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Empire-building not needed
Microsoft's recent overtures to SAP should come as no surprise to anyone who's followed either vendor. Each company covets the other's market. Microsoft is evolving into a more complete vendor of ERP and other business applications. SAP has become a full-fledged Web application and integration platform vendor, in addition to strengthening its core ERP, CRM and supply-chain management application suites.
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It's also no surprise that their discussions didn't result in a merger. Tying the knot would have required Microsoft to seriously rethink its commitment to its emerging Project Green next-generation business application suite. SAP, for its part, would have had to turn its back on Java 2 Platform Enterprise Edition, on which its mySAP applications and NetWeaver Web services application platform are built.
As it is, the two vendors remain on friendly terms and, in fact, recently announced joint efforts to strengthen integration between their products. Microsoft and SAP complement each other more than they compete. In spite of its recent forays into ERP, Microsoft sees itself primarily as an application and integration platform vendor. SAP, for its part, continues to focus on its core business applications market, and has only ventured into Web services platform software to strengthen mySAP.
Truth be told, Microsoft had more to gain than SAP from a merger. Over the past two to three years, Microsoft has acquired vendors in the small and midsize business segment of the ERP market. However, it has no business applications that address the needs of large companies, the segment in which SAP is the predominant vendor.
It's probably best for enterprise customers that Microsoft and SAP didn't merge. The platform and application markets have become more consolidated over the past several years, with Microsoft and SAP emerging as the kings of their respective hills. Anti-trust lawyers everywhere would have jumped at the chance to challenge the consolidation of so much market power in a single vendor.
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