Analysis: SAP's inevitable BI acquisition

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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.

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