Frank Scavo assesses SAP's efforts to become a database giant in a market where firms want to buy applications.
There are varying views ranging from Larry Ellison’s ‘they must be on drugs’ dismissal through to the more contemplative reactions of many analysts who view this as an interesting gambit but a tough one to pull off.
Constellation Research’s Frank Scavo has come up with some interesting analysis of the situation, one that he concedes is amibivalent but which has an underlying assumption that: “I think that selling databases is going to be harder row to hoe than SAP is making it out to be.”
“With Oracle taking an ever-increasing adversarial position toward SAP, I can understand SAP’s discomfort with having a large percentage of its best customers running on Oracle’s database.,” he argues. “At the same time, the other two major providers of relational databases (IBM and Microsoft) are SAP-friendly. IBM is SAP’s largest system integration partner, while SAP and Microsoft often find their technology interests aligned. So, how do you threaten Oracle while not also threatening IBM and Microsoft?”
Scavo also questions any assumptions that existing SAP customers are going to desert Oracle, IBM and Microsoft en masse. “In the case of business analytics, there may be some movement toward HANA, yes, as the value of in-memory performance for analytic applications is somewhat easy to envision,” he suggests. “But what about SAP’s business applications, such as Business One, All-in-One, and the Business Suite? With all the challenges and demands placed on CIOs these days, it’s difficult to imagine an installed SAP customer undergoing a database migration, simply to eliminate some Oracle, or DB2, or Microsoft SQL Server licenses..”
He adds: “SAP insists there is business value for HANA in some transaction processing—and I can see that, say, in supply chain management. But is that enough to justify a database migration? Even less so, why would a customer swap out Oracle, DB2, or Microsoft for ASE, which is essentially a like-for-like product? I just don’t see it.”
Nor do some SAP execs, according to Scavo, which leads him to the conclusion that the real target of this database strategy is new application customers. If this is the case, there are still problems, he argues. “The challenge is essentially the same,” he states. “In most cases, business apps prospects already have skills and experience with Oracle, DB2, or MS SQL Server. Are they really going to want to invest in learning Sybase ASE, or HANA? Unless they can completely eliminate those other database platforms from their environments, going with Sybase or HANA is adding to their complexity, not simplifying things.”
Scavo notes that SAP is putting its money where its mouth is in order to help existing customers cost-justify a move to HANA and to encourage new tech start-ups to take the leap. But he suggests that this funding from SAP may lead to a conflict of interest with its partner ecosystem who make money from existing SAP implemenations and migrations.
SAP says it will bring partners inside the HANA tent, but Scavo is dubious. “I have to believe that, at first, partners will view SAP as increasing its share of services at the partners’ expense,” he says. “This is especially true under current economic conditions where customers can only absorb a certain amount of change at once. Moreover, by delivering HANA services directly, SAP delays giving partners the HANA experience they will need for the future.”
Overall Scavo suspects that SAP itself may be realising that it needs to be realistic in its expectations of becoming a database giant in a market where organisations want to buy applications rather than databases. He notes that SAP’s earlier stated ambition of becoming the “No. 2 database provider by the year 2015” is now the less ambitious goal of “becoming the fastest growing database provider.”
Scavo concludes: “When you are starting from such a small market share, becoming the 'fastest-growing' is not a very high bar..”