The heat is on: SAP’s purchase of Business Objects is a defensive move

SAP’s plan to acquire Business Objects is an indication that the German software giant is feeling pressure from Oracle, its chief rival in the enterprise software space.<br/>


SAP ’s plan to acquire Business Objects is an indication that the German software giant is feeling pressure from Oracle , its chief rival in the enterprise software space.
As Oracle went about gobbling up large software companies like PeopleSoft and Siebel the past few years, SAP limited its acquisitions to small “strategic” purchases. The SAP management team insisted any major additions to its product portfolio would be developed in-house.
But early this week SAP pledged to spend $6.8 billion for business intelligence (BI) software specialist Business Objects. That’s more than twice the $3.3 billion that Oracle paid for Hyperion—another BI supplier—barely six months ago.
In a conference call announcing the Business Objects deal, SAP CEO Hennig Kagermann said the company isn’t abandoning its organic growth strategy; it’s merely making an exception in a market segment that demands flexibility from its technology suppliers. The BI sector is “more like a consumer market in that customers expect you to embrace the latest and coolest technology," Kagermann said. "For this, we decided to go with an acquisition strategy.”
To a large extent, SAP already was giving BI users want they wanted by forging alliances that give various BI vendors easy access to data contained in SAP applications. When Oracle purchased Hyperion, however, users suddenly could look to a single supplier for both a full set of enterprise applications and business intelligence tools. SAP could no longer stand pat—particularly in light of how things have transpired since Oracle outbid SAP for Retek, a retail software supplier, in 2005. Since closing that deal, Oracle has made significant inroads
The question now is, what does SAP’s proposed acquisition of Business Objects mean for the BI software market? Executives with Teradata , a BI specialist and SAP business partner, found themselves confronting that question repeatedly at the company’s annual user conference, which opened in Las Vegas the day after the SAP-Business Objects deal was announced.
Terdata’s expertise is in centralized data warehouses that can serve as foundations for enterprisewide business reporting and analysis programs.
“The statement from SAP says Business Objects will operate as a stand-alone company,” Teradata CEO Michael Koehler said. “It shouldn’t have any impact on us.”
Bob Fair, Teradata’s executive VP, global field operations, said previous acquisitions of BI companies by IBM and Oracle had strengthened Teradata’s partnerships with those organizations, and he sees no reason to think things will be different with SAP and Business Objects.
“These large technology vendors are looking to expand software portfolios as means of growing their business,” Fair said. “But they are not looking to do away with their partner ecosystems, which also do a lot to contribute to their growth.”
Tim Shaw is a Teradata program director who works closely with manufacturing companies that link Teradata’s data warehousing and analysis tools to SAP applications. In an interview with MBT, he said SAP recently added components to its NetWeaver technology stack that make it easier for independent BI vendors to access native SAP data. He also argued that it would be impractical—if not impossible—for SAP to reverse that trend given the manner in which most companies deploy BI technology.
Noting that companies historically have deployed BI in somewhat ad hoc fashion—department by department or division by division—Shaw said, “They typically have BI tools from a number of vendors. And they generally are looking for ways of linking all those tools rather than eliminating them.”

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