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Retail in Flux as Oracle Battles SAP

While SAP and Oracle fight over who has the cash to acquire Retek , the retail industry is stuck with the bill for now, according to research published this week.

Analysts at AMR Research suggest that Enterprise Resource Planning (ERP) software market leaders SAP and Oracle have such vastly different approaches to product integration and market execution, that the current bidding war will "confuse many retailers and freeze critical enterprise retail IT software spending until there is a clear winner."

SAP's initial $496 million offer in February was quickly countered by Oracle's $525 million bid last week. SAP's initial offer is set to expire by the end of March. Representatives with SAP and Oracle told internetnews.com they expect direction from Retek's board of directors well before then. Executives with Retek were not immediately available to comment on the multiple offers.

In its research paper, Oracle vs. SAP -- What's at Stake for Retek and the Retail Industry?, AMR Research analysts and report authors Scott Langdoc, Robert Garf, and Jim Shepherd echo Oracle CEO Larry Ellison's comment that the size of this deal is tiny, but the significance is huge.

"What will become increasingly important is whether there will be short-term deliverables to help close some of the key functionality and workflow gaps that have either kept retailers on the sidelines or created difficult implementations," the AMR analysts said. "They want better interfaces, more embedded analytics, tighter supplier collaboration, and transparent multi-channel execution. Retailers will not be satisfied until either company addresses these vital investment priorities by conveying a strategic roadmap and then executing it in a timely fashion."

Oracle may be trying an end-run approach to Retek's board, AMR's analysts suggest. The database software company purchased nearly 10 percent of Retek's outstanding shares on the open market in the last few days.

Still, Retek stockholders should enjoy the spotlight while the Minnesota-based retail software provider's board of directors considers whether to back the SAP or Oracle deal, the research paper suggests. The large integrators like Unisys and Accenture also stand to profit regardless of which company acquires Retek, since all of them have strategic alliances with SAP and Oracle.

"Service providers will need to hedge their bets and cozy up to SAP and Oracle, if they haven't already," the AMR report said. "Even if Oracle gets Retek, SAP still has a substantial retail business and not enough consultants to address demand. Because Oracle's plan is to keep Retek's application more or less intact, Accenture's and IBM's Retek teams will benefit by supplying expert resources on the product in the short term."

Retek specializes in software and services for the retail industry, such as merchandise operations management, store and multi-channel retailing, supply chain planning and optimization and demand planning. The company has marquee contracts with retailers such as A&P, RadioShack, GAP, Circle-K, Kroger, Best Buy, Hallmark, Abercrombie & Fitch and the Home Shopping Network.

Previously, Retek built most of its software applications on Oracle JDeveloper platform. But the company has recently moved onto an open standards base more suited to NetWeaver, SAP's own development platform.

If Oracle ends up acquiring Retek, AMR analysts said retailers will still be able to use their current technology investments because unlike SAP, there is no product overlap between Oracle and Retek. However, the report points out that SAP's strength is its global reach and its existing retail sales and presales team that it would combine with the Retek field organization.

"The fact that two software giants are fighting over a company that had a 9.8 percent decline in fourth-quarter revenue shows that the retail software market is heating up," AMR researchers said. "Aside from a few enterprise software players, the retail market is populated with smaller, best-of-breed applications. While retailers will continue to seek unique capabilities that don't fit an enterprise retail software platform, they are increasingly intrigued with larger suites that provide company stability and tighter data and process integration. We expect further consolidation to occur in the next 12 to 18 months."