Rejecting Larry Ellison’s recent claim that he’s convinced one of SAP’s largest customers to dump SAP and move to Oracle’s Cloud ERP, SAP co-CEO Christian Klein denied any such defection and said his ERP share is in fact expanding.
What makes this particular case of dueling realities so intriguing is that Ellison spent a significant amount of time during Oracle’s earnings call last month describing this impending customer-cutover and the disastrous impact it would have on SAP.
SAP is of course the longtime world leader in the highly strategic market for ERP applications that run the core processes of tens of thousands of large and mid-sized businesses around the world. Oracle and Ellison have been chasing SAP since entering the ERP market about 15 years ago, and Ellison has stated emphatically that the move to the cloud will provide the opening for Oracle to finally overtake its longtime rival.
In that context, Ellison has said that if Oracle is able to convince a big and well-known global business to switch from SAP on-premises ERP to Oracle Cloud ERP, other SAP customers will then feel confident to make similar moves.
So it was that in Oracle’s fiscal Q2 earnings call last month, Ellison fairly gushed over this looming defection—and I’ll share his verbatim comments in a moment—from SAP and the pied-piper effect it would have on other SAP customers
But last week during a CNBC interview from Davos, Klein calmly dismissed a reporter’s question about Ellison’s claim and turned the tables by saying that SAP will soon announce some big customers it has pried away from Oracle.
“We of course also got that talk, and heard about customers moving away from SAP,” Klein said during the CNBC interview that also featured co-CEO Jennifer Morgan.
“And actually we double-checked and honestly, I couldn’t find any customer who moved away from SAP ERP. We have next week earnings and we will share some concrete names who actually just did the opposite and have chosen SAP for their digital transformation.”
Again, it’s not unusual for head-on competitors to make passionate-sounding but detail-free comments about competitive battles and giant new contracts that can’t be mentioned just yet but are really and truly just around the corner.
But the stakes here are so large that it would be difficult to overstate them. It’s safe to say many, many billions of dollars in future ERP revenue would come into play if Ellison’s assertions turn into specific reality.
On the flip side, if what Klein said is true—that no big SAP ERP customers are about to switch over to Oracle, and that SAP’s ERP market share is indeed rising—then Oracle’s credibility will take a hit and the momentum will shift to SAP.
So having heard Klein’s dismissal of the imminent big-scale defection, take a look now at Ellison’s comments about that soon-to-transition SAP customer, which Ellison made on Dec. 12 during Oracle’s most-recent earnings call.
In his opening remarks, after offering some broad comments about Oracle’s surging growth in cloud ERP, Ellison made his assertion. “Importantly, a few months from now, in Q1 of calendar year 2020, one of SAP’s biggest customers will go live on Fusion ERP,” he said. “Many of SAP’s largest customers are already working with us to develop plans to migrate to Fusion ERP.”
Ellison then hammered away at a point he’s been making for several years: that SAP’s failure to optimize its traditional ERP applications for the cloud has given Oracle and its modern new ERP SaaS apps a big advantage.
And that advantage, Ellison promised, is one that Oracle is about to fully exploit.
“SAP’s customer base is up for grabs,” Ellison said as he continued.
“They didn’t rewrite their applications for the cloud, and that has created an enormous opportunity for Oracle. We’re already declared #1 in the cloud ERP market as measured in market share, and our cloud ERP business is already growing at a rate of over 30%. By offering a safe and compelling alternative to SAP’s old technology, we can increase our applications growth rate far beyond that 30%. We are very, very comfortable that we will be the overwhelming winner in this generation cloud ERP business.”
Okay, those are some strong claims—and they are pretty much exactly the same claims Ellison has been making for a few years. What makes the current situation different, though—and potentially hugely disruptive in the marketplace—is what he said about “one of SAP’s biggest customers” preparing to go live on Oracle’s Fusion ERP this calendar quarter. Ellison elaborated on that claim during the Q&A portion of the earnings call. Here are the relevant excerpts:
- “Right at the very apex of SAP’s customer base, in their top 50 customers around the world, is this big opportunity and we’re looking at this one particular implementation where we expect to go live in March of next year [that’s 6 weeks from now in March 2020]. And I would describe them as rooting for us. They want to have an alternative to a $1 billion SAP upgrade.”
- “We’ve just got to demonstrate that we can safely take these enormous companies to the cloud in a way that they’re not putting their business in any risk. And that’s why they’re watching this one particular giant implementation so closely.”
- “By the way, they’re not just watching and waiting. A number of their biggest customers in the heart of Germany—these are German customers, the core of SAP—are working with us. And moving some of their divisions to Oracle Fusion to persuade themselves that we can do this safely. They’ve gone that far.”
- “So, we have a chance here to get what used to be, in the old world, called ‘Gates’s share’ [for Microsoft founder Bill Gates] for ERP. And like Microsoft Office, to be the Microsoft Office of ERP, and it’s sitting there. And we just have to get this last proof point out to SAP’s largest customers.”
We’ll get considerably more detail from SAP later today when it releases its Q4 and full-year earnings results. It’s very likely co-CEOs Klein and Morgan will use their earnings release and the subsequent earnings call to emphasize their unwavering focus on customers, but they also need to take that public opportunity to amplify Klein’s promise to showcase Oracle customers moving to SAP.
As for Oracle, Ellison’s foreshadowing of a March 2020 announcement could possibly coincide with Oracle’s fiscal Q3 earnings release, which will probably happen March 11-12 or 18-19.
One thing’s for sure: whichever way this story turns, the Cloud Wars will certainly intensify around the Ides of March.
Disclosure: at the time of this writing, Oracle was a client of Cloud Wars Media LLC.
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