(sorry for the earlier post sans picture)
I find the things I’d most like to blog about I unfortunately really can’t blog about (you’ll have to wait for my book). So I have to take advantage of industry events in which I don’t have a stake. The Oracle-SAP super heavyweight bout falls into this category except it hasn’t really turned into a bout yet – that would require SAP to fight back
So far, it’s more like Oracle coldcocked SAP in their most recent earnings call and SAP is stumbling around in a daze. SAP announces later this week and we’ll see if they ignore Oracle in their earnings call or counterpunch. In case you missed it, Oracle announced earnings on September 19th and were very “on message” versus SAP, claiming their applications business was growing ten times as fast as SAP’s and SAP’s strategy was flawed in a myriad of ways (including apparently not having enough investment bankers). They barely mentioned their own results except to compare them with SAP’s. They’ve been hammering away on this theme since then. There are not many companies that would include a quote like this in their earnings’ release:
“SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA),” said CEO, Larry Ellison. “They’ve just announced that they are delaying the next version of SAP applications until 2010. That’s a full two years behind Oracle’s scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP’s slowing organic growth. These are major changes in direction for SAP.”
This is entertaining in multiple respects:
1.) This kind of brazenness is awfully rare. Textbook Oracle: declare yourself number two (or in this case spend tens of billions of dollars to be number two) and turn your guns on number one. To come up with anything comparable, I have to go back to the ad earlier this year claiming “Computer Associates Runs SAP”, also coincidently from Oracle.
2.) SAP botched their immediate response and therefore the news cycle. They issued a statement that failed to address the share and growth accusations (which we’ll get to with #4 below) but went after the more philosophical charges leveled by Oracle:
“Larry Ellison’s statements in today’s Oracle earnings press release about SAP’s product and acquisition strategy are a complete misrepresentation,” said Bill Wohl, vice president of product and solutions public relations, SAP. “Since January of 2003, SAP has consistently articulated and delivered on its vision for enterprise SOA following a course of organic growth combined with strategic acquisitions. SAP offers customers market-leading, enterprise SOA applications today while Oracle’s next-generation applications exist only in PowerPoint and won’t be delivered until 2008 or beyond. mySAP ERP 2005 gives customers and partners a world-class ERP platform with planned, regular functionality enhancements without the need for major upgrades through 2010, and has been shipping to customers since June of 2006. By contrast, Oracle’s statements about SAP and their own Fusion progress continue to be inconsistent and misleading. In January, Oracle claimed they were halfway to Fusion and two weeks ago they said they were not even halfway done — Oracle needs to adopt one version of the truth, and be honest with the market on its actual progress.”
Am not. Are too. Am not. Are too.
3.) They’re actually having a fight about who professes to like Service Oriented Architecture more: “No, we’re more SOA than they are…” The reality is neither of them come anywhere close to offering service-oriented applications today and if anything are slowing their march to SOA. Both have yielded to a distinct lack of customer interest in major new releases by pushing their big bang roadmaps further out and focusing on incremental releases. Oracle tells customers not to pay any attention to those Fusion apps and apparently plans to obfuscate the issue with their similarly named Fusion middleware. SAP begs its customers to upgrade to the latest version of SAP and in return they promise not force any more major upgrades any time soon. Given the costs, risks and unknown benefits of these major upgrades, the ERP space is now the paragon of a “good enough” market. But even more mystifying, neither of them really want to see a SOA world come to pass as liquefying all those business processes into individual services undermines their way of life and raison d’être (I apologize for my French). Having to sell a bundle of services as opposed to the transactional monolith undermines their business models. The world won’t unravel into an atomistic collection of best of breed services but customers will come at it the other way, chipping off important higher value functions in favor of best of breed solutions. We’ve seen this inside Microsoft as the move to services has let us pull relatively more important/highly specialized functions like sales commission calculation or managing the Xbox 360 supply chain out of our big, monolithic enterprise applications.
4.) Finally, people are questioning Oracle’s actual growth and share claims. You can see the influence of the investment bankers who run Oracle. They closed the Siebel acquisition exactly one year and one day after the PeopleSoft deal closed, which means Siebel revenues look to the casual observer like growth for a year. And they’ve reclassified some of Siebel revenue into their middleware line. Oracle’s quarter is a month offset from Siebel’s quarter so it is hard for analysts to do apples-to-apples comparisons. Most of the Wall Street analysts fell for all this and exulted in the apparent success of Oracle’s acquisition strategy, pushing Oracle’s stock is up two bucks. But as people dig deeper, organic growth looks much lower (CRN, Smart Money, eWeek and Motley Fool all dig into the numbers), possibly even lower than SAP’s.
SAP probably won’t descend into the mud in their earnings call, but who knows, maybe they will follow Oracle’s lead and help liven up earnings calls in this drab, Sarbanes-Oxley world we live in.
