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Microsoft Should Acquire SAP, Not Yahoo
Reservoir Hill writes "Randall Stross has an insightful article in the NY Times that says that if Microsoft thinks this is the right time to try a major acquisition on a scale it has never tried before, it should pursue not Yahoo but SAP, another major player in business software, thus merging Microsoft's strength with that of another. This is more likely to produce a happy outcome than yoking two ailing businesses, Yahoo's and Microsoft's own online offerings, and hoping for a miracle. Stross points to Oracle as a company whose acquisition strategy has picked up key products and customers while avoiding venturing too far from its core business, or overpaying. Stross recommends that Microsoft acquire SAP and leave it alone as an autonomous division — which would avoid a culture-clash integration fiasco. Besides, large enterprise customers are arguably the best customers a software company can have. A few dozen well-paying Fortune 500 customers may actually be more valuable than tens of millions of Web e-mail 'customers' who pay nothing for the service and whose attention is not highly valued by online advertisers."
SAP is already a nightmare, I can't imagine Microsoft expending serious efforts to roll it into the Windows Server platform. It'd be like watching a thousand train wrecks, again and again...
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
Great point. However, it's worth mentioning that Microsoft isn't in all that much trouble from Google. They still have a virtual monopoly on the OS market, which means that the only real "threats" to Microsoft's main income source are sites like /. where people give information about and advocate the use of other operating systems.
Google apps are a joke for the enterprise software market as well as any public company due to SOX, HIPAA and other laws. this article actually has a point
with Yahoo Microsoft is paying $40 billion for a bunch of web designers, some media contracts and other intellectual talent that can flee at any time and MS will have to keep the business going. Customers can flee to any competitor with a minimum of problems.
with SAP Microsoft will gain a product lineup with large customers that pay for service, can't migrate easily and SAP's product will have synergies with Microsoft's other products where they can sell more products to a customer.
and Google seems to be coming to the end of the current growth cycle. revenue and profit growth seems to have peaked, expenses are going up, they seem to be expanding to new areas that don't really make any sense to the core business, the new expansions don't seem to be #1 in their areas and Google doesn't seem to want to make them #1, Google's big thing is the search algorithm and the infrastructure behind it and they don't really own any data they return and the owners of the data may one day start to demand royalties or block Google from it like say blocking their site from Google News, funny things happen in recessions when businesses start looking under every rock from cash, a lot of Google's customers are small businesses and have a real chance of going under in a recession
Now which do you think is going to be a bigger growth industry:
A) OS sales as 3rd world countries develop
B) Internet advertising as 3rd world countries develop
Hint: Only one of these things does not require the copyright police to enforce your business model
[Fuck Beta]
o0t!
Wrong platform: SAP runs on all sorts of platforms. Short of gutting the customer base there's no way they'll ever push platform support purely onto a windows platform. If they don't make that change though, then you'll have a mircrosoft division (SAP) selling you a product that runs on a combination of Solaris and Oracle. Talk about a non starter.
Wrong business model: SAP is a platform, meaning you buy it and then spend millions of dollars and years of consulting to "customize" it to your organization's needs. It's about as far from shrink wrap as you can get. Microsoft has virtually no experience in this kind of enterprise software market.
Wrong culture: SAP is about as germanic as a firm can be and, in their own way, every bit as committed to global domination as Microsoft is (albeit in a different market space). Trying to integrate the two firms, even into a loose confederation like, say, GE or Mitsubishi, and expecting anything other than all out, internal, bureaucratic warfare is willful ignorance (or gross stupidity).
Google is working on number 3, is rapidly getting the necessary position to do number 2, and regards number 1 as irrelevant.
The "benefits" of SAP are quite debatable. I'd say that's true for practically ALL of these "enterprise class" applications that try to tackle the problem of integration of incoming sales orders, corporate accounting, shipping, human resources, etc. etc.
It's "beneficial" for the consultants who get highly paid to train employees on how to use the software, and for the people who customize the software for each business that takes them up on a purchase. But beyond that, it's unclear that it's *really* an efficient, worthwhile solution.
