard, considering Ellison virtually owns all of the company). Or SAP snatches up Salesforce.com. Though unlikely, Martens notes that it would be a "very bold way for SAP to gain sizable SaaS credibility, which it lacks in apps given the slow road to general availability for its own Business ByDesign SaaS apps suite."

The Sun Deal Will Come Out Tomorrow?

Of course, one rather large and now semi-notorious acquisition is the Oracle-Sun deal, which is still pending. Ellison made a recent appearance and mentioned that Sun was losing $100 million each month.

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