Chapter 2: Oracle Bids for Retek
By Stuart Silverman, Publisher, Retail Technology Milestones (www.rtmilestones.com)
Last week SAP offered to buy Retek for $8.50 per share. Now Oracle has stepped in to defend its turf and has upped the bid to $9.00 per share after buying 10 percent of outstanding Retek shares over the last 2 days.
To many in the industry, this deal makes more sense from a technology and architecture standpoint than an SAP/Retek marriage. Retek and Oracle have had working partnerships in place for years and most Retek customers deploy their applications on the Oracle platform. On the other hand, there were many questions raised last week about the integration challenges that SAP would face while trying to bring the applications together.
However, the driving force here is Oracle’s competitive streak and unwillingness to allow SAP to gain any ground in the business applications market.
Moderator’s Comment: What’s next? Oracle has shown how aggressively they will fight when they truly want something, e.g. PeopleSoft. Will SAP rise to
the challenge and enter into a bidding war? Or should SAP pursue another suitor at an uncontested price? –
Stuart Silverman – Moderator
From our perspective (the retail user), the question is “what is best for the consumer.” There is no doubt that the Oracle and Retek technical environments are a better fit than an SAP and Retek combination IF you plan to support your applications in-house. If you plan to provide IT services through a hosted solution, then the technical considerations are far outweighed by the “feature and function” concerns over the process changes and training that might be involved in moving from one vendor to another.
The bigger question here is what the impact of continued consolidation of the software industry (don’t forget there were 100’s of automobile manufacturers at one point) will do to our choice of solutions. As the software industry moves to an oligopoly structure with the likes of Microsoft, IBM (maybe), Oracle, SAP, etc. providing the only solutions, where will that leave retailers? Just as you can’t put Chevy parts on a Ford, retailers who see an opportunity that is not supported by their software provider will be out of luck.
This is where the opportunity for “boutique solution providers” opens up. Just as there are custom vehicle producers for armored limousines, custom sports cars, and stretch limos, there will be software solutions directed to the unique characteristics of various retail segments such as butchers, delis, and supermarkets where in-store processes convert receiving units to final products. The next evolution of software solutions based on a “Service Oriented Architecture” will enable the small software vendor to extend the “standard vehicles” offered by the “big guys” into retailer specific solutions that provide unique advantages. The challenge for the retailer will be to sort out the viable solutions from the pipe dreams and take advantage of them.
For right now, I just wish I owned some Retek stock.
The Oracle-Retek marriage has made sense for years. SAP’s move was designed to corner the retail software market, especially for tier 1 retailers, and take Oracle (or another entrant like Microsoft) out of the picture. If Oracle loses the battle for Retek, they are left out in the cold. None of the retail software players are a good fit for SAP and few are for Oracle. Oracle wants products that use Oracle’s database and integrate with their financials (read Retek). SAP’s philosophy is to develop everything in-house as an integrated solution. Oracle doesn’t fit that model, nor does JDA. JDA would be a nightmare for SAP, because their products are the antithesis of SAP’s direction, mostly stand-alone point solutions which are being migrated to .Net. I doubt we will see a bidding war here, because SAP has traction in U.S. retail today winning some big contracts of late, so they can continue down that path and be successful, albeit in a longer time frame.
I’d like to come back to Bill Bittner’s comments about consolidation and a “Service Oriented Architecture.”
So, lets say there are a couple of big guys left standing – Oracle, SAP, Microsoft and some mega integration firm in the IBM/Accenture/EDS mold (maybe with a touch of Bangalore thrown in). Each of these solutions providers will have their own “proprietary standards” (a wonderful oxymoron). And all the little specialist tools providers will have to decide which platforms they will develop for – kind of like Microsoft/Apple or Nintendo/PS2/XBox, etc.
Maybe the glue that holds it all together will end up being UCCnet, the trading exchanges and the datapool providers. Maybe the effort that the collaboration enablers are making to communicate between suppliers and retailers will create a common architecture that will allow translation capabilities to the proprietary retail platforms – so that maybe the specialist solution providers will only have to integrate to a common translation layer?
I’ve always been concerned that consolidation would stifle creativity and innovation. In the best of all worlds you’d like it if all the great innovative tool providers would concentrate on building great tools and not have to worry about rebuilding the infrastructure. But on the other hand, you look at what Microsoft did – integrate all the best tools into the standard package and then squeeze out the bright young companies. Not a pretty picture. It’s not tomorrow, but with the actions of this past week, it’s not more than a couple of years away.
To SAP: Pull back your well-financed panzer units, preserve your ammunition, seek a new acquisition target, and focus on another conquest. Retek may be a good, but not essential, addition for SAP, but The Oracle is in heat.
SAP should consider JDA or other major players in the retail tech space before entering into a bidding war with Oracle over Retek. JDA has a stronger install base than Retek, and doesn’t have as much baggage (i.e. a severely challenged installation at a major supermarket chain).
The retail industry needs one thing from the technology vendors – higher service levels. Oracle, SAP and Retek…now which provides the highest level of true service? Service is a blend of understanding, caring, and acting that is focused on the issues that help retailers to best help their own customers.
So, if you had to choose, which company can deliver the best service level?
Note: Technology is not a long-range issue nor is application functionality. In the end, tech and function will be standards, but service will be the differentiating force.
SAP should enter another bid. Ellison is in charge of getting the acquisition completed for Oracle and will go higher than $9.00 per share. JDA is not a good target for SAP. If they don’t acquire Retek, SAP should use the available funds to build out their own product and gain market share in the near term, especially in the European and Asia market. Oracle’s focus in the short term will be in the U.S. and it will take them months to get a consolidated demo in place, joint sales message, etc. Should be very easy for SAP to defeat by stressing new functionality versus Oracle R&D focus on rewriting existing code.