SAP’s $8 billion BI buy poses questions all round

The main impact of SAP’s planned acquisition of Business Objects in New Zealand and Australia will be in the area of distribution channels, says Ian Bertram, managing vice president for business intelligence at analyst firm Gartner.

“Business Objects has very good representation in Australia and New Zealand through channels and SMBs, and the question is ‘how will they do channel rationalisation’.”

SAP also has extensive reseller networks here and worldwide, so bringing together both companies’ channel communities will be a significant task during the integration, Bertram says.

Locally, the proposed take-over is seen as positive by Eagle Technology, which represents both companies in New Zealand.

“We’ve been advised that Business Objects and SAP will continue to operate separately,” says Gary Langford, Eagle’s chief executive.

“Eventually, the Business Objects suite will be extended across SAP’s business intelligence tools.”

Langford notes that SAP and Oracle — which earlier this year paid $US3.3 billion for another business intelligence vendor, Hyperion — have been major adversaries for years in the ERP space. “That’s going to extend to be full-on in business intelligence,” he says.

SAP’s €4.8 billion (NZ$8.8 billion) buyout of Business Objects, announced on October 7, confirmed industry speculation that Business Objects was for sale, Bertram says, and SAP had been “one of the main suspects” as a potential buyer.

The price paid was “relatively expensive” he says, considering SAP is getting a reporting tool and other capability that will add to existing business intelligence features in its own software, such as Business Warehouse and some BI capability in its NetWeaver platform.

The buy may also be a reaction to Oracle’s Hyperion move, he says.

For Business Objects customers, the main benefit of the acquisition will be that they’ll be part of a large company that “can spend more on R&D and support”, and for SAP customers, integration with Business Objects will be easier.

Bringing Business Objects into the SAP fold will “take a while”, he says.

“It’s all about the roadmap.”

Mike Harte, director of IT services at Otago University, which uses Business Objects, says the news was “a surprise — the first we heard about it was in the press.”

He says it’s “business as usual” as far as the university is concerned, especially as SAP plans to maintain Business Objects as a separate entity.

Other New Zealand customers of Business Objects include the Auckland District Health Board, the Ministry of Health and many smaller organisations.

A positive sign is that Business Objects chief executive John Schwarz will head the SAP business unit that will lead the integration, Gartner’s Bertram says.

Questions that remain unanswered include how the buy might affect Duet, the SAP-Microsoft project that is seeing the two vendor’s products made more interoperable, he says.

Also, SAP’s existing OEM relationships re data with companies such as Informatica may be in question, he says.

“The prediction is that the OEM relationship will cease, because SAP now has much of that [capability] itself after buying Business Objects”.

Eagle has a non-exclusive arrangement with Business Objects but is by far its biggest reseller in New Zealand. That non-exclusivity, however, could open up opportunities for others. Oxygen, for example, is a major player in the SAP market. It is owned by Australian company UXC, which represents Business Objects in Australia through a reseller.

The takeover announcement has stirred up the business intelligence market. It leaves just one major pure-play publicly listed BI vendor, Cognos, whose shares hit a five-year high on the NASDAQ this week upon analysts’ speculation that it could become a takeover target.

With nearly C$440 million (NZ$570 million) in cash and equivalents at the end of Q2 in August, Canada-based Cognos is projecting revenues this financial year, ended February 2008, of around $C1.1 billion.

IBM is viewed as the most likely potential suitor of Cognos, which has been represented in New Zealand for more than 20 years by CDP.

One New Zealand veteran of the BI space, who does not want to be named, says Cognos would be smart to begin offering cross-over deals to Business Objects customers who don’t want to be locked into SAP. He says there’s roughly a 40% customer base currently using both products, so a huge opportunity exists with the remaining 60%.