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."

Comments

Wrong POV.

[Whiney Mac Fanboy]

The article is looking at things totally from the wrong point of view - it's as if they believe that Microsoft's problem is that it has a huge pile of cash & don't know what to do with it.

It's not. Microsoft's problem is Google. Google are eating them in the only arena where you can make serious money on the web (ad brokerage) and doing things to threaten MS's monopoly elsewhere (Google Apps, Photoshop on linux, Webmail, etc)

The Yahoo purchase might not be a solution to this problem, but a SAP purchase sure as hell won't be.

(and frankly, I can't imagine SAP's websphere/java using userbase being enthused with the next SAP release being C# only)

Re:Wrong POV.

[ScrewMaster]

Because Google would /never/ considering doing anything in terms of an operating system. That's just silly!

I know you're just being funny, but you're right that they probably wouldn't bother coming up with their own proprietary OS. I mean, they already use Linux internally anyway: that plus a lot of their own code is one of their strengths.

Now, what would cause problems for Microsoft would be a Google distro marketed to the Dells and HPs and Lenovos of the world, and also on store shelves. Google has both the brand recognition and the in-house technical skill to pull that off, and it's probably that which keeps Ballmer awake at night. Hell, much of the overseas market would jump on a Google OS in a heartbeat: Microsoft is not well-liked in many parts of the world. I kinda hope they do it, just to shake up Redmond a little.

Worse yet for Microsoft, if such a Linux distro just happened to integrate phenomenally well with Google's online services and Android offering ... well.

Re:Wrong POV.

[Ethanol-fueled]

Good point, but many more people know what Google is (or at least know what it does). If you went around asking what Google and Ubuntu are to a bunch of random schmoes then chances are that much more would be familiar with only Google. Google could create their own distro, or they could build an OS from scratch which could be successful if it were interoperable with all the other players and, of course, it Just Worked(TM) -- but that would be one hell of an undertaking.

Re:Wrong POV.

[postbigbang]

I would strongly disagree.

Google has made a lot of money from ad sales and web search. That's one big fat market segment, without a doubt. But no one uses google for comporate data processing. They do, however (and for better or worse), use SAP. In the services sector, which Yahoo and Google aren't in, SAP is big. That's not to say that they're brilliant but they do make money and are a 'best of breed' (doesn't speak well of the breed, but that's another post).

Yahoo is real estate. SAP is a running, producing engine. I think SAP is a better idea. Leave Yahoo alone, I'd say to Microsoft. Stick with what you do best: tying up clientele with proprietary, always-needs-integration stuff.

Re:Wrong POV.

[Deanalator]

I can't imagine SAP's websphere/java using userbase being enthused with the next SAP release being C# only

I think this is the largest reason why Microsoft is doomed to fail if they don't get their act together. They require a massive corporate lockin with all of their products, and there is a much smaller pool of startups doing creative things with .NET

Even yahoo has acquired many companies that operate outside of the "Microsoft bubble". Microsoft would stumble in a huge way if they tried converting all of yahoo's acquisitions into pure .NET environments, and that would likely require them flushing out a majority of the old programmers, and getting new ones, which sort of adds bloat and eliminates the whole point.

Advice to microsoft:
* Learn to play nice with standards that already exist instead of wasting money creating your own.
* Stop trying to sell software, move to a pure subscription model.
* Make sure .NET integrates well with java.
* Make sure linux and OSX machines can integrate well into Microsoft environments.
* If you actually sit down and talk with apple, yahoo, google, sun, etc, I am sure they would be perfectly willing to cut you in to how they are revolutionizing information. You need to learn your place and stop pretending like you can take them all on at once. Your biggest weakness is that you do not know how to operate in your own market any more.

If Microsoft does all of those things, they have a chance of surviving the next 10 years. I really want to see them succeed because I love the progress Microsoft research is making in the fields of virtualization and compiler theory. Stuff coming out of Microsoft research is pretty cool, but their marketing department is killing them.

Re:Wrong POV.

[Mongoose Disciple]

I definitely agree with this:


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.


But I'm of the opinion that Microsoft can (and does, in fact, have their eyes on) get most of the benefit there without having to buy SAP to do it.

