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SAP to acquire
Business Objects
Computers & BusinessWorld News
Helena Schwenk and David Bradshaw (Ovum)
Boston
Massachusetts, USA
Late on October 7th, 2007 at in
impromptu press conference, SAP announced that it had agreed to
acquire Business Objects for €42 per share or around €4.8bn. The
deal needs approval from the shareholders of Business Objects.
It also depends on the approval of the French Stock Exchange
Authority and the French Finance Ministry. It's also complicated
by Business Objects having dual listings in Paris and New York.
There are two key questions here: why is SAP buying Business
Objects, and why is Business Objects interested in being
acquired? Turning to the first, SAP has tended to carry
relatively small acquisitions and that's one thing this isn't.
So there must be compelling reasons from its side for this to
happen.
Most obviously is retaliation to Oracle buying Business Objects'
competitor Hyperion, which specialized in adding financial and
performance management tools for SAP systems. While neither SAP
nor Hyperion can afford to back away from this relationship, it
is deeply uncomfortable to SAP. We therefore expect SAP to work
with Business Objects - which only recently acquired performance
management vendor Cartesis itself- to provide an alternative for
its customers.
Another factor is the business growth that SAP can get from the
combination. Large suppliers are attracting ever larger share of
customer spend, as customers try to reduce the number of
suppliers to bring some order to their IT buying. In some
accounts, the purchase might turn SAP from being an 'also ran'
into a strategic supplier. However, our experience is that SAP
tends to be either a strategic supplier to its customers, or to
have such a small footprint that it is barely on the corporate
radar screen.
But a much more important and longer term objective is what we
call 'operationalising' the intelligence from the business data
and here Business Objects brings great breadth of BI and
performance management capabilities to SAP. Managing processes
and transactions efficiently is only half the challenge that the
typical business faces - the other half (at least) is trying to
decide what the smart thing is to do. This is a problem that
extends from the corporate strategy level all the way down to
the people at the coal-face carrying out the business processes
and transactions. Typical BI systems address only top
management's need for 'intelligence', which is why penetration
of BI within the enterprise has only hit the 15-20% range.
Two other issues for SAP in the acquisition will be conflict
with its existing BI capabilities and its relationship with
other BI vendors. SAP's own BI platform (SAP Netweaver BI)
competes with BI vendors in around 30% of deals, but SAP also
operates in a landscape of 'co-opetition' with the leading BI
vendors - including Business Objects - to complement and broaden
the reach of Netweaver BI. Some SAP customers had success with
Netweaver BI, but others had problems, for example with
integrating non-SAP and SAP data sources and the complexity of
SAP's analysis front end (BEx).
The Business Objects acquisition will bring both data extraction
capabilities and market-leading front end query and reporting
tools, complementing parts of the Netweaver BI stack. However,
there are huge areas of overlap between the product sets. We
expect any soon-to-be-announced integration plans to detail the
areas for rationalization and the product roadmap moving
forward. How well it can carry on 'playing nicely' with
competing BI vendors after it acquires Business Objects remains
to be seen, but we think it will have no choice but to try.
So why would Business Objects want to sell? Consolidation in the
independent BI space has picked up space recently with the
acquisitions of Hyperion, Cartesis and Applix - to name a few -
all happening this year. In fact rumors surfaced in September in
the French newspaper Le Figaro that Business Objects was looking
for a buyer. We expect this consolidation trend to continue in
the future, so it comes as no surprise that Business Objects
took the initiative. The only other indicator was a profit
warning that the company issued last night. Business Objects
will hope that being part of a larger company will help drive
revenue and growth for its BI and performance management
products in an increasingly competitive market. |
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