The Single-Stack “Advantage”
What Does SAP’s Hardware Stance Mean for Its Long-Term Competitive Success?
SAP’s stance as one of the last software-only vendors has become a debating point in recent months as long-time rival Oracle continues to herald the advantages of designing both the hardware and the software that powers the enterprise. The passing of Steve Jobs, an acknowledged master at harnessing hardware and software to a single harmonious purpose, has added to this debate. And while there is merit to Oracle’s claim of synergies between its hardware and software lines, and there is little argument that Apple’s products have been enormously successful, the question of whether SAP’s software-only, hardware-neutral approach is viable today might not be as debatable as it seems.
In short, SAP’s approach has considerable precedent in the market, and indeed, SAP’s hardware independence may be the long-term key to its competitive success.
In case you haven’t heard, there’s a new paradigm in town — SAP HANA. It runs on inexpensive, commodity hardware, and it’s about to make older relational databases running on big hardware systems obsolete.
The Secret to Apple’s Success
A close analysis of Apple’s strategy shows that marrying hardware and software is not the most important secret to its success. What really distinguishes Apple’s success is an attention to what makes its customers tick, either in terms of paradigm-shifting offerings such as iPods, iTunes, and iPhones, or in taking the user experience to a completely new level of usability, as with the iPad.
Despite appearances, these innovations don’t depend on marrying hardware and software as much as they depend on understanding what customers want and what user experiences can be like. Indeed, Android has proven that an iPhone-like smartphone can be brought to market in a hardware-neutral way, and the vast array of iPad-like tablets has proven you can build these devices in the same hardware-neutral way.
In fact, what makes Apple’s latest products successful has much less to do with the actual device than with the services wrapped around them. In the case of the iPod, the real innovation is iTunes, now the undisputed leader in music sales. And the innovation leadership of the iPhone and iPad is maintained by Apple’s App Store, which has a huge advantage over Android or any other platform to date.
With customer-centricity as the driving force for Apple’s innovation, the relative position of Oracle vis-a-vis SAP starts to look less advantageous. And Oracle’s ability to engineer its systems to optimally support its software — particularly with respect to the relational database that is at the core of Oracle’s software offerings — has even fewer advantages if you consider the history of the database market and its early experiments with linking hardware and software.
A Bit of History
The relational database market started with a similar debate about hardware and software. Shortly after Edgar Codd and Chris Date invented the relational model in 1970, two companies sprang up to capitalize on the idea. One of them was Oracle; the other was a company called Britton-Lee, which built what we would now call database appliances. The reason you may not have heard of Britton-Lee is that it was eventually acquired by Teradata, and promptly disappeared soon after.
After gaining experience developing early relational database appliances for Britton-Lee, a young engineer named Bob Epstein co-founded a new company that eschewed the bundling of hardware and software in favor of optimizing the interaction of the database with a newly emergent operating system called UNIX, which could run on a variety of relatively inexpensive hardware platforms. Epstein and his co-founders realized that optimizing for a lot of inexpensive hardware was a better choice for customers than optimizing for a single hardware platform. At the time, Oracle was taking this approach as well. Effectively, the database appliance market was over — for the time being.
Epstein’s new company, Sybase, is one you probably have heard of — and for many years, its relational database gave Oracle a real run for its money.
This concept of divorcing a database from the underlying hardware was, interestingly, similar to the one SAP was also developing, as SAP R/3 was intended to be as independent of the underlying relational database as possible. The rationale was similar to Epstein’s reasoning when he formed Sybase: database independence would give customers greater choice in their technology infrastructure, and would free SAP developers to focus on features and functions instead of optimizing to a single database.
So here we are almost 30 years later, and the arguments are essentially quite similar — although this time, Oracle is trying to restart the appliance market that Epstein helped bury in the 1980s. And the problem for Oracle is that Epstein is still right.
A Major Shift in the Database Market
Epstein is still right because the database market is about to undergo a major refresh. Back in Epstein’s day, it was about the UNIX operating system; today, it’s about the relational database itself. In case you haven’t heard, there’s a new paradigm in town — SAP HANA. It runs on inexpensive, commodity hardware, and it’s about to make older relational databases running on big hardware systems obsolete.
This paradigm shift presents a problem for Oracle’s customers, which is why Oracle’s new “in-memory” database (Exalytics Intelligence Machine) can’t begin to compare to SAP HANA. If you don’t already know, there’s only one database for Oracle’s applications, which means that, until Oracle decides to open up its applications to other databases, innovations like SAP HANA simply won’t be available to Oracle applications customers. Engineering hardware and software locks one system to another, and that means Oracle’s customers can’t capitalize on the latest and greatest in database technology. On the other hand, SAP’s customers are poised to benefit from 20 years of database independence with the ability to run the fastest in-memory appliance on the planet, SAP HANA, on hardware that costs significantly less than Oracle’s hardware.
What’s the Future for SAP?
Coming full circle, if customer-centricity is the reason why Apple has been so successful, then SAP is already well on its way in a broad range of areas including mobility, in-memory, and new cloud applications like SAP Sales OnDemand, SAP StreamWork, and SAP BusinessObjects BI OnDemand, among others. And SAP is innovating with customer-centric services too — Value Engineering and Business Analytics Services are just two examples.
Will these innovations be enough to overcome Oracle’s hardware-software “advantage?” Considering the history of the market, the advantage is of limited value. What customers want are products made with their specific needs in mind — and you have to do a lot more than pull together hardware and software to deliver those products. I think even Steve Jobs would agree with that.
Joshua Greenbaum has over 25 years of experience as a computer programmer, systems and industry analyst, author, and consultant. He spent three years in Europe as an industry analyst and a correspondent for Information Week and other industry publications. Joshua regularly consults with leading public and private enterprise software, database, and infrastructure companies and advises end users on infrastructure and application selection, development, and implementation issues. You can reach Joshua at editor@insiderPROFILES.wispubs.com.
January 02, 2012