Another 'strategic alliance' crumbles

, vnunet.com's sister publication, is not one to gloat, but it allowed itself a brief smile last week when SAP and Commerce One broke off their 'strategic alliance' to sell the jointly developed Enterprise Buyer online purchasing software.

A few months ago, Computing incurred the wrath of SAP chief executive Hasso Plattner when it questioned whether the partnership could survive unless the German software giant acquired the ailing US outfit.

"Why is it you press keep asking this question? There is no need to if we are working together successfully," said Plattner at the time. Clearly the two are not getting on as well as he hoped.

SAP owns 20 per cent of Commerce One and the two still develop the MarketSet exchange application. But Commerce One is struggling with falling software sales, and has admitted that a "substantial majority" of licence revenue comes from the SAP partnership. SAP's decision to end the Enterprise Buyer agreement shows that Commerce One needs SAP more than Plattner needs Commerce One.

There appear to be only two outcomes for the alliance: SAP buys the rest of Commerce One (not that difficult with a share price 90 per cent down on last year); or it develops its own version of the shared technology and cuts Commerce One adrift.

But the question marks over the partnership have a wider significance. "Given the number of partnerships that never go much beyond the press release, the term 'strategic alliance' is becoming meaningless," said researcher IDC.

Last week, Computing received seven notifications of newly formed 'strategic alliances'. That was a quiet week.

When a supplier is losing out because of gaps in its product range, the typical reaction is to approach an overlapping rival in the hope that each complements the other. This rarely works.

SAP and Commerce One's problems selling Enterprise Buyer show one of the main reasons for failure: both sales forces targeted the same users.

Other high profile alliances have also foundered on different, but equally self-inflicted, problems. Ariba and i2 fell out once they started struggling for sales and wanted a bigger share of the money spent by joint customers. Why let all that revenue go to someone else if you can do it yourself?

So i2 bought one of Ariba's rivals, and Ariba tried to buy an i2 competitor but failed when its share price plummeted.

It's no coincidence that three of the more successful application software providers have largely avoided the 'strategic alliance'. Oracle chief executive Larry Ellison is a sworn enemy of the 'best-of-breed' approach.

PeopleSoft and Siebel have a keen eye for rivals' complementary software, and they buy them. None of this wishy washy alliance stuff.

Even SAP acquired Top Tier when it needed a stronger portals capability. A previous alliance with Nortel's Clarify unit proved to be a tactical move that faded once SAP developed its own equivalent.

It's not clear which way the Commerce One deal will go.

Users must be cautious of suppliers touting 'strategic alliances'. Be clear where each partner's responsibilities fall, and always mandate one vendor as the prime contractor. If neither party is willing to take responsibility for the other, it seriously questions the partnership's long-term future.