Battle for Rule in Business Application Market

An interesting battle is taking shape between Microsoft and Oracle, two titans of the database world, and the prize is business-application software (i.e., ERM, ERP, CRM). In a surprisingly short amount of time, the competitive landscape at the upper end of this space has changed dramatically. Hey wait! You might be thinking "I thought this was a SQL Server column, what do I care about business ERM stuff?" Well, don't forget all business-application software needs a database to store its data in. Pricing for databases and prices for high-end business-application software can be inexorably entwined when a vendor controls both the business layer software and the database. Vendors who sell both have a lot more margin to play with and can be a lot more creative about how they price a total package for customers. Plus, Microsoft and Oracle are fierce competitors in the database space; competition in other areas inevitably has an effect on their database competitions. So this battle will have a bigger effect on Microsoft and Oracle's database strategies than you might think.

So here's the rest of the story. Earlier this year, Oracle (the second largest provider of business application software) merged with PeopleSoft (the third largest provider), which had already swallowed J. D. Edwards (another major provider) back in 2003. SAP is still the dominant provider, but Oracle's PeopleSoft acquisition is intended to grow the company's flagging application division. Oracle's attempt to achieve a competitive advantage in the market is a classic case of strategic management.

So a series of acquisitions has led to an oligopoly in which SAP and Oracle share market leadership in the world of business application software. At the same time, Microsoft has been making slow but steady strides in building its own competitive offerings in this space. Microsoft has been on a buying spree since its purchase of Great Plains several years ago. Microsoft acquired Solomon and several other niche companies to stitch together the Microsoft Business Solutions Business Group. Last week, Microsoft announced the acquisition of a business analytics tool and new enhancements to Microsoft Business Solutions Great Plains 8.0. Also, an upcoming SQL Server 2000 Reporting Services Report Pack will use the power of SQL Server 2000 to let customers draw information from Great Plains and create analytic reports specific to their business needs. For more about these enhancements, see "Microsoft Business Solutions Acquires Business Analytics Tool" at . Don't forget that the competition between Microsoft and Oracle isn't only about business software. Both companies are striving to be platform companies. I don't see Microsoft abandoning the business-application software space without a pretty cool Rock 'em Sock 'em Robot-style fight with Oracle.

SAP is still the leader in this space, but for how long? From what I gather, Microsoft's Business Group hasn't had the financial success the company expected. But Mr. Gates has a big piggy bank and knows how to spend money to make money. The business-applications software market is dizzyingly large and important, plus, those applications need an OS to run on and a database to keep their data in. I don't know what will happen in this space but it should be interesting to watch. You can keep up to speed at the Microsoft Business Solutions newsroom at

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