Oracle and SAP Are Big: Too Big for Their Own Good?
The billion-dollar behemoths are top dogs in enterprise software. But they just might be too big to manage the change that's happening all around them.
CIO — The battle and competition in the enterprise software market between SAP and Oracle has fast become one of the hottest rivalries in high-tech. And while it might not have the pop-culture pizzazz of Red Sox-Yankees or Coke-Pepsi (PEP), the passion of the thousands of the combatants involved makes it no less fervent or important a battle.
As it stands now, these companies are big. Not only in revenues, customers and market cap, but also in the number of employees who call each vendor "my employer."
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Oracle (ORCL) has approximately 83,366 employees wearing the red and swearing allegiance to Larry Ellison. At last corporate count, SAP has 47,804 workers, who probably can speak a little German (Danke!).
But I've wondered this lately, especially as the Great Recession still works its way out of the global economy's system and enterprise software vendors struggle to sign on new customers and license agreements: At what point do vendors of this magnitude, with their various lines of businesses, traditional product portfolios, competing in-house personalities with vested interests of their own, and inherent aversion to real change, start interfering with the overall efforts of trying to serve their current and future customers?
In other words: Have SAP and Oracle become too big to compete in this new decade of constant change, next-generation app pipelines, pricing upheavals and innovation-first business strategies?
It's easy to suspect that the two companies' relative bloat and market complexity have made decision-making and strategizing thornier propositions for them, especially as of late, though it's difficult to know the exact answer.
But what we do know is that companies such as SAP and Oracle could, internally, be dealing with a unique, festering problem that may be overwhelming executives: Are the companies too big to manage?
That's the question posed by an MIT Sloan Management Review article (though not specifically with SAP and Oracle in mind). The article offers an intriguing premise: Looking back at the companies that did and didn't survive the global economic meltdown, were these companies not only too big to fail but also too big to manage?
Complexity inside large organizations manifests itself in several ways, note authors Julian Birkinshaw and Suzanne Heywood: dysfunctional management, risk-management blunders, burdensome regulations, bureaucratic hurdles, and an inability to quickly respond to changing market demands.
In sum, write Birkinshaw and Heywood, "Some companies are simply too complex to be run effectively."
