The Biggest Loser in Oracle-Sun Deal: SAP

Oracle’s announcement of its intended $7.4 billion acquisition of Sun has certainly shaken up the hardware and server operating system (OS) business markets.

During the next several months, important questions will have to be sorted out by Oracle, such as can the Silicon Valley behemoth succeed in a subsuming Sun’s wares and employees into its own world, and will Oracle be able to achieve the lofty earnings predictions made by CEO Larry Ellison?

But another critical question is this: What will be the effect of this transaction on Oracle’s other main product area: business software applications, such as its ERP, CRM, supply chain and BI lines?

And, of course, how will this affect Oracle’s number-one competitor in the space: SAP?

It’s all speculative at this point in the process, of course, but the collateral damage to SAP could be significant.

“This deal is very, very complementary for Oracle,” Laura DiDio, principal analyst at researcher Information Technology Intelligence, told Infoworld.com. “It gives them instant credibility with hardware, virtualization, open source, storage and cloud computing.”

Oracle’s Ellison was naturally bullish on the deal. “The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Ellison, in announcing the deal. “Oracle will be the only company that can engineer an integrated system—applications to disk—where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”

Even if Ellison’s rosy estimates and expected synergies are half correct, the long-term implications for SAP could be harsh.

First off, Oracle will now have control over Java. The consequence of that is huge, notes Jack Gold, founder of J. Gold Associates, via e-mail. Oracle will have the “ability to kill off an imminent threat to its database hegemony in the MySQL open source database,” Gold notes. “Control of Java, at the core of Oracle’s enterprise software products and similarly for many of its competitors, is a real coup for Oracle and Larry Ellison.”

Gold writes that this scenario won’t make IBM or SAP “very happy,” since they have also built some of their key business software offerings around Java.

Bruce Richardson, AMR Research’s chief research officer, blogged today about the “pain” SAP customers and CIOs are feeling because they don’t have a good grasp of SAP’s roadmap right now.

The challenges these customers are facing today, Richardson writes in “SAP’s New CEO to Inherit Far More Complex Product Set,” are “mixing and matching transactional, analytical and collaborative applications in some combination of on premise, on demand and in the cloud,” which produces the pain.

But not knowing SAP’s release schedules, he adds as an example, adds higher degrees of difficulty to the already-challenging IT process. “In meetings with SAP customers,” Richardson writes, “we usually hear the same request unanimously: ‘Please help get SAP to provide us with product roadmaps.'”

If Oracle can chart a “cradle to the grave” roadmap that includes new Sun-related options, then Oracle could have a huge competitive advantage over archrival SAP.

That’s assuming, of course, that Oracle will succeed in incorporating and integrating Sun’s assets into Oracle’s products sets and corporate culture. Recent history—the friendly and not-so-friendly Oracle takeovers, such as with PeopleSoft, JDA and Siebel—would tell us that Oracle will succeed, at least from a balance-sheet perspective.

For what it’s worth, however, SAP might not be the only “loser” this week. Another loser of the Oracle-Sun deal is ERP vendor Lawson, whose annual Conference and User Exchange (CUE) get-together—taking place now—is being slightly overshadowed by the big industry news.

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