SAP Strikes Back at Oracle

The German applications vendor announced an initiative, dubbed the Safe Passage program, aimed at wooing customers who currently run both SAP and PeopleSoft/J.D. Edwards software in their IT environments. The prime message SAP is sending to these estimated 4,000 customers: Come over to our side and we'll provide a flexible, at-your-own-pace roadmap for migrating off your old software --if you even choose to do so at all. In other words, stick with Oracle and you might be force-fed its software sooner than you'd like.

"Oracle's acquisition [of PeopleSoft/J.D. Edwards] is forcing customers to be very uncertain about the future of their software systems, support for those systems and the future of their architecture." says Bill McDermott, president of SAP Americas. "It's very disruptive."

Now, McDermott adds, SAP customers who also run PeopleSoft or J.D. Edwards have an even more compelling offer to migrate fully to SAP.

The terms of the program are multipronged, involving license discounts, maintenance and support and migration strategies.

First off, to participate, customers must buy SAP's MySAP ERP software. Under the program, SAP will give customers a 75 percent credit toward the purchase of MySAP ERP licenses that is based on the amount the customer spent on its PeopleSoft or J.D. Edwards implementations. So, for example, a client who purchased $1 million worth of PeopleSoft software two years ago will be allowed to buy $1 million of MySAP ERP software for $250,000, according to SAP.

In addition, SAP has pledged to provide indefinite maintenance and support for that customer's PeopleSoft and/or J.D. Edwards software investments at 17 percent of the value of the MySAP ERP licenses. To do so, SAP has acquired TomorrowNow, a third-party provider of maintenance (which includes bug fixes, compliance needs, etc.) for PeopleSoft and J.D. Edwards software. To scale to meet demand, engineers from TomorrowNow also will be augmented in the field by technical staff SAP plans to ramp up internally, according to McDermott.

Furthermore, as part of the MySAP ERP purchase, customers who sign onto the program also get license rights to SAP's Netweaver integration and development platform. Netweaver will sport connectors to both PeopleSoft and J.D. Edwards applications, so, as SAP board member Shai Agassi says, "Customers get immediate benefits of integration, and they can extract more value from current investment."

The final piece of the plan includes a roadmap for migrating fully to MySAP ERP, McDermott says. The migration opportunity is one where partners will play a key role, he adds.

"Since Oracle announced its intentions with PeopleSoft, many of our partners have redoubled their efforts on their SAP practices and moved resources to those practices," McDermott says.

One other reason partners are aligning themselves with the company, he says, is the 22 percent market share that SAP gained for enterprise software in North America in 2004.

McDermott says that while the Safe Passage program is currently targeted at existing SAP customers, he expects it will be expanded to a greater ecosystem later this year. He didn't specify what types of customers he meant.

SAP's competitive gauntlet came down just one day after Oracle's CEO Larry Ellison unveiled an ambitious -- some say, impossible -- plan for the integration of PeopleSoft and J.D. Edwards into his company. During that talk, Ellison took shots at his prime competitor, at times deriding SAP's software as proprietary.

To that, SAP officials say hogwash.

"These are misperceptions by Oracle," Agassi says. "We are standards-based. We truly support Java and .Net in one environment. We deliver products that go both ways. I did not hear anything yesterday about any support for openness from Oracle."