Keep an eye on just how many reporters are getting bylines on stories about the HP corporate espionage debacle. It isn’t just one or two at each publication. An incomplete and cursory count reveals 16 different Wall Street Journal reporters with bylined stories. I don’t think they had that many when they unraveled the Enron fraud.
The press has “flooded the zone” which is really bad news for Mark Hurd as they seem to want blood. Is there an ending here where he keeps his job? He missed an opportunity Friday to raise himself above the fray. Reporters tend to write the news straight but these new-fangled blog things give you a better sense of what they are thinking and he blew the press conference (here and here). I don’t think Dunn’s scalp will be enough (David Kirkpatrick at Fortune has the most interesting insight into Dunn’s situation and motivations).
The other guy in the crosshairs is Silicon Valley uberlawyer Larry Sonsini, whose apparant oking of the HP spying comes on top of his firms’s relationship with almost half of the Silicon Valley companies implicated in options backdating.
It is tough to get meetings with both industry and business press right now because they’re so focused this story. The reporters who got spied on are getting their just revenge and the ones who weren’t spied upon are even more motivated to show they were in fact worth spying on in the first place. And we haven’t even had the Congressional hearings yet–need I mention it is an election year?
I just got back from a week in Europe where, with the possible exception of
I saw perennial powers
They’re setting all kinds of new records for blood, ejections and poor officiating, so they do seem to have a strategy to reach out to the American market. And Budweiser is the official beer and they have some good Sportscenter-esque ads that don’t seem to be posted yet, but the site implies they will be.
So brush up on your nationalist football/drinking songs and enjoy the rest of the World Cup.
I’m fascinated by the Enron collapse and trial. The sheer brazenness and magnitude of the crimes is mind-boggling. WorldCom ended up eclipsing Enron to take the title of biggest financial fraud, but Enron is a better story. Everything at least seems bigger in
I can remember first hearing about them during the bubble when they announced something they called the “Broadband Operating System”. Having some experience with what it takes to build and ship an operating system (insert your own Windows Vista joke here), I was surprised to hear of a new player with the wherewithal to do an operating system. Surely it was BS I thought but what company would be shameless enough to pretend they were playing in this space? Evidently I needed to lower my shamelessness bar.
A whole Enron genre has emerged. Several of the reporters who covered the company’s downfall have written books, of which I have read a couple. They chronicle the Enron story but also give insights into the interplay with the media, both as the company unraveled and how the press is being used by the lawyers in the subsequent criminal trials. If you are a practitioner of the black art of PR, it is fascinating inside baseball.
The New York Times reporter’s book is Conspiracy of Fools, which was the best general account of the story I’ve read. A well-written narrative, it practically reads like a novel. It is also fascinating because the book was published before the various cases went to trial and you can perhaps discern the hand of defense lawyers trying to tee up their defense, which basically amounts to “they were incompetent fools, but not criminals”, hence the title. Enron’s head PR guy manages to burnish his reputation and do some personal PR to go down in history as a hardworking, responsive professional who was mislead by management. Skilling and his lawyers must not have participated in this book as he remains an enigma, in particular why he resigned just months after getting the CEO job and just months before the company blew up.
The other book I read was by the
Kind of like blogging, I never quite get around to executing various ideas for hedge funds so I’ll share one. Big IT outsourcing deals are dead. They just don’t pan out as advertised, end up being renegotiated and/or leave companies unable to adapt to a changing world. The only customers with big outsourcing deals who seem to be even remotely happy are those who take solace in the fact their outsourcer had to take a big write-off on their deal. Companies are splitting up their outsourcing into smaller pieces to get more expertise, focus and to play the vendors off against each other. Some companies have realized elements of IT are critical to the business and are pulling them back in house. Ultimately, people are realizing you can’t separate the business function from the technology that implements it, hence the shift to business process outsourcing. Expect more deals that outsource say HR as opposed to IT. The IT function goes wherever the business function goes.
Yet big outsourcing deals still happen. Why? It turns out they’re motivated by a more primal consideration – financial survival. The investment thesis is you short any company that does a big (a billion dollars or more, but you can also look at relative size of the deal for smaller companies) outsourcing deal. It is a great indicator of a deteriorating balance sheet. You could have caught WorldCom, Enron, Adelphia amongst others.
Just look for this kind of gushing:
"Enron is one of the most innovative, fastest-moving companies we’ve seen in any industry," said Tom Cotney, vice president, Utility & Energy Services, IBM Global Services. "We are delighted to have the opportunity to work with Enron as it builds its information technology infrastructure for the future. IBM will deploy the people, technology, and skills Enron requires as one of
The “most innovative, fastest-moving” companies don’t elect to set their IT in concrete without a more pressing rationale.