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Report finds SAP winning war with Oracle

A new report from Forrester Research finds that SAP has the edge in its longstanding battle with Oracle.

Oracle's Fusion strategy won't be enough to slow the momentum that business applications leader SAP AG has built around its NetWeaver platform, the authors of a new analyst report said in an interview.

The new report from Cambridge, Mass.-based Forrester Research Inc. found that SAP has stronger momentum than Oracle, due largely to its major head start in the business applications market. It also concludes that SAP has a better partnership strategy than Oracle and has done a better job of articulating the value of its technology to customers.

"[SAP] built those partnerships at the application level, and they also have the largest customer base," said R. "Ray" Wang, a Forrester business applications analyst and a co-author of the report. "A head start, a partner ecosystem and a customer base are pretty much key ingredients for success."

Alternatively, the report found that Oracle's strong middleware platform and better support of open standards make it the right choice for customers who rely heavily on custom development in conjunction with packaged applications.

Wang and one of the report's other authors, Forrester analyst John R. Rymer, said that the competition between Oracle and SAP will remain fierce in the coming years as the two duke it out in the areas of business intelligence (BI), master data management (MDM) and business process management (BPM).

Wang and Rymer said they believe that customers who do not already have a major investment in either company -- those akin to swing voters in an election -- will probably be more likely to choose SAP going forward. They add, however, that this could change if an unexpected event, such as SAP failing to deliver its next-generation applications on time, tips the scale in Oracle's favor.

Wang said that the industry verticals that potential customers serve will also play a large part in their decision-making process. He said that companies in the high-tech manufacturing market segment would likely be better off with Oracle, while companies in the pharmaceutical and utilities industries would be more likely to choose SAP.

"I think what Oracle needs to do is define their partner ecosystem for applications; they need to lock down their data models and they just have to win the existing base and continue to win new customers," Wang said.

Sizing up the enterprise apps market

SAP and Oracle, with $10 billion and $5 billion in annual applications revenue respectively, lead the business applications market by a wide margin, according to Forrester. The research firm says the vendor holding the third-place position, Sage Software Inc., lags behind Oracle and SAP significantly at $1.3 billion in revenue.

At a press event in January, Oracle president Charles Phillips promised that his company would deliver the first set of Fusion applications in 2008. Based on a services-oriented architecture (SOA), Fusion will combine the "best of" functionality acquired through Oracle's acquisitions of PeopleSoft Corp., Siebel Systems Inc., Retek Inc. and a host of others, according to Oracle.

It's a goal that Forrester says will be difficult but not impossible to achieve on time due to the complexity of all the integration involved. And, assuming that Oracle does deliver on time, Forrester predicts the platform won't see significant adoption until 2010 due to typical concerns over product hardening and migration planning.

SAP is promising to deliver mySAP 2007 on time and says its next generation of applications will be fully service-enabled through SAP's Enterprise Service Architecture (ESA). The Forrester reports states that mySAP 2007 won't see significant deployments for 12 to 24 months following its release due to normal adoption lags.

Striking similarities and stark differences

Wang and Rymer pointed out that Oracle's and SAP's strategies are similar in some ways, but very different in others. They said that the distinctions between the two are large enough that potential customers will have two clearly different approaches to choose from.

Both firms are relying on composite applications and SOA and standards to create their next-generation suites, and both are incorporating BI functionality directly into those architectures.

Robert McCullough, program manager of the business applications and commerce section of the Yankee Group, a Boston, Mass.-based research firm, said that the area of SOA is a race within itself, as Oracle and SAP compete to create architectures that are viable both economically and functionality-wise. "That's really a battleground of the future," McCullough said.

Forrester finds that both vendors have also embraced business process modeling and similar visual development techniques for customizing and extending their applications. Oracle extended its JDeveloper IDE to support programming through property sheets and visual tools, while SAP's new Visual Composer embraces similar techniques, although not within the context of an IDE, the report says. It has also been reported that SAP plans to offer IDS Scheer's ARIS modeling tool in the next release of BPP.

The differences between the two are significant as well, the analysts said. Oracle, they said, will continue to grow through acquisitions, while SAP will for the most part stick with internal development and partnerships. Forrester says Oracle's Fusion applications will only run on Oracle's database, while SAP's new applications will run only on SAP's middleware.

Where the coming battles will be fought

Forrester predicts that the hottest areas of competition between Oracle and SAP will be in MDM, analytics and repository architectures.

Analysts said MDM is an interesting area to watch because it's one of the few places where SAP has relied on an outright acquisition strategy. SAP recently ditched internal MDM development and acquired A2i to meet those needs. Forrester believes that Oracle is ahead of SAP in the area of MDM.

"We haven't heard what pieces of Siebel's customer model are going to enhance the Oracle data model," Wang explained. "But when we look at something like product information management [and customer data management], in SAP's case all of the first-party vendors are doing a better job of providing the functionality."

Yankee's McCullough added that BI and BPM are other areas to watch as both vendors try to move that functionality closer to the applications themselves than they have been in the past.

"BI and BPM are getting closer together," he said. "What is classically BI is becoming more operationally focused, and what is classically BPM is focused on trying to build in more intelligence based on history."

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