Some tech industry speculation has an extra-long life, with the one about SAP buying middleware vendor Software AG getting an extension following recent public comments by top leaders of both companies.
In an interview with Bloomberg News, Software AG CEO Karl-Heinz Streibich said SAP would "definitely" be a sound fit for his company, while adding that with any sale, the price would have to be "excellent".
His remarks came at the same time as SAP's annual shareholder conference, where co-CEO Jim Hagemann Snabe reportedly indicated the vendor is open to more large acquisitions beyond its pending deal for Sybase.
SAP does not comment on industry speculation, says spokesman James Dever. Software AG did not immediately respond to a request for comment.
Software AG's portfolio would add significantly to SAP's NetWeaver line, with its crown jewel being the WebMethods suite of BPM (business process management), integration and governance software. The company is also known for its ARIS process modelling tools, which are used by many SAP customers.
But industry observers polled last week expressed mixed views of a hypothetical merger between the companies, both of which have German roots.
Software AG "has the same 'pride in our engineering' vibe SAP has," says Jon Reed, an independent analyst who closely tracks SAP. "There is a cultural compatibility around that stuff."
In addition, SAP has been trying to portray itself as having more choice and flexibility compared to rival Oracle, which is pursuing a strategy around integrated systems following the acquisition of Sun Microsystems.
There would be obvious benefits in SAP improving its middleware strategy, and "making it super-easy for customers to approach their 'non-stack' stack," Reed says.
SAP recently made a move in middleware, purchasing assets from SOALogix late last year. But NetWeaver still lags behind the market's top players, which include companies like Software AG as well as rival Oracle, observers say.
Oracle itself became a middleware giant only through its purchase of BEA Systems, says Forrester Research analyst John Rymer. "They weren't competing in IBM's league. ... They weren't BEA."
In contrast, Software AG "is a bona fide force [in middleware] and SAP is not," he says. "If they bought them, they would be saying to the market, 'We're in.'"
SAP already made a go at it with NetWeaver, but has lagged the pack for two reasons, he says.
"Their salesforce couldn't sell it. They sell apps. They can't sell this stuff. Of course, they would say that Software AG knows how to sell this stuff."
"The second reason is that middleware is so hard," Rymer added. "You have to invest at such a high level. It changes constantly and they could just not keep up."
Then again, if SAP buys a middleware company now, SAP would arguably be fighting a market battle that has already been waged and largely won, Rymer says, "They should be looking at the next hill."
The company's recent focus on in-memory database technology represents such an opportunity, he says.
Another observer took a different view, saying middleware is too crucial for SAP to neglect, particularly given the company's vast size and the needs of today's customers.
"If you don't have your own tools, you are dependent on someone else," says Ray Wang, partner with Altimeter Group. "Is SAP going to become dependent on IBM or Microsoft? It is a strategic asset they have to own."
NetWeaver has been improved over the years, "but it still does not cut it," Wang says.
It works for companies' basic requirements, "but as you get into a lot of heterogeneous data, and get outside the SAP world, that is where you see some of the challenges," he says.
There are other potential middleware targets for SAP, with a popular pick being Tibco. SOA Software is another possibility, Wang says.
Many large SAP customers are already using software from these vendors "to take care of the things SAP can not do."
Still, SAP has made significant advances in NetWeaver of late, and may decide against an acquisition if it feels the right level of functionality is within reach, Wang says.
Then there's the question of cost. Software AG could represent a fairly sizable investment for SAP, as it had revenues of €847 million in 2009.
But new product lines and other innovations can no longer provide software vendors with the type of steady growth shareholders demand, Wang believes.
"The shift has occurred. Oracle and IBM have proven you need to make large acquisitions in order to grow. It has taken SAP a while to realise this," he says.
But SAP users could get anxious if the acquisitions don't better their experience, he added. "This kind of money could be spent on making the [existing] products better. There could be some kind of backlash if they make a lot of these [acquisitions] and the products do not improve."