What the SAP/Business Objects Acquisition Means for Data Managers

In October, SAP announced it would acquire Business Objects. This transaction happened amid a quickening pace of consolidation. Oracle bought Hyperion. Business Objects bought Cartesis. Oracle may buy BEA. So it looks like lots of applications are headed into the ERP stack. Data managers need to be on the look out. The best-of-breed BI that they are running or considering purchasing may soon have a completely new product roadmap ahead of it.

One-Stop Shopping

The only users truly in a position to benefit from the acquisition are companies that use both SAP and Business Objects, because they will be larger customers with more bargaining power and the post-acquisition entity will be in a position to offer better pricing because of economies of scale. This benefit will only happen in the long run.

Other users may not be so lucky. The real value from BI comes from extracting meaning from the databases in multiple platforms. Since SAP’s development and roadmapping is typically SAP focused, Business Objects users who do not use SAP or have highly heterogeneous operating environments should be concerned that their BI platform may become more suitable for an all-SAP environment than their own.

What Users Should Keep in Mind

Companies that are thinking about buying Business Objects today should reconsider that strategy. The SAP acquisition is not likely to drive faster innovation at Business Objects, but it may drive higher prices and some confusion as Business Objects employees determine where they fit in the broader SAP organizational chart. In the very long run, unless a company has already had a strong SAP presence, Business Objects is unlikely to be a good choice.

Companies that are considering adopting best-of-breed BI should be ready for integration challenges and make sure their vendors are offering technology and best practices to meet those challenges. Ideally, BI should be independent of - but tightly integrated with - ERP. However, the best-of-breed BI solution bought today may be acquired by an ERP vendor tomorrow. Companies will need to have the integration expertise on hand so that they will always be able to get value from their BI solution, no matter who owns it.

Companies that have integrated Business Objects with a non-SAP ERP system do not need to panic, but they should begin thinking about an exit strategy. SAP may be bureaucratic and slow moving, but it will eventually get around to changing Business Objects features and functionality in an SAP-centric way. When this happens, Business Objects users will probably have to spend more to continue getting rich analysis of non-SAP ERP data.

Companies that are using SAP and Business Objects should ask how this will benefit them, and be guardedly optimistic about the answer. These users are now bigger customers of SAP and should have better bargaining power. And acquisitions like this should result in economies of scale that reduce the cost of software for end users. But SAP has little experience in integrating large acquisitions and has been slow to change, improve, and integrate its own solutions. So it’s not likely that customers of both Business Objects and SAP will see many benefits in the near term.

Proving Cognos Right

Cognos has long been telling BI users that it should standardize on one BI platform. While they naturally profess that it should be Cognos, the pitch does have users’ best interest in mind. Having a BI platform extended broadly across the enterprise independent of, but tightly integrated with, the ERP stack means that you can get actionable conclusions from all your data with consistency without becoming more beholden to your ERP vendor.

Although Oracle and SAP are betting there is a benefit to integrating best-of-breed BI into their stacks, neither has shown how this approach maximizes value for end users. If there is uncertainty around road mapping and support issues for Business Objects and Hyperion users, it gives credence to Cognos’s standardization story. Because few companies are able to standardize on just one BI application, it gives companies a reason to consider shifting their BI purchasing toward Cognos.

A Place for Best of Breed

Is it time to revisit best of breed? Its role is being tested, as both Oracle and SAP want to integrate the best BI, analytics, and integration technology in their core offerings. Both also want to reduce the number of vendors and account managers their customers have to manage. As acquisition drives enterprises to become larger customers of either Oracle or SAP, they should use that leverage to demand lower software costs, better application performance and shorter, less expensive deployments.

Over the long term, users should also demand more seamless integration among the solutions that Oracle and SAP have acquired. It’ is not yet clear, however, how Oracle and SAP will be able to deliver that. Oracle is making some headway with its aggressive roll out of Fusion, but SAP is a different story. It has never acquired or integrated a company as large as Business Objects. Given its autocratic and bureaucratic corporate culture and the slowness with which it has addressed on demand and integration challenges in its current portfolio, it is hard to see how SAP will integrate Business Objects products, or its own cluttered BI offering, with its other solutions any time soon.

As Oracle and SAP continue their acquisition roll, smart IT managers will recognize that consolidation is not necessarily a bad thing. In fact, integrating business intelligence, Web services and other functionality within the core enterprise application environment should lower consulting and deployment cost and time. I should also make it easier for the average customer to manage a smaller number of vendors. So-called best-of-breed vendors will continue to be acquisition targets, and will have to continue to show why innovation, support and ease of integration make them ideal candidates for investment. The big guys will have to show a clear vision and product roadmap for how they are integrating (not just acquiring) technology. End users who play it right will have more power over both.