Since taking the reins of Germany's SAP last year, Henning Kagermann has hardly had a dull moment.
Kagermann assumed the role of chief executive officer at the world's third-largest software company in May 2003 after sharing the title for five years with SAP co-founder Hasso Plattner. But a month after Plattner moved aside, SAP's largest competitors sought to unite against the company.
First, rivals PeopleSoft and J.D. Edwards agreed to merge. A few days later Oracle, SAP's top competitor, responded with an unsolicited bid to buy PeopleSoft -- a $7.7bn deal that's since been contested by the government as anticompetitive.
The PeopleSoft acquisition bid sent waves through the IT industry and landed Oracle in court. But it also spurred Microsoft to approach SAP about a merger -- a negotiation the companies disclosed during last month's Oracle antitrust trial. The talks didn't get very far, but their existence underscored just how much this segment of the software industry is in upheaval.
Kagermann recently talked to CNET News.com about his brief courtship with Microsoft, his competitor's antitrust woes, and why it's so tough to innovate when a company has 20,000 chief information officers to keep happy.
Q: A lot of people were surprised to learn that SAP talked to Microsoft about a merger. How serious were the discussions?
A: They approached us, and we listened, but because there was no deal on the table, I cannot answer if we were serious or not. I think that starts once you have an offer.
What was the deal breaker?
We were exploring what could be the potential benefit [of a merger] to customers. It was stopped in the early phases through exploring the question of whether we can both promise significantly more value to both sets of customers.
Is there something particular right now in the enterprise software business that's driving this apparent merger mania? One of the disclosures coming out of the Oracle antitrust trial is that (Oracle CEO) Larry Ellison has a long shopping list. It seems that this is now going to be the thing to do for 2004-2005. How do you see the world shaking out?
I think that because of this new architecture that is emerging -- service-oriented architectures around Web services -- that the position and the way companies present their value will change. It's obvious that people question themselves. Companies -- SAP included -- are asking themselves what are the spots of hottest value in the future and how well are they positioned there. I think every company in IT is reassessing its strategic position. I strongly believe this is the driver behind [this acquisition trend].
