Who Will Win The SAP, Oracle Battle? - Page 2

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Mertz said Microsoft  looms as a potential threat to Salesforce.com down the road. It will be releasing the latest version of its Dynamics CRM Live service in the first quarter of 2008. She said Microsoft is already bringing in between $175 million and $200 million from its CRM Live offering.

"I don't believe Salesforce's success is necessarily due to the fixation Oracle and SAP have with each other," she said. "They have a good alternative to on-premise solutions for a wide range of company sizes. Now they're making more headway into the larger companies, selling into SAP and Oracle strongholds."

Analysts say the growing popularity of SaaS with companies large and small represents a significant growth opportunity for vendors who can branch out from traditional SaaS applications for CRM and human resources to more business-critical applications such as procurement and compliance management.

In March, Gartner reported worldwide SaaS sales surged to more than $6.3 billion in 2006 and predicts the market will blossom to more than $19.3 billion by 2011.

While Salesforce.com keeps adding subscribers, Oracle and SAP continue to trade punches.

In March, Oracle filed a lawsuit alleging SAP engaged in "corporate theft on a grand scale" by engaging "systematic, illegal access to -- and taking from -- Oracle's computerized customer support systems."

Last month, Kagermann conceded that its subsidiary, TomorrowNow, engaged in "inappropriate" downloads of Oracle support materials but said SAP did not access any of Oracle's intellectual property.

SAP claims the "majority" of the 150-plus complaints in the Oracle lawsuit are "unfounded" and Kagermann said he was "surprised and disappointed" that Oracle did not personally contact him when it discovered the downloads. He also acknowledged the U.S. Department of Justice (DoJ) has requested some of SAP's internal documents for its investigation.

Oracle contends TomorrowNow employees downloaded thousands of mission-critical items from Oracle's knowledge bases used to service its customers.

Both CEOs have shown an affinity for mocking one another and their companies in the press, particularly in the months leading up to and immediately following Oracle's hostile takeover of PeopleSoft in January 2004.

Kagermann, in a July 2004 interview with Business 2.0, said he wasn't too concerned about Oracle's $10.3 billion purchase.

"Larry claims that he will overtake SAP," he said. "But just look at the facts. Who's gaining market share? It's all bullsh**."

Ellison enjoys mocking his chief competitor by calling it "sap" and damn SAP with faint praise with quotes such as "[SAP] has good industry knowledge and products in some industries, like oil and gas, but they lack industry-specific knowledge and products in most other industries."

Denis Pombriant, an analyst at Stoughton, Mass.-based Beagle Research Group, said the ongoing war between SAP and Oracle is playing a role in distracting both companies from the threat Salesforce.com presents.

"Salesforce started as an insurgent in a corner of the market that Oracle and SAP didn't want to play in," he said. "They're both making half-hearted efforts to develop an on-demand strategy. But they're more focused on attracting customers with on-demand and then switching them to on-premise solutions with bigger price tags and profits."