Taking a page out of rival Oracle Corp.'s playbook, Germany's SAP AG announced late Sunday that it had agreed to acquire France's business intelligence (BI) and analytics powerhouse Business Objects S.A. for $6.8 billion. The surprise move is almost certain to trigger further consolidation in the near future as smaller players and large ones, such as Microsoft Corp., reassess their strategies to take on the established enterprise resource planning (ERP) giants.
Not only does this acquisition echo Oracle's $3.3 billion purchase of business performance management (BPM) and BI leader Hyperion in February for $3.3 billion, some consultants see it as a concession by SAP that organic growth alone will not be able to produce enough growth to meet the company's ambitious goal to double its customer base to 100,000 by 2010. “SAP has always insisted that growth would be internal. Just last spring, the chief executive told us that the company could not justify an acquisition of this magnitude,” says Paul Hamerman, Forrester Research Inc. vice president of enterprise applications. Oracle CEO Larry Ellison, by contrast, has always boasted of his company acquisition lust.
“It's interesting to see two very different strategies bring SAP and Oracle to the same place,” says Bruce Myers, managing director at financial advisory firm AlixPartners. “SAP was always promoting its “Built by SAP” slogan, promising all the functionality in one integrated package.”
It wasn't as surprising to consultants that Business Objects, with dual headquarters in San Jose, Calif. and Paris, was in play–despite its pronouncements that it would preserve its independence. “We just figured that someone else, like Oracle, IBM or {Hewlett-Packard}, would make a bid for it,” notes Hamerman.
So who's next on the eat-or-be-eaten menu in the rationalization of financial information technology? All eyes are on the potential buyout of Cognos Inc., the only remaining publicly traded performance management and BI company, and the other contenders in the ERP space–IBM, Hewlett-Packard and Microsoft. “The acquisition of Cognos may very well be a way for the smaller ERP companies to move up,” suggests Myers. “It would certainly expand their customer base and make them more appealing to larger corporations.” The three contenders have focused on providing software to small and midsize companies.
For SAP, the acquisition of Business Objects is expected to add revenues from small and midsize companies that use Business Objects software without an ERP system base, but it could also over time help them to expand their base of multinationals to include those that use Business Objects but not SAP.
In announcing the agreement, SAP CEO Henning Kagermann said Business Objects would operate as an independent subsidiary. While no immediate restructuring is planned, consultants reckon that over time SAP's Business Information Warehouse suite would be eliminated to reduce the overlap with BI product lines.
Besides performance management, the acquisition also strengthens the overall dashboarding and BI capabilities for SAP?s governance, risk and compliance (GRC) offerings, although some analysts believe that, to be fully competitive with Oracle GRC, SAP will still need to fill gaps in its enterprise content management platform and BPM functionality.
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