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Posted by Noel Yuhanna on May 17, 2010
Recently, SAP announced a definitive agreement to acquire Sybase for $5.8 billion, at $65 a share, a 44% premium over the share's three-month average price. The transaction is expected to close during the third quarter of 2010. Sybase will operate as a standalone unit under the name “Sybase, a SAP Company,” and be run by Sybase’s management team.
Although execs from SAP and Sybase have stressed mobility, real-time information, in-memory, and analytics benefits that come from this acquisition, the increasing pressure from Oracle cannot be undermined. Oracle’s stronger focus of stack level integration and selling around applications, middleware and database, and recent acquisition of SUN has put pressure on SAP.
SAP-Sybase Deal Offers A Lot Of Synergies
SAP and Sybase offer many benefits ranging from in-memory technologies, databases, analytics, and data integration to mobility and ILM.
- SAP finally gets an enterprise-class database. Although SAP has a database called MaxDB that is used by hundreds of companies, it's not had great success and is typically seen in smaller deployments. The most popular SAP ERP database remains Oracle, despite a decline over the past five years. Today, more organizations lean towards a tighter integration of packaged applications with a database, especially seen in large multi-terabyte implementations, mainly because of performance concerns. SAP with Sybase creates a huge opportunity for SAP to not only make large and complex SAP implementations simpler to manage, but also improve the performance and scalability.
- SAP gets the ability to extend on its mobility platform. When it comes to mobility, Sybase is the leading mobile database provider that offers the iAnywhere solution to support large and complex deployments. With the increasing usage of smart phones and mobile devices in enterprises, SAP applications embedded with Sybase mobile databases could become a competitive advantage, potentially expand to new markets, and trigger further innovation.
- SAP gets an in-memory database to expand on its vision. With the growing number of application users and data volumes, in-memory technologies have become a critical requirement to support real-time applications. SAP in-memory technology along with Sybase in-memory database offers the ability for SAP applications to deliver extreme performance, especially around analytic processing. In addition, SAP is likely to integrate transactional and analytics capabilities with their in-memory offering. We estimate that over the next five years, a third of the enterprises will be using in-memory database and other caching technologies to support mission-critical packaged applications.
- SAP gets a leading columnar data warehouse. Currently most enterprises are dealing with increased volumes of data, and SAP ERP databases are no exception, where SAP customers are seen running tens of terabytes, some with 20TBs and more. Sybase IQ, which offers a columnar database and advanced compression, is well suited to meet the growing needs for SAP customers, especially if SAP can tightly integrate the SAP BW and Sybase IQ engine in the coming years. The SAP-Sybase combination could offer advanced analytics, ILM, and end-to-end archiving platform to support various warehousing requirements.
- Sybase ASE might finally get some traction. Sybase is the fourth database vendor in the OLTP DBMS space, after Oracle, IBM, and Microsoft. While Sybase has had some success in the financial sector, it has failed to attract new enterprises in other sectors, mainly because of viability concerns, cost, and lack of support for packaged applications. If SAP executes well, including focusing on innovation and making Sybase ASE cost-effective, it could potentially gain some traction and even take share away from top DBMS providers.
But SAP-Sybase Will Have Some Rough Road Ahead
While the two companies have many technologies that supplement well with their vision, integrating them will take time and effort, especially since many of these are not integrated.
- SAP ERP Application currently does not run on Sybase database. I believe that SAP will spend at least 6 to 8 months in porting SAP ERP on the Sybase platform, but the good news is that Sybase has all of the core database features that will create a showstopper. Even after the first SAP-Sybase release, which might come in early 2011, it could take a year or two before companies start to migrate from other DBMSes. However, if the SAP-Sybase combination proves to be cost effective and reliable, it could get an early start.
- Competing in the database market will remain tough. Today, Oracle, IBM, and Microsoft dominate the database market, with combined share of more than 85%. Although Sybase has good database technology, it needs to become more aggressive to gain market share. SAP would need to focus on innovation, improved scalability and performance, lower cost, and higher degree of automation to win customers.
- Migration path from other DBMSes to Sybase remains weak. Sybase has never put a strong focus on the migrations from other DBMSes such as Oracle, Microsoft SQL Server, and IBM DB2 to Sybase. SAP would need to improve its migration tools and services to offer a more simplified migration path for customers wanting to migrate to Sybase.
- Sybase has staffing issues that SAP needs to fix going forward. Sybase is not as widely adopted compared to Microsoft, IBM, and Oracle databases. A key issue often facing Sybase customers today has been around staffing. Sybase skills are often hard to find especially beyond key cities, and it's becoming a critical criteria whether or not to choose Sybase DBMS. SAP will have to ramp up its training offering on Sybase and other initiatives to expand the skills base.
The bottom line: Sybase acquisition by SAP was long overdue. It definitely puts some pressure on Oracle, Microsoft, and IBM in the database arena, but the major impact is unlikely to be seen anytime soon. We believe that SAP will take anywhere between six to eight months to do the SAP ERP Application port to Sybase. Although SAP will continue to support Oracle, SQL Server, and DB2 databases, it is likely to offer tighter and more optimized integration with Sybase in coming years. SAP and Sybase are likely to roll out more integrated solutions around mobility, in-memory, analytics and warehouse that are likely to win new customers. Overall, a great move by SAP.
Will you expand your current usage of Sybase ASE and IQ products in your organization, or try out Sybase for the first time, now that it'll be under SAP? I would love to hear your feedback.
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