Thursday, October 15, 2009

SAP vs Oracle - quick thoughts after #OOW09

Well, Larry finally told the world about Fusion Apps with some details. And he did it in Steve-Jobs-like "Oh, and one more thing" fashion at the end of the last big presentation at Oracle Open World 2009.

There are plenty of analysts posting plenty of analysis based on plenty of briefings and facts and NDA's, and I don't feel qualified or compelled to add my voice to that chorus. However, I've been doing some thinking about SAP Business ByDesign (ByD) and Oracle Fusion Apps (FA), and what might be the dynamics between these two offerings in the coming year(s).

ByD and FA have been in development for a very long time. Both have had huge amounts of R&D investment in them. Both build on even more years of investment in predecessors, and both are meant to use that experience and expertise with a much more modern technology approach.

As it turns out, based on information from the analysts, both offer suites of functionality with some significant gaps as compared to more complete "current generation" suites, particularly in areas like Human Resources and Manufacturing.

From a technology perspective, FA appears miles ahead of ByD. FA appears to have a very clean SOA architecture with separate orchestration and business process management, pretty good user interfaces, nice social features, RESTful API's, and a more standards-based (e.g., Java) orientation. ByD, however, likely will have more functionality than FA.

ByD is targeting "the mid-market" customer, which SAP has described in the past as being from several hundred million dollars in annual revenues, up to somewhere around one to two billion dollars in annual revenues. ByD has been available for more than a year to a very limited set of customers, and SAP has been saying it will roll out ByD to a wider audience in 2010. According to Larry Ellison's presentation at OOW, FA will hit the market, coincidentally or not, in 2010.

FA is targeting a variety of customer segments, but one notable segment is the installed based for the "Applications Unlimited" (or "legacy") applications such as JD Edwards, eBusiness Suite, and so on - a very large fraction of these customers are in what SAP considers to be in the mid-market. These customers will be facing the end of life for their applications, along with a paucity of innovation associated with those applications and sky-high maintenance costs, so they will be natural candidates to consider a move to FA over time.

Some of the analysis written about FA has indicated that a move to FA from a legacy Oracle application will involve a complete reimplementation - some data will migrate, but the processes will likely have to be implemented "from scratch." Given that these customers will be facing a reimplementation if they choose to "upgrade" to FA, it seems likely that they will also consider alternatives to a move to FA. For example, they may consider staying on their current products, but going off maintenance or switching to third part maintenance providers. However, there is another alternative that these customers are likely to consider: moving to a new product potentially from a different vendor.

You can be sure that SAP will be visiting these customers and pitching SAP solutions to them. Given the timing, and given that many Oracle customers are in what SAP considers to be the "mid-market," ByD will be the solution SAP will pitch to many of these customers. And if Oracle pushes FA further "up-market," you can bet SAP will bring ByD there as well.

If SAP goes head to head against FA using the current Business Suite product line, Oracle will clearly make a big deal over technology advantages in every competitive situation. While ByD is not as advanced technically as FA, ByD will be SAP's best response to FA. For a while, large customers will be best served by SAP Business Suite or Oracle's legacy apps, as large customers will have many requirements that will not be met by the relatively immature ByD and FA. Thus, initially, it appears inevitable that Oracle and SAP will be going head-to-head with these two products. So, what will happen when these products collide?

I think the most likely scenario is this: ByD in 2010 will be made to work well in a SaaS deployment model, and FA will have quality issues and functionality gaps and internationalization limits. If this scenario plays out, SAP may be able to convert a significant number of Oracle legacy applications customers over to ByD (and/or perhaps SAP Business Suite) in 2010 and 2011.

We shall see ...


  1. I wonder whether you are comparing apples and oranges. BYD is not for 'mid-market' as you define it as based on the customers I've met the last 18 months - unless you know something very new. Plus, BYD is in the field, Fusion ain't. But let's see what happens a few yards down the tracks.

  2. SAP has a definition of mid-market, which has changed very little over the past 5 or 6 years. For example, in a 2004 presentation, SAP defines the mid-market as companies from $200M to $1.5B in annual revenues ( Or this 2006 presentation which defines the mid-market as companies from $200M to $1.5B (;jsessionid=%28J2EE3417500%29ID1885233750DB11740854660198088462End). Or this late 2007 presentation that defines the mid-market as extending from $75M up to $1.5B, and defines the specific market segments in which each of SAP's mid-market product suites are meant to be targeted (, including specifically recommending ByD for companies from $75M to $500M in revenues - and surely that number will grow on the high end as more functionality is added to ByD over time. It seems like this number may even be just an arbitrary cap in place for now to limit channel conflict and avoid freezing sales of All-in-One (and Business Suite?) until ByD is ready to scale up.

    SAP has said they have a limited set of functionality in ByD at this point, and that they are growing that functionality over time - focusing in the released version on "professional services, consulting, manufacturing, wholesale distribution" industries in "United States, the United Kingdom, Germany, France, China, and India." Obviously ByD is being extended over time so it can serve additional customer segments - different national languages, multinational operations, different industries, and obviously also larger customers than the $500M "limit" currently in place. FA and ByD will initially compete in the low-several-hundred $M market segment, when FA comes out and ByD is allowed to expand past the dozens of customers in place now. Pressure from Oracle could push SAP to compete using ByD above the $500M cap. ByD as described particularly in that last presentation referenced in this comment seems like a very good upgrade path for some JD Edwards customers, as I said in my commentary above.

    Apples and oranges? No, just facts.

  3. I am not so deep in technology. So maybe you could elaborate a little bit more why FA is "miles ahead" compared to ByD.

  4. Where to begin? FA is written from scratch, designed based on advances in computer science over the past three or so decades since SAP first shipped product. FA is written in Java, with support for true object-orientation and multi-threading, with a real separation of services from business processes, with declarative business process definitions, built-in support for social computing, and much more. By contrast, some parts of ByD are very old, and have not been rearchitected at all; other parts are retro-fitted with new technologies, but still suffer from having been redesigned. Some parts of ByD are completely new, but they are still written on a technology base and a language that is extremely old and lacking in support for some new technologies like those mentioned above for FA. ByD was built as an "evolutionary not revolutionary" system (as many SAP people have said publicly), and it achieved the "not revolutionary" goal. For some customers, that will be a good thing: as I point out above, no smart businessperson wants to buy the hottest technology when they buy applications - they want to buy applications that will help them improve their business, and for many ByD will be better (at least in the short to medium term).