News

Microsoft, SAP: Web services deal followed failed merger bid

• By Rich Seeley
• June 8, 2004

Broken discussions on a Microsoft-SAP merger, confirmed this week, did not prevent the two companies from trying to knit together .NET and NetWeaver.

Before an anticipated disclosure by the DoJ forced Microsoft and SAP to come clean on their now aborted merger talks, the two companies announced “a significant expansion of their long-standing relationship.” Putting aside whatever ups and downs accompanied their merger negotiations late last year, Microsoft and SAP shared a 10-year plan for cooperation with SAP customers at Sapphire ’04 in New Orleans last month.

The Microsoft-SAP road map would improve integration of .NET and NetWeaver to help Visual Studio .NET developers work with NetWeaver. It would also increase the interoperability of SAP applications and Microsoft Office, according to the announcement.

SAP’s long-standing Unix bias may be shifting. The Sapphire announcement noted: “More than 40,000 SAP installations run on Microsoft Windows -- more than all other platforms combined. Almost two-thirds of all new SAP installations are deployed on Microsoft Windows.”

For all that, analysts at Gartner Inc. were less than impressed with the agreement. “Though Microsoft and SAP are significant business partners with respect to SAP deployments on the Windows operating system, this alliance announcement provides more promise than specifics,” analysts wrote in an assessment of the agreement published on the Gartner Website.

Noting that such agreements on Web services technology are “commonplace,” Gartner’s view is that while potentially significant, the Microsoft-SAP road map is short on both details and serious commitments.

As for the now-shelved plan for merging Microsoft and SAP, Ovum research director Philip Carnelley commented: “If this had gone through it would have been a bombshell.”

He noted that the one major software area Microsoft does not dominate is business applications, which represent one-third of the total market. Recognizing that fact, Bill Gates and company spend a lot of time and money looking for a way to get hold of the business app space, Carnelley said. This includes thinking big enough to consider spending $50 billion in cash to capture SAP and its market share. But in this case, Carnelley said the obstacles including merging technologies, corporate cultures and overcoming possible objections from government regulatory agencies were more than even Microsoft thought it could handle.

Thus, forging a closer relationship with SAP appears to have been Microsoft’s plan B, at least for the present.