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By Tony Hallett, 4 May 2004 17:20

COMMENT Dell last week followed up a 12-month-old formal Oracle alliance with a love-in in New York with enterprise applications giant SAP. But what do all the smiles amount to, asks Tony Hallett, beyond the teaming of two of the industry's biggest players?

Dell is desperate to be called a grown up. The company, still just 20 years old, has come to dominate the market for PCs. And while there are plenty of headlines about its moves with printers, PDAs and MP3 players, what it seems to care most about right now are the three Ses: servers, storage and services. These are where it sees the juiciest margins - where it sees its future enterprise credentials and the possibility of inflicting most pain on rivals HP, IBM and Sun.

Given all that, an official tie-up last week with German enterprise software behemoth SAP comes as no surprise. The two companies have of course worked with each for some time but with more and more organisations trusting their high-end software roll outs on Dell hardware, it was time to make it official.

Speaking in New York, Dell chairman and CEO Michael Dell talked - not for the first time - about "customers being tired of the lock-in of proprietary systems" and called SAP implementations "a huge opportunity for Dell", as many migrate from systems provided by other vendors.

For his part, SAP CEO Henning Kagermann said Dell has "very attractive hardware and good services" but in a post-presentation chat with silicon.com was reluctant to play down his company's relationship with Dell's rivals.

While the two companies share customers in over 5,000 installations - including big names such as ABB, Aventis, Nestle and Texaco - rivals for now still question Dell's credentials at the high end where SAP plays.

Paul Slinger, SAP solutions manager at Sun, wonders just how many of those Dell implementations feature Dell merely "as an element".

SAP doesn't break down its software by the hardware on which it runs - that can be a tricky business, on several levels - but it is indisputable that more often than not SAP enterprise resource planning (ERP) and other applications are mission critical for organisations. As such, SAP already has 'centres of excellence' with Dell's main rivals, while a company such as Sun has similar arrangements in place for software from the likes of IBM, Oracle and Veritas. It's a prerequisite for best practice enterprise computing.

Dell has in the last few years made great strides with its services offerings and very much needs that credibility to further its relationship with SAP but while the Texas-based vendor is one of the industry's rising stars, its hardware alone isn't enough of an attraction.

One analyst calls hardware "almost tactical" in any SAP implementation, next to services, consulting, project management and so on.

A lower total cost of ownership for SAP software that runs your business won't be because of commodity Dell servers, even if Kagermann admits to admiring Dell's model.

One Dell and SAP customer, Buckinghamshire County Council, was a happy Dell desktop user but running SAP on Dell servers was a more challenging proposition - though one that ultimately it pulled off.

Dale Vile, service director at Quocirca, said: "A server migration at the heart of a big live SAP system is a pretty hair-raising prospect and people will think not just twice but three times, four times and more before doing it, even if there are substantial cost savings.

"The bottom line is that [the SAP tie-up] is a good move to make sure Dell gets its fair share of the pie in the traditional SAP market but HP and IBM are going after the same Linux/Windows space so Dell is not just going to swan in and clean up."

What SAP does get, of course, is potentially another channel into key users. For example, there is talk that Dell is making headway in key verticals such as defence, versus some of its main foes, and an account manager there can effectively become an SAP advocate, in an area where SAP isn't so strong.

Where does this leave the competition? A Sun, to come back to that wily foe, will continue to stress its 'been there, done that' experience with SAP and while Dell rightly points out its clustered Intel-based servers can handle heavy duty software these days, outsourcers may sometimes charge per operating system installation - meaning a bunch of Dell servers might just work out more expensive than Sun kit.

Sun and IBM might also point to their experience with 64-bit computing, an area where Dell and HP - rallying around Intel's Itanium 2 processor - are seen to be trailing. That, Sun says, is the migration they are seeing among SAP users, not proprietary to standards-based, where those 'standards' are Intel and either Microsoft or Linux as the OS.

But for all the opposition's experience, Dell continues to make progress. Its services business may not be all about Dell-badged staff but it is opening doors and will make it money.

Last year Oracle, this year SAP - it could just be that its enterprise credentials are raised further should it hook up with another key player. How about PeopleSoft next?

"We're watching that one closely," a Dell spokesman said.