Thursday, January 11, 2007

Organic growth story is now just a story

Organic growth works for human beings and cows. Not so well for large enterprise software companies. After beating up on its competitor for pursuing an acquisition-led growth strategy, SAP failed to meet its numbers this quarter.

Message to Waldorf, Germany- let's leave organic to California's Yoga-loving Hybrid-driving meditation-praciticing vegans. For growth, you need to eat some beef.

On a more serious note, the two areas where SAP showed weakness may also be leading indicators:

North America: Is it possible that SAP is getting beat by its arch-rival Oracle?

Asia (outside Japan): SAP had made claims of making great inroads and betting on the emerging market economies. Here, the issue could be either local software companies or custom built software. In either case, it does not portend well for the SAP strategy.

(Another Infosys, India building: by reidmix)

It is my (very personal) opinion that the large enterprise vendors may have to look into acquiring companies that are focused on mid-market and/or emerging economies. It is nigh impossible to take your first-world overly complex software requiring massive infrastructure and compete with local vendors selling low-priced limited functionality software. In fact, some analysts have predicted that at least one large software vendor will emerge from India/China over the next few years on the global scene. Kingdee is one such aspirant that InfoWorld talks about here in "China's Kingdee wants to take on Oracle/SAP".

Jeff Nolan wrote an excellent piece "SAP, Oracle under the SOA, On-Demand gun" highlighting the issues facing enterprise software leaders. Vinnie Mirchandani (or Microchandani, his tech name) wrote on similar theme in "Oracle and the 29.2 factor". With the coming IPO of NetSuite, the focus will once again be on mid-market and SaaS (Software-as-a-Service).

(Disclaimer: As is the case with all my posts, this reflects my personal views and does not in any way reflect the opinions of my employer or anyone else. See profile for detailed disclaimer.)

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