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Oracle's Phillips swings at SAP

Oracle president Charles E. Phillips Jr. sharply criticized SAP, and touted his company's ability to deliver a complete infrastructure and application package.

Oracle Corp. president Charles E. Phillips Jr. criticized SAP, citing a lack of endorsements and support for NetWeaver and a lack of upgrade projects among SAP's customer base.

"NetWeaver has not been proven in terms of ISVs [independent software vendors] and third-party endorsement," Phillips said, during a webcast this week for investors. "We have the standard architecture proven in the market."

Phillips answered questions posed from a researcher with financial analyst firm SG Securities. The webcast is hosted on Oracle's investor Web site. The software vendor said it hosted the event to communicate its software strategy.

Oracle and SAP are clashing over which vendor can claim the largest share of the market for enterprise resource planning (ERP) software. The competition intensified in January when Oracle acquired PeopleSoft, which increased its customer base.

Both vendors have launched incentive campaigns to attract each other's customers, and both vendors are reporting an increase in market share and revenues as a result of new license sales.

Phillips said many SAP customers don't want to pay to upgrade to the latest version of SAP, mySAP ERP and are considering alternatives, including Oracle. A majority of SAP customers have not chosen to upgrade and are running SAP R/3 software, according to analysts.

Phillips called SAP's enterprise service architecture (ESA) plan, which calls for service-enabling all its products by 2007, similar to Oracle's Project Fusion. In January, Oracle CEO Larry Ellison launched Project Fusion to integrate technology from its PeopleSoft and J.D. Edwards & Co. acquisitions.

"This is not a big-bang project," Phillips said of Fusion. "Because it's component based, you involve one component at a time."

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Fusion middleware is Oracle's answer to NetWeaver and consists of Oracle's Java application server, business intelligence software and its data hub integration technology. Phillips said the Fusion project will service-enable its software by 2008, allowing Oracle customers to integrate data with third-party systems.

SAP has disputed Phillips assertions in the past. The vendor has launched an aggressive campaign to boost support among ISVs and endorsements from third-party vendors. Earlier this year, a group of partners endorsed SAP's strategy and agreed to ESA-enable future products.

EMC Corp., Adobe Systems Inc., Cisco Systems Inc., Computer Associates International Inc., Intel Corp., Macromedia Inc., Mercury, Microsoft, Symantec Corp. and Veritas Software Corp. will license ESA to provide products that integrate into a Web services architecture.

SAP and Microsoft are also developing software code-named Mendocino that can move data from SAP systems in Microsoft Office programs.

But Phillips downplayed the partnerships.

"Cisco and Microsoft are not companies that drive enterprise application decisions at all," Phillips said. "The issue is what is your relationship with ISVs and innovators that help you install it, and those are the two relationships that matter."

Phillips also clarified Oracle's Off SAP migration program, noting that in one month more than 200 companies have registered to get more information about rebates and other incentives being offered. Off SAP was launched in response to SAP's incentive program to attract J.D. Edwards and PeopleSoft customers to migrate to SAP.

So far Oracle has not had any takers under its program, but Phillips said "230 customers are talking to us, and we're having those conversations."

Room for SAP and Oracle

Oracle chief financial officer Greg Maffei said the market for ERP software will be split by industry segments, with SAP showing strength in licenses to certain industries and Oracle strong in other areas. The oil and gas and the retail industries have been particularly strong for Oracle, he said.

"It's not quite so black and white because the horizontal application business is not going to be winner take all," Maffei said. "It may happen in spaces where somebody tends to get the lion's share of that vertical."

SAP America CEO Bill McDermott has also been critical of Oracle, calling its strategy "flawed" and lacking any tangible plans. McDermott said the winners and losers in the ERP software market will be determined by mid-2006.

"It's project confusion, not project fusion," McDermott said, in an interview with SearchSAP.com in May. "They're a database company and they're trying to approach business applications from a database model. I think they have a flawed strategy, poor application sales, no domain expertise around business processes, no industry competence or capability, and irrelevance to customers at the enterprise level."

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