For the past several months SAP has been aggressively promoting a study showing that SAP customers were 32% more profitable than their peers. If the boys and girls at SAP who decided to trumpet this little study did so without expecting Oracle to answer then they were sorely mistaken.
Nucleus Research just released an "independent" study showing that SAP customers were actually 20% LESS profitable. Of course Oracle was only too happy to purchase full page ads in places like the Wall Street Journal to promote this little feat of statistical jujitsu. I saw Oracles ad on the back section of my Journal today.
Business Week on-line has a roundup of the complete story. They quote Bill Wohl an SAP spokesman who has a hissy fit about ambush research, junk science and rotten oranges. What Bill doesn’t realize is that nobody cares. The bottom line is Oracle’s punch line in the ad "Don’t SAP Your Profits".
As we have indicated many times in this blog, tactics need to be thought out three moves: your move, your adversary’s response, and then your response. This three move set is continuously calibrated and you ALWAYS know what your decisive blow will be. Most marketers today never think beyond their first move.
I just blogged a few days ago about Jeff Nolan, SAP’s strategist tasked with attacking Oracle. I hope he has more up his sleeve other than spokesfolks throwing hissy fits and dueling third-tier research firms. Be interesting to watch, but as I said in my post a few days ago, my sentiments are with Oracle on this one.
03.15.06 UPDATE: Several readers of this blog have downloaded the Attack Screener
this morning, and used it to try and predict the outcome of SAP’s
attack on Oracle. I wanted to issue a cautionary note on the results.
The Attack Screener is a subjective tool designed to quickly gauge
top-of-mind impressions. And while the results of the screen may not
look good for SAP, they by no means should be taken as a complete and
thorough analysis. This can only be accomplished by utilizing the
entire workbook. And for what it’s worth, while I still favor Oracle in
this fight, I wouldn’t bet against Nolan and SAP.
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Re dueling analyst firms, it’s not an effective tactic to allow your competitor to mistate the facts and the research to make mistruthful claims in their advertisements. Of course we are going to discredit the Nucleus research, because if for nothing else it is entirely discreditable.
First argument: Their ROE calculations are inaccurate, and they also divert from the numbers that are published in reputable financial industry sources like Bloomberg and Hooverss. For example, they use one time charges for M&A in their ROE calculation… these are non-cash expenses.
Second argument: they used a sample size of 81 customers, while the Stratascope research used a sample size of 580.
Third argument: Even if you take the the ROE that Nucleus issues at face value, the return to shareholders for there group of 81 SAP customers was 89.1% vs. 37% for the S&P 500. You tell me, did our 81 customers outperform their peers? Yes.
Lastly, Nucleus has a record of being biased against SAP. All 8 reports they have published were negative while all 16 reports on close competitors has been positive. This firm is a bought-and-paid for attack analyst, nothing more, and their research should be ignored because it’s an extension of the companies that hire them.
We do have a lot more up our sleeve, as evidenced by the fact, I repeat *fact*, that we have increased our market share against Oracle in the last two years. We continue to take their customers away from them (we recently had the single best quarter in our history).
Fusion applications exists as a set of powerpoint slides, Oracle hasn’t delivered them and credible analysts, like Gartner, are starting to see them for what they really are, a massive rewrite of the applications that Oracle has spent $20 billion acquiring. Their core database business is growing at GDP and under assault from IBM, Microsoft, and Open Source, and there are no signs that this is abating.
Despite all of the above, I continue to treat Oracle as a serious adversary, if anything because they are highly unpredictable. However, anyone who looks at the facts objectively is certain to come to the conclusion that it’s more up to Oracle to figure out how to compete with SAP than the other way around.
Don’t be ridiculous, Jeff. First, we took the ROE numbers directly from Bloomberg without any modification or adjustment. What they published is what we used, or are you implying that SAP is better at calculating ROE than Bloomberg?
Second, a check of SAP’s own Web site will find a Nucleus Research ROI case study on an SAP deployment at Seattle Public Schools. That was also one of our 2004 ROI Award winners. Hate SAP? We neither hate nor love SAP but we did give them an ROI Award.
As for bought and paid for, that is simply untrue and a long-used rant from Bill Wohl at SAP. Unlike other firms, Nucleus Research cannot be commissioned to create white papers. We can’t be bought… which may be why SAP fears Nucleus Research so much.
Finally, as for the non-existent Stratascope report, it is clear from SAP’s methodology statement that Stratascope backed into a set of numbers that would make SAP look good. It must have taken a lot of late nights but profitability, especially when you limit the data set to large companies with fully depreciated assets, borders on research fraud.
But let’s be clear: until we see the data in the Stratescope report the most comprehensive look at SAP’s customers is the one from Nucleus Research.
It seems to me that both Jeff and Ian make good points. Perhaps a broader perspective is warranted. One problem with enterprise software is that, like air, its value is difficult to measure. Without air, life as we know it would not exist. That makes it both priceless and of no value at the same time. Without enterprise software, Citibank would not be able to accept credit cards, Qwest could not place calls, American Airlines could not book reservations. Clearly SAP applications adds great value to all those organizations – otherwise they would have stopped using them long ago. Yet the value each of the three organizations receives from SAP is different and difficult to aggregate. In our data driven times where attention spans are shorter than a New York minute (I am in New York today by the way) it is tempting to use stock price as a proxy for value. That can be very misleading. Since May ChevronTexaco shares have increased by about 14%. Both SAP and Hurricane Katrina were factors in that increase. To what extent did SAP contributed to that increase, to what extent did Hurricane Katrina? Perhaps the augment should not be about the measuring tools but the measurement itself.