Oracle and SAP - going soft in their old age?

Profile picture for user gonzodaddy By Den Howlett February 13, 2020
Summary:
There's a subtle but perceptible change at two of the world's largest application software vendors. What's going on.

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As I read Derek DuPreez' Oracle CEO Safra Catz - ‘We had to change, we are here to serve you’ I was reminded of the biblically insipred expression, 'can a leopard change its spots?' Now juxtapose that with the current SAP mantra of 'customer first' and you're left with a conundrum. 

By any measure, both SAP and Oracle are wildly successful. A combined market cap of $342 billion is not to be sneezed at. Neither is a customer base running hundreds of thousands across all their product lines and in almost all corners of the world. Nor the fact that between them, SAP and Oracle dominate the back office enterprise technology markets by some considerable margin with Oracle leading the world's database market, a position it has held for many years. And while both appear on the surface to be the bitterest of rivals, one cannot ignore the fact that they have enjoyed a mutually lucrative relationship for more years than I can remember. 

But in recent times we've seen something of a sea change - at least on the surface. Both, it seems, have woken up to the fact that firms like Salesforce, Workday, Coupa, Google and Amazon represent existential threats they are both hard put to push back against. In short, while neither are going away any time soon, both are long in the tooth and need to reinvent themselves if they are to stay relevant. 

Reinvention is never easy, especially when you've enjoyed a long period of success. After all, who wants to rock the proverbial boat when the cash register is singing along? But in these companies' case, change is a-coming and not just in the product lines where both have been slow to understand the impact of technology shifts. As Catz reflected yesterday:

Our ability to invest $6bn in R&D a year is only because of our own transformation. We know that we can’t sell you hardware and software and say good luck to you - we are here to serve you. That’s been a real change and I hope you feel it. I hope you can really see it. Ultimately for us, our greatest success is when we see you successful.

And on that, DuPreez noted:

It does seem that Oracle has recognised that business (and the world more broadly) has changed and that customers have different expectations. How deep does that run throughout the organisation? Time will tell. But it’s a good sign that the change in tone is coming from the top.

In a recent conversation with Christian Klein, co-CEO SAP, I was struck by the extent to which user group representatives have given him pause for thought. Jon Reed recently spoke with Klein and Jennifer Morgan, co-CEO SAP during which Morgan said:

In the cloud world, customer success is really important. I know that that's a statement of the obvious, but how you support customers in the cloud takes on a different meaning than maybe the way we supported customers in the core software years ago.. It just requires a different level of attention, speed, and support. And I think that that's an area Christian and I are very, very focused on,

Most recently, both Klein and Morgan engaged us in conversations where it is clear they are prepared to listen to what we're hearing in the field. That's a net good but it will be at the coalface of customer interactions where both SAP and Oracle must put the legacy of the past behind them. It won't be easy. Both companies are known for aggressive, some say predatory behavior. Neither fights shy of what Brian Sommer accurately if colorfully describes as 'wallet-fracking.' I'd go futher. 

In a recent conversation with a global customer which has used SAP software since the early 1990's the sentiment was clear. While the firm wants to maintain a good relationship with its vendor, it no longer has the appetite for never-ending spend where value is hard to justify. For example, this firm reckons that an S/4 transition will gobble up some $15 million give or take at a time when its industry is under enormous economic pressure. You'd think that pressure would serve as an incentive but the customer expressed the view that it is fatigued in its relationship with SAP, although it is hopeful that a rejuvenated approach to customers will revive the relationship. It's not an uncommon thread. 

Elsewhere, Oracle has similar problems. Offering unlimited support for its legacy applications is an excellent way to keep customers onside. But that seems to have had the knock-on effect of making it hard to persuade customers to shift to its new, generation of cloud-related applications. Functionally, those newer applications are world-class in many categories. At its Open World events, the company confidently fields happy customers. In my conversations with Steve Miranda, executive vice president of Oracle Applications product development, Oracle claims to be 'comfortable' with its progress but that's not really showing up in the opinion of some financial analysts.

What we have therefore, is a pair of companies that are coming to terms with market realities. While they may appear to have customer control, that same control is challenged by other vendors. Some of those challengers not only offer comparable and, in some cases better products, but critically, those same firms provide easier and better ways with which to do business.

The notion of the trusted provider is something to which all technology vendors aspire, none more so than SAP and Oracle. Those of us who are of a grandparent generation might like to think we've earned that trusted status, but we also have to look at the youngsters in the family and learn from their expectations. And so it seems true for the two great grandparents of the applications technology world. In the meantime, like anyone who has been repeatedly bitten, customers are standing back to sense check whether the changes signaled at both SAP and Oracle are real.