In-Depth
Industry Reacts to SAP’s Business Objects Acquisition
Most BI and PM players see an upside to SAP’s acquisition of Business Objects—but no two vendors see the same one.
Industry watchers have mixed feelings about SAP AG’s $6.8 billion purchase of Business Objects SA, but competitors do agree on one thing: It’s a bad thing for SAP and Business Objects, they claim, and a good thing—a very good thing—for them.
Business Objects brings bloat and overlap to an already bloated NetWeaver business intelligence (BI) and performance management (PM) stack, they argue. Because both companies built out their stacks (and market share) largely by dint of acquisition, the combined SAP/Business Objects runs the risk of shortchanging—if not marooning—its sizeable customer base, even as it struggles to reconcile a Babel of inherited assets.
That’s the (predictably self-serving) competitive take. Comparatively few BI or PM competitors seem inclined to discuss the thornier aspects of the acquisition—especially about partnerships. After all, industry watchers note, SAP is a ubiquitous BI and PM partner.
"[T]here’s a long list of third-party vendors who’ve earned certification from SAP, to prove that their products interoperate with SAP products appropriately," notes Philip Russom, a senior research manager with TDWI. "Certification will get really interesting, now that SAP owns products that compete directly with most of the vendors seeking certification." The acquisition will affect nearly every BI, data integration, and data quality vendor, too, says Russom: most such companies have existing relationships or partnerships with SAP.
Most of the BI and PM vendors with whom we spoke—all have a relationship with SAP—demurred on the partnering front. Not surprisingly, most want to explore what they see as the upside of the acquisition. The irony, of course, is that no two vendors see the same upside.
Take Cognos Inc., for example. With Oracle Corp.’s acquisition of the former Hyperion Solutions Corp. earlier this year, Business Objects and Cognos jockeyed to position themselves as the Last of the Big Time BI Pure Plays. Now that Business Objects, too, has been gobbled up by an ERP competitor, Cognos is touting itself as the Unqualified Last of the Big BI Vendors.
"The acquisition … presents a great opportunity for Cognos and validates the market vision we laid out more than six years ago—to be the leading independent provider of performance management solutions for customers," comments Mychelle Mollot, vice-president of market strategy and strategic communications with Cognos. "Our single focus on performance management will enable us to innovate and respond to the changing needs customers better and faster than any other vendor out there."
Mollot cites research from Goldman Sachs—the same research, for the record, that Cognos touted after Oracle’s purchase of Hyperion—that found that more than 60 percent of CIOs preferred to purchase their BI solutions from an independent vendor—not an application or database vendor. "We welcome the removal of a competitor who was committed, as we still are, to being an independent player and giving customers equal access to their entire infrastructure, applications and data sources," she says.
Mollot claims Cognos’ strategy has been validated—and is still being validated—by demonstrable customer interest. "In terms of customers, we were already getting calls once the news was announced," she says. "Customers need an independent performance layer that fits into their enterprise infrastructure that sits on top of all their applications and data sources, and Cognos is the only vendor that can deliver that single version of the truth that users need to run their business."
Filling Holes
BI and PM giant SAS Institute Inc., a privately-owned vendor with annual revenues that outstrip those of both Business Objects and Cognos, has a somewhat different take on the acquisition. For one thing, says Gaurav Verma, SAS’ global marketing manager for BI, it’s a good thing for SAP, even if it is a departure of sorts from the company’s standard operating procedure.
"They [SAP] typically choose to develop their own software rather than acquire major components," he observes. "If you think through it, this transaction makes sense. SAP has tried for years to develop and deliver capability that would allow ad hoc query and reporting capabilities against their operational system," Verma continues, arguing that SAP has developed "many iterations of their offering"—from SAP BW through NetWeaver—and has "fallen short of user expectations."
In this respect, he concedes, Business Objects helps SAP "fill some holes." Moreover, Verma notes, SAP’s move amounts to … a validation of sorts of SAS’ own approach to ERP. "By making this acquisition, SAP further acknowledges that ERP and other operational platforms have reached a plateau in their capabilities to impact cost efficiencies. Now, companies are looking to add intelligence capabilities to differentiate themselves."
It’s in this respect, Verma concedes, that SAP’s move complicates things for SAS, which has attained several software interface certifications from SAP, and which is also an officially accredited SAP Software Partner.
"The scope of our partnership and of our interface certifications is worldwide, not country-specific. SAS is also a member of the Powered by SAP NetWeaver Partner Program, the next higher level above the Certified for NetWeaver status," Verma acknowledges. Nor is that all: DataFlux, SAS’ wholly-owned data-quality subsidiary, is also an SAP Software Partner with an SAP certified interface.
Nevertheless, Verma argues, the acquisition shouldn’t unnecessarily complicate things for SAS, which has collaborated with SAP for more than a decade now. "SAS has been partnering and working with SAP from the R2 days [1994] and we don’t see this acquisition complicating our relationship with SAP for multiple reasons, including that this move was precipitated by the need to grow market share in response to the recent Oracle acquisition of Hyperion," he says.
"SAP is not acquiring an integrated pure-play BI software vendor but rather an acquisition-heavy entity that is still in the process of integrating its own recent acquisitions"—which include not just data quality specialist FirstLogic (acquired early last year), but also (in 2007) Cartesis, InXight and Fuzzy Informatik.
Instead of staking out a position as the last—or as one of the last—pure-play BI vendors (ala Cognos), Verma and SAS play a quite different trump card: namely, that SAS isn’t a pure-play BI vendor.
