Posted on 06/08/2004 4:46:57 AM PDT by Bloody Sam Roberts
Microsoft shocked the global technology industry yesterday with the revelation that it tried last year to buy SAP, the German software giant.
Though SAP said the talks had been abandoned this spring, the pursuit of such a big merger represents a radical departure for Microsoft and could herald a new phase of consolidation in the fast-maturing technology business.
SAP, with a current stock market value of $51bn (£27.7bn), is the world's third biggest independent software company, after Microsoft and Oracle. A deal with Microsoft would have threatened the balance of power in the market for selling technology to large companies and governments, where International Business Machines is the dominant force.
Microsoft said it broke off the talks "due to the complexity of the potential transaction and subsequent integration".
Henning Kagermann, SAP's chief executive officer, said SAP "routinely evaluates" mergers that would improve the German company's competitive position. Both sides said there was no intention to resume the talks.
A purchase of SAP would have propelled Microsoft into the business of making the software that drives the back-office functions of large companies and government. The Department of Justice in the US has sued to block a merger of Oracle and PeopleSoft, the US software companies which are SAP's rivals in this so-called enterprise applications market.
Microsoft said it had disclosed the SAP talks because they were likely to be revealed in a court case over the justice department action that began yesterday.
Microsoft does not have the salesforce or the service and support organisation needed to break into the enterprise business and had not been expected to attack the market, said Bruce Richardson, an analyst at AMR, a technology research firm in Boston. The surprise move on SAP suggested it has changed course and "could waken the sleeping giant of IBM", he added.
Microsoft's interest in SAP is another sign of its efforts to break out of its traditional PC software business, said Mr Richardson. Despite spending billions of dollars to become a player in internet services through MSN and the video games market through Xbox, Microsoft still relies on desktop software for more than 90 per cent of profits.
While its cash mounts up, reaching more than $56bn at the end of March, Microsoft is to cut costs to convince investors it is taking a disciplined approach to such new investments.
Any big acquisition by Microsoft would be likely to stir up opposition from regulators, antitrust experts said. A purchase of SAP would not represent the sort of combination of competitors that draws the most official concern, said Charles Biggio, an antitrust lawyer at Aken Gump in New York. He added, though, that Microsoft's desktop monopoly had been at the centre of earlier cases about how it used this power to gain an unfair advantage in other markets.
It's just as well- Windows runs like sap until you tweak it.
I can't imagine why... SAP R/3 sucks worse than any software ever imagined.
SAP R3 is the most user unfriendly software I've ever had to use.
I agree. I don't directly interface with SAP but it seems we are constantly having to revise our PDM (Product Development Management) procedures because of the requirements of SAP.
When we were surveying the market for enterprise software SAP was one of the systems we reviewed.
Several of our customers have implemented it, and it is a nightmare. Software is supposed to facilitate a company's operations - but with SAP (an apt acronym) it's the other way around. Our customers have adopted some really stupid business practices because of this ridiculous software.
A medium size SAP customer gave us a pitch about why it had been so good for him to go with SAP. Problem was, he'd spent nearly as much on consultants as we had for our whole system !
And we run rings around them for efficiency, ease of use, excellent reporting, excellent linkages - we love our system. We implemented over New Years 1999. Finished the year with one system and started with our new one, and haven't looked back. We had around 500 active work orders during the transition.
Want a good system ? Try Visual Manufacturing by Lilly.
MS would buy or merge with SAP to get the EU regulators off it's back. After such a merger MS becomes *voila* a European company, thus not beat up on the way an American company is.
Attention racially inferior dogs, you vill do everysing our way, or you and your system will die! Ve are not here to make the software user-friendly, ve are here to make you suffer because you are not true members of the herrenvolk!
Over the next six months (which is what it take to install this monster at great cost, and inconvenience) many vill die. Can't be helped. It is the German way.
The product I support backs up a number of database products and enterprise solutions, SAP among them. True, SAP ain't no fun. I can't imagine the drek that would come from a MS/SAP merger.
That was my first thought when I read the article.
That type of maneuver is right in line with the way Bill Gates thinks.
Great minds think alike?
Implementation of SAP is 5-7 times the cost of the software. In a Fortune 1000 size company, upwards of $100M to implement.
Quite intentionally - how else would SAP consultants make such obscene amounts of money? ;)
The guy I was talking about had spent $250K for a 100 person company. And that was only on consultants, not the full implementation cost.
But the REAL costs of SAP are often hidden. Our customers are being forced to renumber ALL of their parts - with a nine or ten digit number. Drawings, instead of defining the part, are an attribute of the part, with another document doing the actual definition. Drawing revision and part revision are no longer the same - or even linked. Either one can change without the other changing - which means the part "definition" must be researched EVERY time a part is made to insure the definition has not changed.
SAP sucks.
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