An interesting article from Wharton about the consolidation in the Software industry and the talks between SAP and Microsoft. Some extracts of this article:
Microsoft, the world’s largest maker of software for personal computers, last year had approached Germany’s SAP, the world’s leading business-software company, about a potential merger, but the preliminary talks were discontinued this spring.
The coming consolidation in software will involve companies in the three chief categories of software for both businesses and for consumers. They are: applications (software that handles a slew of administrative tasks for corporations, such as financial management, procurement, human resource management and order processing, as well as for desktop computers); platforms (the so-called “middleware” systems on which some software applications run and which coordinate different software programs); and system infrastructure (the operational software that keeps computers running).
Raphael Amit, professor of entrepreneurship and director of the Wharton Electronic Business Initiative, says a combination of SAP and Microsoft would be “advantageous from a strategic standpoint for both companies. For Microsoft, it would be going up market [to sell products to the world’s biggest companies] and for SAP it would expand its reach into segments of the market where SAP today does not enjoy a high degree of penetration.” SAP reportedly has a 54% share of the global market for enterprise software, compared with 13% for Oracle and 11% for Microsoft.
Other possible merger partners for SAP include IBM and Accenture, according to Amit. “Going with IBM or Accenture, which have armies of engineers who could help implementation of software, is a natural. SAP does software but not implementation, and Accenture and IBM do implementation but not software. There’s a certain degree of complementarity. But the story with Microsoft is a bit different. Microsoft, unlike Accenture and IBM, is not very active in the space where SAP dominates, so SAP would bring a lot to Microsoft. Maybe SAP is worth a lot more to Microsoft than to Accenture and IBM. And from that standpoint the shareholders of SAP might be better off with Microsoft.”