"SAS is a provider of enterprise intelligence. An enterprise intelligence architecture has many components, and BI is just one of those components. SAS provides value by being able to deliver industry-based solutions on top of an enterprise intelligence architecture that includes data integration, storage, analytics, and BI components," he argues.
Cognos’ Mollot, not surprisingly, doesn’t see being a "preeminent" BI pure play as much of a disadvantage. She cites the need for a vendor that, like Cognos, can work with each of the ERP vendors—or what’s left of them—to "embrace and extend" their native BI and PM capabilities.
"We will continue to … [take] full advantage of what each ERP provider offers, and at the same time, [extend that] to cover other data sources and environments," she indicates. "In fact, on Monday [of this week], Cognos will … [announce] that we continue to offer dynamic and effective globally scalable reporting, ad-hoc query, analysis, dashboarding and scorecarding capabilities alongside (and in conjunction with) SAP ERP and SAP NetWeaver Business Information Warehouse applications."
Direct Competition?
What of the probability (some would say likelihood) that SAP will field BI and PM offerings that compete, like for like, with those of Cognos?
Mollot dismisses it as a negligible concern, pending SAP’s successful incorporation (and integration) of those assets, which she and Cognos overlap in many respects with its own offerings. The salient point, she claims, is that SAP’s existing stack wasn’t getting the job done—and that a sizeable number of SAP customers have already turned to Cognos to help redress the ERP giant’s BI and PM shortcomings.
"This announcement is a $6.8 [billion] admission by SAP that the BI and PM strategies they have been sharing with customers were not cutting it," she argues. "It’s also an announcement that is likely to leave many customers—who bought the SAP Business Suite believing they were getting access to all of the technology and applications they needed for BI and PM—angry they will have to buy additional licenses to really get what they were promised."
There’s something to Mollot’s point, to be sure, but—according to TDWI research—it’s Business Objects, and not Cognos, that has the largest BI and PM presence in SAP accounts. TDWI’s Russom, for example, cites a recent TDWI report—"BI Solutions for SAP"—which found that nearly half (46 percent) of survey respondents were using BI products from Business Objects. That number was ahead of both Cognos (at 37 percent) and Hyperion (30 percent). As such, there’s a large built-in audience for Business Objects solutions—assuming SAP doesn’t botch the integration, of course.
In any acquisition scenario—and particularly in cases where both vendors bring legacy or inherited customers and assets to the table—that’s a notoriously big "if," industry watchers stress.
The threat of an antagonistic (or not quite as partner-friendly) SAP looms large as a result of the acquisition. Not everyone admits to being concerned, however. BI stalwart Information Builders Inc. (IBI) says it has often gone it alone, at least as far as its BI solutions are concerned.
"SAP has not been a close partner from a BI perspective," confirms chief marketing officer Michael Corcoran, who says his company developed SAP-oriented BI solutions on its own. "We have been successful in delivering solutions to SAP customers without their support, and we will continue to do so."
IBI doesn’t ignore SAP, Corcoran stresses. Its iWay Software subsidiary -- which publishes integration adapters for more than 300 different data sources -- markets a native SAP adapter, too. "We develop integration software for SAP and have deep expertise in SAP Netweaver and SAP BW," he points out.
IBI isn’t alone in this regard, however. Business Objects -- which acquired SAP ETL specialist Acta half a decade ago -- can also make a credible claim to best-in-class SAP connectivity. Earlier this year, for example, it touted a series of SAP-specific "Rapid Marts" -- essentially turnkey SAP data marts complete with canned data models -- to help customers quickly start querying, analyzing, and reporting against SAP operational data.
Isn’t IBI concerned that Business Objects and its Data Integrator ETL tool (not to mention its Data Federator EII offering) might steal some of iWay’s thunder?
Corcoran demurs. "Information Builders still provides the greatest integration with SAP data and applications, far beyond Business Objects or any other BI vendor," he claims. More to the point, Corcoran argues, IBI (unlike Cognos, Business Objects, or even SAP) focuses almost exclusively on BI. With adoption of integrated BI and PM stacks lagging, it’s a good focus to have, he says.
"The customer adoption of an integrated BI and PM strategy has been limited. While SAP and others continue to focus their efforts on this integration, Information Builders will be delivering massively used BI applications across all functional areas of the enterprise, not just finance," he points out.
Corcoran stresses that IBI is a survivor. "Information Builders has been quietly ... competing against larger vendors for many years. We will continue to focus on expanding on our unique strengths. In some ways, it will be business as usual. However, you can expect us to market much more aggressively and visibly."
Representatives from Informatica Corp. and MicroStrategy Corp. were also invited to contribute to this story; neither had responded at press time. IBM said it doesn’t comment on competitor’s acquisitions.
Several vendors published statements, however. MicroStrategy’s long-time COO, Sanju Bansal, played to his company’s strengths as a pure-play BI vendor—suggesting that Business Objects, which Bansal accurately pointed out had looked to be acquired, couldn’t hack it in the pure-play space.
Not surprisingly, Bansal claimed, MicroStrategy’s focus on BI—that company has neither notched any third-party acquisitions nor positioned itself as a PM player—have served it better than Business Objects’ far broader bent.
"Business Objects needed to be acquired because its long sequence of non-synergistic acquisitions has ultimately diluted the company's focus in a market where focus is essential for delivering the next-generation of BI," he argued, in a statement. "Business Objects has had poor license results and, in my opinion, turned to SAP as a lifeline to access the SAP customers as a prospect base for its diverse products."