SAP, Business Objects Deal Leaves Market in Turmoil

Customers of both Business Objects and SAP are waiting to learn what that the buyout means for them.

SAPs announcement on Sunday [Oct. 7] that it plans to acquire business intelligence software vendor Business Objects for $6.8 billion has left the software industry in turmoil with conflicting prognostications coming from industry watchers and investors alike.

They are asking whether SAP has done a total and permanent about-face on its organic growth strategy (the companys stock fell 4 percent after the announcement) and wondering whether Cognos, Business Objects remaining competitor, would fall next.

But whats been left out of many discussions about SAPs buyout of Business Objects is the customer equation. While those SAP customers who have a classically aligned SAP shop have little to be concerned about—Business Objects will give them an opportunity to noodle around with third party applications if they wish—its those customers coming in from Business Objects who may have even more at stake.

SAP officials have said that Business Objects will operate as a stand-alone business, as part of the SAP Group. Business Objects customers "will gain the advantage of application alignment for business analytics," the companies said in a joint press release.


Read more here about what SAPs Business Objects buyout means for VARs.

What application alignment actually means isnt quite clear if SAP plans to keep Business Objects separate; the benefit to customers—at least SAP customers—would seem to come from a tight integration between the two software sets. That integration likely would come in the form of NetWeaver, SAPs integration and development platform, which could be a problem for Business Objects customers.

SAPs stated goal in acquiring Business Objects is to help the company reach its goal of doubling its market base in the next several years.

"The acquisition of Business Objects is in keeping with SAPs stated strategy to double our addressable market by 2010 as announced in 2005," said SAP CEO Henning Kagermann. "SAP will accelerate its growth in the Business User segment, while complementing the companys successful organic growth strategy."

Forrester analyst Ray Wang said that SAP analyzed the Business Objects acquisition not only for its technology, but for its partner ecosystem as well—a strategy that will help the company reach its customer goals by adding to its reseller base. But in doing so, Wang predicts that many Business Objects customers may be forced, in the long run, to move to NetWeaver.

Wang said that users should hang tight, "and if you have the budget, negotiate longer maintenance contracts and buy new modules for significant discounts," he said. "In the history of post merger announcements, sales reps typically will be offering sweetheart deals to close out the quarter and status as an independent company."

Wang posited half a dozen key questions Business Objects customers should be asking SAP, including: will Business Objects users be forced on to NetWeaver in the long run? Can users ensure that they do not have to use NetWeaver? Will key management change and who will replace them? What impact will the acquisition have on post Business Objects XI releases? Does being a "separate company" in the SAP group work like the way the TomorrowNow works (theoretically, with no sharing of data or technology between the companies)? And how will SAP continue to support non-SAP users?

Aberdeen Group analyst David Hatch said that there are a lot of Business Objects users out there right now asking hard questions—mainly along the lines of what the acquisition means for them, particularly given the fact that Business Objects itself has acquired at least eight companies in the past three years, including Inxight Software, Cartesis, nSite, ALG Software, Firstlogic, Infommersion, Medience, and SRC.


Click here to read more about why SAP is saying its business intelligence strategy is more important than the competition with Oracle.

"As companies start to look at their BI strategies [the first thing to determine] is am I or am I not an SAP shop? If so, do they have enough to support me? The answer is yes," said Hatch. "SAP bought Business Objects to offer BI to its customer base."

To win over customer hearts and minds, SAP needs to develop a plan with regard to Business Objects, according to Hatch. "Customers will seek guidance from SAP," he said.

"SAP has an opportunity to provide a clear roadmap—or not. And, if they dont, SAP customers can look to others. There are a lot of BI solutions. So certainly Business Objects becomes more of a de facto option on the short list, but are they the only choice? No. Its up to SAP to position the company."


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