Retail experts mull back office impact of Retek buyout

While both Oracle and SAP have made bids for retail software company Retek, experts say that practically any sort of vendor consolidation could help IT integration efforts in Canadian stores.

SAP made an initial bid of US$8.50 per share

of Retek last week. Oracle countered by buying 10 per cent of Retek’s outstanding shares and Tuesday offered US$9.00 to purchase the rest for an estimated US$515 million.

The two companies have traded blows over which could present the best package for retailers. “The retail market is a market where we are stronger than SAP,” said Oracle CEO Larry Ellison during a conference call. “Combined with Retek, we would be able to pursue this market more aggressively.”

SAP said in a statement released Wednesday that it “offers superior interoperability with both Microsoft’s .Net and the Java programming environments . . . SAP is in a better position to offer Retek and SAP customers a swift and painless path to the integration of these and other third-party applications.”

At press time SAP had not made a counter offer for Retek shares, but has three business days to respond following Retek’s next board meeting.

Retek has more than a decade of history with Oracle, argued Ellison, and builds its products to be compatible with Oracle technology. Oracle had been in discussions with Retek since last September and only recently learned that there was another interested party. “We knew they were talking to someone else, we didn’t know who,” said Ellison. “We were focused on the PeopleSoft integration. It has been our intent for some time to acquire Retek. It was all just a matter of timing.”

Historically, retailers tend to buy the various best of breed solutions necessary to run a business, said retail analyst Marty McGinnis of McGinnis & Co. Ltd. in Toronto. “If you go into the large retailers, you can find some of everything.”

Hudson’s Bay Co. uses a variety of software products, including Microsoft, Retek, SAP and Oracle. “Generally, we’re in favour of anything that will consolidate and strengthen offerings to the retail industry,” said HBC’s CIO Gary Davenport. “For us, with a large investment in both Oracle and Retek, if there are some synergies there that we can take advantage of, then that would be favourable for us.”

One of the biggest problems for retailer IT is integration, he said, and Oracle’s acquisition of Retek would likely help build bridges between those two product sets.

“There’s nobody that has everything (but) if we can lessen the amount of integration of various aspects of our enterprise, then obviously we’d like to do so,” said Davenport. “If there’s somebody that can offer a more complete solution then we’d want to be looking at that and assessing it.”

But many retailers will remain cautious, said McGinnis, particularly in light of Oracle’s recent acquisition of PeopleSoft. “One of the things I tell my clients is, ‘If you don’t believe this vendor is . . . committed to this product, then take the proposal and put it away right now,’” he said.

Ellison’s promise to retailers is that Oracle could offer a one-stop shop. Company president Charles Phillips said that the writing has been on the wall for some time. The retail market has become more complex with the growth of e-commerce and call centre sales, as well as storefront offerings.

The line between the people who make products and the people who sell them is blurring, he said, which leads to added complexity. Retailers are offering more of their own store brands, while manufacturers like Apple Computer, for example, are opening their own stores.

An industry that had traditionally built its own software tools now wants to buy packaged applications to simplify back office environments, said Phillips. “They’d rather do that through a viable platform from a large third-party software company. Obviously, we’d like that to be us.”

Phillips also hinted that Oracle’s burgeoning interest in the retail market could help the company take advantage of upcoming technologies like RFID, which has been heralded as a means to optimize supply chain integration.


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Jim Love, Chief Content Officer, IT World Canada

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