Why is SAP Acquiring Sybase to Battle Oracle and IBM? Is it the Right Move?

Every segment of the technology industry has been reinventing itself in recent years. Companies and competition look much different going forward than they did looking back. Large companies like SAP have softened in recent years as competitors like Oracle are winning. So what will SAP do in order to recapture their strength and growth? Acquire? Maybe. Will it be successful is the next question.

This is a new and bold SAP. We have watched many acquisitions over the last 20 years. Perhaps one third are successful and result in improvement. Another third result in a larger, but still struggling company. The last third does not work at all and would be better off never happening.

Which of these will this SAP acquisition of Sybase be? We will not know for a few years. It will take at least a year for the deal to be closed and the companies to be sorted out and blended. Then it depends on what SAP does going forward.

It also depends on what competitors like Oracle and IBM do going forward. They are now aware that SAP is turning into a larger and potentially fiercer competitor. What will they do to solidify their relationships with their existing customers, and to sweeten the pot for new prospects?

These are the important questions we do not have an answer for yet.

We have seen many similar acquisitions. Most were not worth the effort. What will SAP do to make sure they are one of the success stories?

We all know how different groups think and operate. Investors want to know whether stocks will be up or down and place their bets accordingly. Competitors want to know whether this will be a fierce new competitor that they have to prepare for or if it will be irrelevant to the marketplace. Customers want to know what the company will look like a few years down the road to make sure they are where they want and need to be in order to grow their businesses most effectively. Workers want to know because every industry has ups and downs and people want to work for one of the winners for their own personal reasons.

The simple fact is we do not yet know, and will not know for at least the next year or two.

Remember in the 1990's when AT & T, after competing for years with MCI and Sprint, and after the Telecom Act of 1996 decided to reinvent itself? It acquired TCI the big cable television company and turned them into the largest provider in that market. Add to that their growing wireless business, their long distance business and their new local phone business.

There was a time when that occurred that we all thought this was the creation of one of the largest and strongest brand name telecom competitors to ever exist. They seemed bullet-proof and growing faster than we could fathom. It was a big success.

That's what we thought anyway. What happened surprised everyone, and quickly.

Within the next year or two the company started to crumble. They were losing consumer long distance customers to the baby bells. Their stock price was not rising so they thought they should separate the business into units and let each perform on its own.

Then one by one they spun-off the huge business units like wireless and cable television. What was left after a few short years was a small and struggling business services company. That's it. The huge and successful AT & T was suddenly a very small and almost insignificant business services company.

That was a complete shock to the telecom system and it happened so quickly.

So lets not put the cart ahead of the horse and think that if SAP is acquiring Sybase it will be a success. It may. Then again, it may not. Lessons learned from the past show its smart to take a more measured approach going forward. Let's see how the company changes, for better or for worse.

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