Business applications giants SAP AG and Oracle Corp. are gearing up to battle for customers in "hot" markets like healthcare, insurance and financial services, IT industry experts say.
Ray Wang, a business applications analyst with Cambridge, Mass.-based Forrester Research, says the longtime arch rivals want to expand their customer bases to include more clients in high-growth industries that focus on providing services. Wang predicts that
"These are big areas of growth and that's really where the new battlegrounds are for Oracle and SAP," Wang said. "They're trying to expand out of their traditional manufacturing [customer] bases."
Oracle, which has been on a three-year, 23-company-and-counting acquisition spree, is seeking to enter into new markets by purchasing customer bases of established software firms. Meanwhile, SAP, which has traditionally sought to grow primarily by organic means, is reacting to Oracle's plan by sending signals that it may embark on a new acquisition strategy of its own.
To be sure, SAP is no stranger to the acquisition trail, but to date the firm hasn't been nearly as aggressive toward acquiring technology and customer bases as Oracle, experts point out.
In 2005, SAP acquired Lighthammer Software Development Corp., a supplier of enterprise manufacturing intelligence and collaborative manufacturing software. And this past April, SAP purchased compliance software vendor Virsa Systems Inc. for an undisclosed sum.
Gene Phifer, lead Oracle analyst with Stamford, Conn.-based Gartner Inc., predicted in a recent interview that the rivals will also race to offer the most robust set of service oriented architecture (SOA) capabilities. Companies that can provide Oracle and SAP with cutting edge development, compositing or orchestration capabilities may be ripe for acquisition, he said.
Phifer added that he thinks Oracle will seek to get into the world of Web 2.0.
"They may be looking at some technology acquisitions to fast-forward their entry into that [market]," he said. "That could include acquiring capabilities around AJAX, around building mash-up types of applications -- everything from blogs, to wikis, to social networks, you name it."
SAP suggests change in strategy
Michael Fauscette, vice president of the applications program at Framingham, Mass.-based International Data Corporation, says that Oracle's acquisition plan is proving to be successful thus far. And news that SAP is reacting by considering a more aggressive acquisition plan of its own seems to validate that strategy, he said.
"I actually believe that [Oracle] has been successful to maybe very successful and I think that maybe the jury is still out on the very successful part," Fauscette said in a recent interview. "But all the signs point to a very strong strategy that has played out very well for them."