I don't see SAP alone as being a major growth product at this point in time. It's aimed at fairly massive corporations, and I think by this point, most of the existing companies that see a need for something like SAP have already implemented one.

I think the synergy potential between existing SAP systems and Office/.NET/Windows Workflow/BizTalk/etc. is enormous. Company A has SAP implemented already? Well, maybe they'd like an application that sits in Outlook and automatically grabs order e-mails from customers and pre-fills most of the data in their SAP order entry forms and auto-archives the e-mails sorted by customer across all salespeople in some searchable central repository, making their salespeople that much more efficient and eliminating a lot of operator error.

On the surface, that doesn't make Microsoft a lot of money, but it ensures that all the people at that company definitely need Office (and not just something that can work with the same file formats, not that anyone's rushing to get away from Office at the moment), need a Windows server, need consultants with MS-tech expertise to set it up, etc. It gets people thinking of MS as a business solutions company and not just an OS/Office company, which it isn't to a lot of people yet.

It doesn't take a lot in the way of SAP/MS cooperation to make the SAP interface part of this easy, and my understanding from people that have worked on projects in this mold is that it's already there.

Not quite correct

[EmbeddedJanitor]

MS's main problem is not Google per se, but a Google obsession.

MS has failed dismally with its various acquisitions, with very few exceptions. MS core money makers are OS and Office. They seem to be putting very little energy into Vista and fixing its problems, doing something which would make their core business sound. In fact it looks like they've just cut these adrift.

If Google had not emerged as the new obsession, they'd still be aiming for Apple with knock-off interfaces, Zune etc.

This is reaaly the MS tradgedy: instead of being customer focussed and delivering new exciting products and technologies (something such an organisation should be able to do with their huge resources), they have become competition focussed.

Re:Not quite correct

[Omnifarious]

As someone pointed out, lack of customer focus is not a new thing for Microsoft. They have always been competitor focused. I don't think Microsoft can change this, it's too core to what their company is all about. Microsoft is always really unhappy when anybody talks about someone else more than them. They want to be 'it' for some rather amorphous domain of computer oriented mindshare.

MS already has a Bussiness Application.

[WildStream]

Many people don't realize that MS already has a business Strategy for ERP systems. They've bought several small to large system. Navision, Great Plains, Axapta, Solomons. They have built in house CRM system and they are creating the Dynamics Product. Getting TOP 500 customers doesn't make sense for MS. They have already spent their money and won't change or grow. It's the small-mid businesses that will be growing and MS will be right there providing them with the right software. MS already considered buying SAP 6 or 7 years ago and the culture clash and business model did not fit MS goal, which is every business to run on their ERP system.

Re:No, whinney is right on the point and so is MS

[rbanffy]

That's simply not true.

Microsoft has been, for a lot of its history, very customer focused. They would not be able to achieve their current market position without being customer focused. It wasn't until they have secured their monopoly on Windows through OEM deals that they became the evil company they are today.

I can remember a couple brilliant examples where they outsmarted their competition by paying attention to what the market really wanted:

- Windows for Workgroups: They realized people did not want file and servers - they wanted to share files and printers and do e-mail. WfW, for all its failures, was a bright example of simplicity. With this, they more or less took the low-end of the NetWare business from Novell. This foothold allowed them to claim the rest of NetWare's share with NT.

- Visual Basic: People wanted an easy to use language to develop for Windows. The C/C++ tools they had were hideously expensive and painful to use (they more or less still are - C++ on Windows helps create the ugliest C++ I ever saw). VB surpassed all other development environments for Windows for flexibility, ease of use and productivity. It was the Ruby on Rails of its time. Sadly, it pretty much caused massive brain damage to a generation of programmers that never quite recovered.

Windows 3: People wanted GUIs but couldn't care less about bulletproof multitasking. OS/2 was great, but Windows 3 hit the sweet spot. 3.11 hit it even better with its TrueType rendering.

Windows 95: The last major overhaul of their consumer OS. Gave a nice (for the time) and easy to use GUI overhaul to the tired Windows 3 desktop. Thanks to the problems with the 68K to PPC transition, it was even stable compared to Macs - a first for MS.