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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."
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)
There are shills on slashdot. Apparently, I'm one of them.
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.
SAP isn't so much a finished application as a license for the vendor to bleed you dry with "special" modules supposedly tailored to your business. In one way, Microsoft software doesn't fit that model (i.e. SAP isn't just a shrink wrapped product like Office). In another way, the endless bleeding of your tech dollars while your practices are changed to match the (in)capabilities of SAP would suit their revenue requirements perfectly. The real problem is that SAP is probably too labour intensive for a company like Microsoft.
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.
Engineering is the art of compromise.
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.
My current employer is a dominant player in our field, in a smallish country, that sells about a billion dollars of $stuff a year to 10,000 or so customers.
:)
Our $30m+ competition for a new ERP system came down to SAP vs Microsoft.
SAP gave us 50 reference companies of similar size in similar industries, 5 of them in the same country as us, 3 of whom let us visit on site and grill them about their setups.
Microsoft gave us one reference company smaller than us in our country AT ALL, and one company in the US in a similar industry, but 10 times smaller than us.
We got the distinct impression that we would be pretty much the largest deployment EVER of Microsoft Business Apps in an industry similar to ours, by an order or magnitude.
SAP won, of course.
Microsoft has a horrid bootstrapping problem. Until they build up experience and a userbase that people like us can go visit and actually SEE their stuff working, they're going to struggle to be competitive.
The other big plus for SAP was their upgrade attitude "We understand that most of our customers want to upgrade their core ERP around every 8-12 years, on a Saturday afternoon"