Battle royal
An all-out war between Microsoft and SAP would certainly be spectacular. Microsoft is the largest software maker in the world, with more than $32bn in annual revenue. Though sales from its business applications unit reached just $567mn in its 2003 fiscal year, the company is expected to boost revenue in 2004 to more than $700mn.
Overall, Microsoft has enormous resources -- more than $50bn in cash -- and has proved in the past to be a ferocious foe to those it's challenged in the database, desktop software and Web browser markets, among other areas. The company has invested more than $2bn into what it hopes will be a $10bn business by the end of the decade.
Germany-based SAP is the leading maker of business application software, with $7.8bn in annual sales. For the past 30 years, the company has focused exclusively on business applications -- complex software programs designed to streamline corporate bookkeeping, order processing, customer service, human resource administration and manufacturing. SAP is the largest competitor in that market by a wide margin and intends to nearly double its current market share to 25 percent by 2009. Few other rivals in the market, which is slowly emerging from a three-year slump, have set growth goals as lofty as those of SAP and Microsoft.
Yet the two companies downplay their rivalry. As a provider of operating system and database software to SAP customers, Microsoft claims that more than 27,000 SAP installations, about 40 percent of the total, run atop its Windows platform. And Microsoft would like to grow that number. It's also in neither company's interest to highlight a rift that might alarm customers and investors.
Microsoft insists it's competing largely with a collection of several thousand software makers around the world that cater to small businesses. Unlike the high end of the market, the segment Microsoft is chasing is populated by many tiny competitors "below the radar screen of people on Wall Street," says Doug Burgum, senior vice president of Microsoft Business Solutions Group, the unit that develops and markets Microsoft's ERP software. "Our biggest competition is really 'other', not SAP," Burgum says.
Likewise, SAP says Microsoft poses no major threat. "The market for software applications, even in this challenging business environment, is big enough for all of us," SAP representative Herbert Heitmann says.
