Analysis: SAP's inevitable BI acquisition

For the last year, trend watchers in the business intelligence (BI) industry have been watching and waiting for the next big acquisition. In March, Oracle announced it was buying reporting and BI vendor Hyperion and Microsoft acquired ProClarity early last year.

But the big deal was always going to involve Business Objects in one form or another. The French-US software company is largely credited with starting consolidation in the sector by buying reporting software house Crystal. And late last year, rumours emerged in the Parisian press that Business Objects had effectively put it self up for sale.

The suggestion that Business Objects was actively looking for a suitor was strongly denied yesterday by John Schwarz, the company's chief executive, in a joint press conference with SAP executives. The board of Business Objects had not "shopped" the company around, he said. Instead, SAP had called on Business Objects to seek out a deal.

If that is indeed the case, it suggests that SAP was reacting in part to Oracle's purchase of Hyperion. At the time of that deal, Oracle's chief executive Larry Ellison said publicly that the acquisition was driven at least in part by a desire to strengthen his company's offering to SAP customers. A move by SAP to bolster its own BI capabilities was bound to follow.

Best of breed

The decision to buy Business Objects, though, will have come as more of a surprise. SAP has no real history of large acquisitions, preferring organic growth and "in-fill" deals to add specific technologies to its portfolio. Yet it is paying €4.8 billion, in cash, for Business Objects, funding the deal from its own cash balances and debt.

The move is also a significant change of strategy for Business Objects. Bernard Liautaud, Business Objects' chairman, has long been a strong advocate of treating BI as a technology separate to both the operating system and middleware, and business applications.

Liautaud also maintained that Business Objects' focus on the BI market ensured it would stay ahead of the competition, not least that from business software vendors.

For customers, Liautaud maintained, this best-of-breed approach to BI would give end users the best technology for exploiting the data across all their applications. They would also find it easier to maintain a single, consistent data set or "one version of the truth."

SAP says it will continue to operate Business Objects as a separate company, leaving it free to sell to SAP and non-SAP accounts. But customers, especially those not currently running SAP, may start to question whether Business Objects can still offer that all-important independent analysis layer, especially in the medium term.

"There are potential benefits if a company uses their back-office apps (ERP, supply chain management) and BI from the same vendor. In cases where a company does not run multiple operational systems from several vendors, this is particularly true," said Andreas Bitterer, research vice president at industry analyst Gartner. But, he adds, such companies are rare.

Benefits to businesses

Less rare, though, are companies where a limited set of BI functions are good enough for the job at hand.

Most ERP vendors, including Oracle, Microsoft, IFS and even SAP, prior to the Business Objects deal, offered some reporting and analysis tools within their environments.

For businesses that need to carry out task-specific BI, and want to do that quickly, there is a strong case for using the ERP vendors' tools. Taking information out of such environments, bringing into a central data warehouse and then running analysis tools inevitably brings delays and, potentially, data errors.

For SAP customers, the Business Objects deal should bring richer analysis tools to SAP applications. That might not happen immediately, not least because SAP intends to maintain Business Objects as a separate operation. But it is in line with the trend towards "operational" business intelligence and one that CIOs are likely to welcome.

"A much more important and longer term objective is what we call 'operationalising' the intelligence from the business data," according to David Bradshaw, principal analyst at Ovum. "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 is the smart thing is to do."

SAP users might now be tempted to consolidate their BI tools around Business Objects, driven by the promise of greater integration with Netweaver (SAP's middleware environment) and its core applications.

But for companies that are not large-scale SAP customers, the benefits might be more marginal. Much will depend on the resources given to Business Objects to continue to develop its own product lines independently of SAP.

Much will also depend on how well Business Objects maintains relationships with other ERP and CRM vendors, including Oracle and especially, Microsoft. Microsoft is due to start shipping its BI integration tool, PerformancePoint Server, in the next few weeks and this could provide an interesting alternative for CIOs looking for an application-independent BI system.

Some CIOs, and indeed finance directors, may well want to maintain such an independent BI layer. Doing so should help to ensure that reporting and analysis are not tied to any one business application, making it easier to upgrade either BI or the applications that feed it or to add additional applications, for example as a result of an acquisition.

Although the pool of independent business intelligence vendors is shrinking, there are still some strong choices for companies that do not want to go down the SAP-Business Objects or Oracle-Hyperion route, says Nigel Montgomery, at AMR Research.

"There are still a number of independent BI vendors who will certainly step into the void they perceive has been left by SAP's purchase of Business Objects," he said. "These include Cognos, SAS, MicroStrategy and Information Builders. And Microsoft has all the pieces: it just needs to execute well on getting its message, and its software, out there."

Email to a friend

Print this page

Social Bookmark this article: What is this?

Digg

Delicious

Reddit

StumbleUpon

Slashdot

Google

Facebook