Is Software AG a Good Fit for SAP?

IDG News Service — Some tech industry rumors have an extra-long life, and the one about SAP buying middleware vendor Software AG got an extension this week following public comments by top leaders of both companies.

In an interview with Bloomberg News, Software AG CEO Karl-Heinz Streibich said SAP would "definitely" be a sound fit for his company, while adding that with any sale, the price would have to be "excellent."

His remarks came the same week as SAP's annual shareholder conference, where co-CEO Jim Hagemann Snabe reportedly indicated the vendor is open to more large acquisitions beyond its pending deal for Sybase.

SAP does not comment on rumors and speculation, said spokesman James Dever. Software AG did not immediately respond to a request for comment.

Software AG's portfolio would add significantly to SAP's NetWeaver line, with its crown jewel being the WebMethods suite of BPM (business process management), integration and governance software. The company is also known for its ARIS process modeling tools, which are used by many SAP customers.

But industry observers polled this week expressed mixed views of a hypothetical merger between the companies, both of which have German roots.

Software AG "has the same 'pride in our engineering' vibe SAP has," said Jon Reed, an independent analyst who closely tracks SAP. "There's a cultural compatibility around that stuff."

In addition, SAP has been trying to portray itself as having more choice and flexibility compared to rival Oracle (ORCL), which is pursuing a strategy around integrated systems following the acquisition of Sun Microsystems (JAVA).

There would be obvious benefits in SAP improving its middleware strategy, and "making it super-easy for customers to approach their 'non-stack' stack," Reed said.

SAP recently made a move in middleware, purchasing assets from SOALogix late last year. But NetWeaver still lags behind the market's top players, which include companies like Software AG as well as rival Oracle, observers say.

Oracle itself became a middleware giant only through its purchase of BEA Systems, said Forrester Research analyst John Rymer. "They weren't competing in IBM's (IBM) league. ... They weren't BEA."

In contrast, Software AG "is a bona fide force [in middleware] and SAP is not," he said. "If they bought them, they would be saying to the market, 'We're in.'"

SAP already made a go at it with NetWeaver, but has lagged the pack for two reasons, Rymer said.

"Their salesforce couldn't sell it. They sell apps. They can't sell this stuff. Of course, they'd say that Software AG knows how to sell this stuff," he said.

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