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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...
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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.
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.