From past experience, I've observed a trend where these companies (whether it's Oracle, SAP, or you name it) make big promises, a company "bites" (knowing that the problems outlined really ARE big issues they'd LOVE to solve), and then the vendor proceeds to bleed millions of dollars out of their new customer. Eventually, something is constructed/customized that accomplishes SOME of the original goals, but does so in a rather clunky, bug-infested manner, while other items on the "want list" get bumped to "future stages of implementation" (which often never really get completed, because they're too costly and complicated). By this time, upper level management is forced to cost-justify the monstrosity, so they do their best to keep their jobs (and pride) by praising the software as a "big improvement" or "big step towards greater efficiency". Vendor then makes sure to quote them on that, and moves to the next sucker... uh, I mean customer.
IMHO, as disappointing as most Microsoft products are, they built their empire on the exact OPPOSITE philosophy. They promised "relatively inexpensive, out of the box" solutions to problems. Microsoft has never been about customizing their software for individual clients while charging by hours spent on them, nor do they tie customers to "maintenance contracts". They simply develop applications they feel will appeal to the majority of PC users out there, and make corrections and additions as they go, largely based on the collective feedback they receive.
So sure, you have silly things like people running around in large numbers, waving their MCSE certifications, expecting they should command top salaries because of them. But it's probably no more "silly" than companies scrambling to hire "experienced SAP implementation specialists" - when in reality, it just means you have people who helped muddle through the process of selling the stuff to previous customers. (You have no idea if they've ever done any customization work relevant to YOUR company's specific needs.)
I think SAP is a poor fit. Yahoo fits Microsoft's needs. Microsoft wants to further entrench user lock-in to their company. Buying SAP gets them more income directly, perhaps, but that money coming from big companies who can demand flexibility or hire IBM and go open source if need be. What Microsoft wants is to get their claws into more users' online services, which can be tied to Windows and MS specific protocols and formats. Their greatest fear is that the Web will allow other companies to supply al a user's basic needs via the browser, meaning those users can buy a Linux box or an OS X box or a Solaris box or an iPhone or a Blackberry or anything that is not Windows.
MS doesn't need more revenue. Their users will continue to pay because they have no choice. MS has their data and their networks locked up and the expense of switching is too high. MS doesn't want Yahoo to get more revenue. Almost all Yahoo users are Windows users and MS already collects their tithes. MS wants Yahoo to make sure Yahoo users are not given a choice of migrating to being Yahoo/Linux users or Yahoo/MacOS users instead of Yahoo/Windows users. Further they want the lion's share of the market so that most people are locked in. Right now, between Google and Yahoo, most users are not locked in for their mail and messaging and calendaring and in a short time, perhaps their office suite and IM and internet phone and internet TV and whatever else becomes a Web service. If they have most users then they can use that to break compatibility with Google and so Google will have to waste time, effort, and money trying to reverse engineer all of their proprietary apps, to the point of having to screen scrape to get data back to an open and usable format (which they already had had to do to some degree).
In summary, MS wants to buy people so they can use their normal tactics instead of competing to create a better product. If they were interested in making money on their acquisitions they would not have bought dozens of game companies and created the XBox. They want a presence in the living room so they can lock in people even more. Once they have lock-in they can take all the money they wish from people for perpetual upgrades and fees, so long as they make the pain of getting away from them greater than the cost at any given time.
Only one of these things does not require the copyright police to enforce your business model
... the copyright attitude
And perhaps even more important
Are you saying they're missing something important that only Google has?
Google has brand name recognition, almost everyone with any exposure to computers will recognise Google. Only people familiar with Linux will know Ubuntu.
Okay, I understand that MS is hurting and they need to do something. My answer is MS research. You have the development labs. You have the cool ideas. Use them. INNOVATE DAMMIT. Google didn't get to this point by the standard merger philosophy. MS, you didn't get to where you are by stupid mergers and desperate acts. You got there by providing something that people wanted, in a better manner or for cheaper. Keep doing it. PUSH the boundaries of what you're doing. Yeah, it's higher risk. But the reward is higher. You get the revenue, the soft benefit of everyone loving your company vs everyone hating it. You'll avoid the monopoly claims because you won't be a monopoly. The only downside is higher risk. You have the cash to offset that. Use it.
I'm not so sure. MSFT is going into a rather huge debt, and for the first time in its history... just to buy Yahoo. It'll take more than a couple of years to pay that off... unless they can turn a ~90% desktop share into a 150% one.
Now eventually they can, but I'd give it about five years before their budge3t can take that kind of hit, at least at the rate things are going for them. Problem is, five years is almost an eternity in this industry, and a whole bucketload of things can happen between here and there.
Quo usque tandem abutere, Nimbus, patientia nostra?