Chicago -- The jousting between arch-rivals SAP AG and Oracle Corp. has reached new heights.
Managing Automation has learned that SAP is quietly rebuilding its Human Capital Management (HCM) business as part of an aggressive assault on Oracle's newly acquired PeopleSoft customer base. Over the last two months, in fact, the company has appointed a former PeopleSoft executive as vice president of the unit, while building a sales staff and lining up consulting partners to help convince PeopleSoft's human resources software customers to migrate to SAP.
Oracle, meanwhile, made an unsolicited $9.00-per-share offer yesterday to acquire retail software provider Retek Corp., whose board last week agreed to SAP's $8.50 a share tender. In a prepared statement, SAP pointed to its applications architecture, not the value of its acquisition offer, to reaffirm why the company believes it is a better suitor for Retek -- and a more valuable partner for its customers.
SAP's revitalized HCM initiative goes beyond the simple payroll application of HR. It focuses on business process, using technology to more effectively manage employees and improve their productivity. Combining training, incentive management and compensation management tools delivered through a role-based dashboard, HCM aims to transform each individual in the workforce into an enterprise asset.
HCM has caught on in retail and even casinos -- due in part to the impact a better educated workforce can have on the top line. SAP's HCM new initiative is focused on other industries including financial services and manufacturing. Manufacturing companies, specifically, are in dire need of more effective ways to manage their employees amid shrinking workforces (driven by plant closings and outsourcing) and skyrocketing benefits and disability expenses.
"From a manufacturing perspective we'll focus on how to deliver learning modules to employees with specific information," said Mark Lange, national vice president of HCM for SAP America Inc., in an interview with Managing Automation at National Manufacturing Week.
Lange was hired two months ago from PeopleSoft, where he had spent the last two years as vice president of global product marketing for HCM. PeopleSoft took the lead in this category, building a large user base following SAP's exit. "[SAP] shut down its HCM division a number of years ago when they thought they had passed PeopleSoft in HR licenses," Lange explained. Now, with PeopleSoft technology under the Oracle banner and the future of the PeopleSoft HCM business appearing uncertain, SAP has an opportunity to step in and rebuild a strong presence in the market, he noted.
SAP plans to grow its HCM by 50% in 2005 with an aggressive strategy to migrate PeopleSoft customers to the SAP plan by undercutting maintenance fees and offering tailored packages of software and services, Lange explained. Last year, SAP rolled out performance management software for its ERP system. It also has the HR software that is core to the HCM solution. And now, with the NetWeaver integration platform, SAP can tie various applications together on the front and back end, Lange pointed out.
For instance, a company could design an event-driven workflow that is triggered by mandatory learning assignments. A touch screen kiosk situated near the factory floor work area could administer a training program. The interactive kiosk would track, for instance, which individuals completed the module as well as what direct association they have with lowering machine downtime as a result of completing the training session. That would then tie back to HR and other associated enterprise applications.
"We've been getting the pieces together, but this approach to workforce performance for specific individuals is new," said Lange. "More manufacturers have specific issues around becoming more adaptive. It's different than just doing a job."
Realizing this is not a pure technology play, SAP has aligned itself with the big consulting firms including IBM and Deloitte, as well as a dozen boutiques, to help advise customers on how to deploy a successful HCM strategy. The focus will be in North America at first, but the HCM unit is a global initiative, which will help manufacturers understand how they can "change the game," Lange said.
Word of SAP's rekindled interest in HCM comes as the company's battle with Oracle escalates for the hearts and pocketbooks of enterprise customers -- in manufacturing and beyond. In addition to its bid for Retek (which, if concluded, would represent its largest acquisition to date), SAP earlier this year bought TommorowNow to function as the linchpin of its Safe Passage program, an initiative launched to coax PeopleSoft and JD Edwards customers to entrust SAP with maintenance and other services.
Oracle is not standing still. Its $525 million counter-attack for Retek -- which bests SAP's offer by nearly $30 million -- appears to be aimed at making it more expensive for the German software giant to extend its influence in the retail market, a segment that Oracle similarly seeks to dominate. To back its intent, Oracle purchased 5.5 million shares, or nearly 10%, of Retek's stock prior to launching its bid.
In a conference call, Oracle CEO Larry Ellison said his company's bid for Retek was aimed at preventing SAP from gaining more ground in the North American software market, according to published reports. Retek, he said, was a better fit with Oracle than SAP from a technology and market perspective, and nearly 80% of Retek's 200 customers also have Oracle software installed.
In its prepared statement, SAP claimed NetWeaver will offer "a faster and less painful path" toward true application integration for systems built on both Microsoft's .NET and Java. "SAP believes that integration at the applications level -- rather than at the database level -- is what will drive competitive advantage for companies looking to align their IT infrastructure in order to respond swiftly to changes in the fast-moving retail market," the company said in a clear jab at Oracle.
The end game for Retek poses many interesting questions. First, which company -- SAP or Oracle -- really wants Retek more. At the time its offer was made, SAP's $496 million bid already represented a 42% premium for Retek's shares. That question will be answered if SAP sweetens its tender for Retek, which posted revenues of $174 million in 2004. An SAP spokesman declined comment on the matter.
If Retek's board goes for Oracle's richer offer (and SAP bows out of the battle), the key question becomes one of the Redwood City, CA, company's digestive stamina: Can Oracle execute an acquisition following its $10.3 billion takeover of PeopleSoft, which was exceedingly contentious? Stay tuned.
Online Editor Alan Alper contributed to this article.