Today’s brain teaser: What does a Dutch economist called Jan Tinbergen you’ve probably never heard of have to do with the prospect of a single giga-vendor emerging in the applications software space?
Simple: in the 1970s Tinbergen surprised some people with what he called his ‘convergence’ theory that suggested that then Cold War rivals the USA and USSR were actually a lot more alike than their ideological posturings suggested.
The Nobel Prize winner (Economics, 1969) said, well before 1989 and all that, the division between capitalism and communism was becoming illusionary, as the nature of industrial society leads both types to converge towards a common centre. Capitalist societies tend to get more organised and managerial while communist societies tend to have to become more open to market approaches and greater political and civil freedoms.
In our world – this means (or could mean) that there’s a logic that one day in the who-knows-when? bitter rivals SAP may merge with Larry Ellison’s Oracle. Why not? Such a combination would be a serious rival for HP and IBM and Accenture in a number of ways.
We ran the theory past Sanjay Poonen, executive VP and general manager, Business User and LOB Solutions of SAP, as he spoke at this week’s ‘SAP World Tour’ roadshow in Birmingham. Obviously we expected a ‘no,’ as otherwise this would have been the CBR scoop of the century; but his reasons why ‘no’ were very interesting.
‘I can give you a quote that, "We have no plans to buy Oracle," but there are reasons why I’d say that, too. For a start, we have a commitment to become the largest independent software applications provider. Second, we don’t agree with Oracle that hardware needs to be part of the ‘stack’ – especially sub-par hardware – Sun may have been great five to ten years ago but it isn’t now. Let’s let HP, Cisco and IBM duke it out and continue to innovate, that’s better for the market," he told CBR.
These are all good ‘political’ objections to an SAP-Oracle alliance. But then Poonen went further – it would just be too hard to do economically. "We’re a company with a $60bn market cap and when you are dealing with entities that big you are talking about mergers we’ve never seen, it’d be bigger than the biggest ever LBO [Nabisco-KKR in the 1980s]."
That doesn’t mean it’s undoable, of course. But SAP, he says, has done all its buyouts, like that of Business Objects and now Sybase, out of cash, and the firm is historically reluctant to dilute stock and use that option. So "a really, really big merger in the industry is theoretically possible but very hard to do and expensive when you get to a certain size".
I’m not reading that as any kind of "confirmation" that anyone in SAP is at all game-planning such a scenario. But I do see a logic here, the same logic that Tinbergen spotted; that two giant Yins may really be a Yin and a Yang waiting to fuse together.
Ultimately, market mechanics aside, something like this will happen in a consolidating and perhaps ‘converging’ enterprise IT market. Think of the car, aerospace, retail markets; the trend is always toward giga-players.
And who knows? It might actually be really good for customers, too, who’d be protected from ever having to make any choices again! (That last bit is a joke, by the way.)
Here’s to a converged future?
