SAP and Business Objects explain strategy shifts
- 09 October, 2007 08:38
Executives from Business Objects and SAP each tried to explain why their companies have parted with long-time strategies by agreeing to merge.
SAP announced Sunday that it would acquire the French-American business intelligence vendor for Euro 4.8 billion (US$6.78 billion), a move to expand SAP's customer base and secure it a place in the growing market for BI software.
It's a big change for SAP, which until now has shunned big acquisitions in favor of small "tuck-in" purchases to get new technologies that it doesn't have.
And it marked an even bigger change for Business Objects, a staunchly independent company that has always maintained it was not up for sale despite persistent rumors.
"To those of you who follow Business Objects, this might seem like a little bit of a surprise," said Bernard Liautaud, Business Objects' chairman and founder, apparently reading the minds of journalists at a news conference in Paris Monday. "For 17 years I have spoken in favor of Business Objects as an independent company. So why the change of heart?"
"If you look at developments in the software market, a lot has changed in the last year," he said.
Some big customers would prefer Business Objects to remain independent, he admitted, but there is also "an increasing number of clients who want a stronger alignment between their business applications and their business intelligence platform."
Business Objects was open to the merger because it will be able operate as an "independent business" within SAP, he said, and continue to offer products that work with applications from other vendors. "SAP understands our openness," Liautaud said.
One development in the software market he did not mention was Oracle's acquisition in March of Hyperion Solutions, one of Business Objects' few remaining independent rivals, for US$3.3 billion.
One analyst said Business Objects may have opted for a merger because it felt pressured by the consolidation around it. "Although Business Objects is a huge company, in a sense they are also a niche player," said Bo Lykkegaard, a research manager with IDC, adding that customers increasingly want to work with a smaller number of vendors who offer a wide range of products.
Even as he outlined the proposed merger plans with SAP, Liautaud continued to insist that Business Objects had not been for sale.
"Business Objects never decided to go on sale," he said. "Never did we ourselves wish to put the company up for sale."
Rather, SAP approached Business Objects in July -- one of several big companies that offered a buy-out, he said. "We were of course willing to listen," he said. "We studied the parameters" and decided that merging with SAP would be the best thing to do.
Leo Apotheker, SAP's deputy CEO, also had some explaining to do.
"We never said we would never acquire companies," he said at the press conference. "We've put the emphasis on organic growth, but we never said acquisitions were out of the question."
SAP still intends to grow its core ERP business organically, he said, speaking in fluent French. "However, the business intelligence market is a new market, and to reinforce our presence there we must reinforce our offering," he said.
Page BreakSAP made two small, related acquisitions earlier this year -- OutlookSoft and Pilot Software -- while Business Objects recently acquired profit management company ALG and financial consolidation specialist Cartesis.
A journalist asked Apotheker if Business Objects would not be "one acquisition too many."
"I don't think so," Apotheker said, saying the companies' products target discrete markets. "I'm not saying there's no overlap whatsoever, but there's not much at all."
At least one industry analyst disagreed, however.
"Product overlaps abound, especially in the business performance solutions (BPS) area," Forrester analyst Paul Hamerman said in a blog posting. "This leaves SAP with a daunting challenge to rationalize 3 planning/budgeting solutions, 3 for financial consolidations, 2 for profitability management and several products for strategy management and performance scorecarding."
Still, Apotheker and Liautaud promised benefits for both companies' customers.
SAP users will have BI reporting capabilities embedded deeply in their ERP applications, giving "real time feedback to know if their decisions bear fruit or not," Apotheker said. SAP will also bring its search, in-memory database and master data management technologies to Business Objects' software, he said.
"This is a growth merger; not a merger aimed at cost reduction," Apotheker said.