Acquiring, everyone's doing it – SAP Buying Sybase – Quick Analysis

SAP’s acquisition target was said to be a head-scratcher. Sybase certainly makes you cock your head a tad.

SAP Buys Sybase for $5.8 billion

Quick, when’s the last time you used something from Sybase? Indeed. Sybase is one of those “we’re big in X” companies: the claim to fame is always in some category you’re not familiar with: finance, SMS services, “the mobile world, but not that whole iPhone mobile world.” And, of course, they have their database and BI portfolio.

The losers of the big Relational Database Wars are often in this category: Ingress, Pervasive, etc. Folks who have their own proprietary databases that didn’t make it Oracle-big, but managed to limp off the field to sell another day. From their revenues and staying power, obviously they’ve moved far beyond being losers of a long-forgotten tech “war,” and come into being companies of their own right. Typically, each has to find a niche and cement themselves into it.

As Ashlee Vance summed up Sybase’s cementing: “Sybase sold about $800 million worth of database software and increased its software licenses 22 percent during the recession.”

Moving the Giant

I would argue that timeless software is an idea whose time has come: keep the base stable but innovate at the edges. The most successful businesses are those that best manage the balance between unstructured and structured process innovation. What is evolution, after all, if not an exercise in pace layering?

—James Governor on applying Pace Layering to SAP

For SAP, much is being pinned on big-bang, big-dollar buys like this. The by word is “transformative.” Most of the “elder companies” are going through some painful disruption at the moment – more cynical folks would suggest that “innovation” was a victim of fat margins on existing offerings and sheer laziness, then the economic crater of the past few years has companies cutting costs, including that expensive “R” part of “R&D.” Now with credit back (SAP wired up €2.75 billion loan) and the piles of cash large tech companies have, it’s time to spend to catch-up with all those pesky ramen coders and cloud nut-jobs who’re stealing customers with good enough, dirt-cheap alternatives.

For lack of transforming on it’s own, some would suggest, SAP needs to go out and buy others. Be a real mover and shaker. The insider-prattle is all about the former CEO, Léo Apotheker being ousted some time ago, and the new CEO duo needing to show some earth-shaking.

“I don’t know what ‘whacko’ means.”

Certainly, buying a database outfit like Sybase does this. It lets us wildly speculate about injecting innovation into the large ERP company without stirring up too many ABAP anti-bodies:

• SAP hates Oracle, Oracle Hates SAP, yet SAP generates around a billion dollars for Oracle each year because many SAP installs need the Oracle database. Sybase has a database that’s mature and old-school enough to satisfy the “it’s enterprise-y or nuthin'” approach to SAP software selection. One wonders if a few billion dollars spent on forking and then beefing up MySQL (instead of $5.8B on Sybase) would have enterprised up MySQL and put a larger dent in Oracle. They could call it “Unbreakable MySQL.”
• Mobile has clearly become a big priority for IT consumers. It has all sorts of benefits to offer: it’s not tied to legacy software and vendor relationships, the application workflow focus is micro-task oriented instead of monolithic suite focused, the going rate is $0.99, and so on. The market all but knows it’s looking to mobile as the silver bullet to fix how terrible computers are. If the computer is a moron, maybe mobile is the smarter child of that grumpy old git on the desktop and in racks. When it comes to mobile, SAP isn’t well known to have much, where-as Sybase is, you know, big in “the mobile world, but not that whole iPhone mobile world.” Still, having a foot print in business centric mobile is dandy – coupled with some folks like Appcelerator or Nitobi/PhoneGap (folks who are big, and capable, in the iPhone/Android/Smart Phone app development world) you could argue that the pieces for a comprehensive “mobile strategy” were available to SAP.
• Big Data, in-memory, analytics – here at RedMonk, we have this theory that cheap hardware, advances in open source software for handling and analyzing data, coupled with the endless streams of data sloshing around in these days just before The “my left shoe has it’s own Twitter account and it keeps DM’ing me about how lonely it is” data-Singularity have all spilled a lot of opportunity on the table to bring analytics to the masses. The hope is that every Excel-user out there will have access to the types of search and predictive analytics that only scientists and spies could previously afford. Of course, I’m on record of cynically believing that “all roads lead to better junk mail.” Still I’m hopefully that the world will come up with better uses for Big Data/analytics than sending me ads for “Cougars: The Ultimate Catch.” SAP has done well getting hip to the Big Data/NoSQL/analytics trends of late. Indeed, a huge chunk of their user-base could probably be more productive if they got analytics savvy. In addition to whatever in-memory pie Hasso is rolling out, the optimistic hope is that Sybase will make a fine filler.

• As R “Ray” Wang points out (in his rosier, conciser rundown of the buy), Sybase has a foot-hold in the cloud:

  “Sybase has built a strong relationship with Amazon’s Elastic Compute Cloud (EC2), storage, and  virtualization vendors required to support cloud technologies.  Sybase products for mission critical data management, embedded and mobile database, column based analytics, and data movement and synchronization already work in the Cloud.”

  If SAP can belly up to actually taking cloud technologies seriously and figure out how to make their customers lives easier and pocket-books fatter by taking advantage of the cloud, Sybase’s inroads there would be a great asset. SAP R&D would do well to check out how SAP sales is using CloudShare to make the whole enterprise software sales and partnering cycle easier. SAP more than most other tech companies has a bad case of NIH, which I suspect has a lot to do with it’s slowness to hitch onto not only cloud buzz, but using cloud as an affordable way to offload some workloads. The job management folks are going crazy with using cloud offerings like Amazon EC2 as grids to run batch-jobs, and many of those jobs originate in SAP or other ERP systems.

Track Record

I’ve been impressed with SAP’s “do something bold and new” releases over the past year. Things like 12sprints/StreamWork show a willingness to innovate that’s pleasantly shocking, and much hope is continually pinned on Business Objects transforming SAP. As ever, the community efforts are solid, and there are plenty of community members like Craig Cmehil who try their damnedest to bring innovation to the front.

“Where we think we’ll make our money — where we think we’re able to differentiate ourselves from IBM and everybody else — is by building complete and integrated systems from silicon all the way up through the software, all prepackaged together.”

–Larry Ellison on Oracle’s “one check to sign” ambitions

It should be kept in mind that SAP’s big rival Oracle isn’t a bastion of ground-breaking innovation itself – though, they just bought a lot with Sun – rather, Oracle’s modus operandi is more it’s differentiating weapon against SAP. So much so that Oracle has opened up a new front with IBM. Well, the 1960’s IBM.

(Apologies for all the war and fighting metaphors. I need to go to some class to get those beaten, er, worked out of me.)

Others

• Official SAP press release on the topic.
• Fine sum-ups from Bloomberg and Ashlee Vance.
• Check out Curt Monash for actual technical commentary on the database angle.
• Dave Kellogg hits up the database angle as well.
• As mentioned above, R “Ray” Wang’s piece is worth reading for the glass half-full take.
• Though originally focused on the Hasso on Hasso video, in what’s best described as “The Zoho Style Reply,” competitors Work Day welcome SAP to “the party.”
• Bob Warfield’s take – not a happy camper.
• Stefan Ried: “Sybase had already recovered from the shock of being seen as irrelevant in the general purpose database market. It invested in analytics and mobile middleware, and its stock price recovered significantly.”

Disclosure: SAP is a client, as is Nitobi and many interested parties. See the RedMonk client list.