by Boris Evelson.

Yet another rumor crossed the wires today about Business Objects getting ready for a takeover. These rumors have come up before, and it may be nothing else but a routine exercise that BO and other vendors go through to test the market periodically.

As I already blogged back in March '07, there's no denying however that the business intelligence (BI) and business performance solutions (BPS) markets are consolidating. Last year Microsoft bought ProClarity; this year Oracle bought Hyperion, Business Objects acquired Carthesis, SAP acquired Outlooksoft, and most recently Cognos acquired Applix.

I predict that within 2-3 years there will be five major BI vendors carving up the BI and BPS market: Microsoft, IBM, SAP, Oracle and HP. There'll be much M&A activity seen from these vendors in the near future.

Here's how I see it playing out:

• HP will probably make the next big move by acquiring somebody like Business Objects, Cognos or SAS. HP is pushing into BI market very strongly: It repositioned NeoView as a strong data warehouse (DW) platform and bought Knightsbridge — leading BI boutique strategy and implementation consultancy. It'd make a lot of sense for HP to pick up BO or SAS, since in one transaction HP would get the entire BI and PM suite. Cognos would be the second choice for them, since Cognos does not have operational ETL and data quality offerings.
• SAP told us repeatedly that they can't justify very large acquisitions — it doesn't fit their model. So Microstrategy, Actuate or Information Builders would be more obvious pick up choices for them.
• I sincerely hope that Oracle is more than busy with Hyperion integration and more than set in the BI and BPS markets for a while. I don't see the next big move coming from them.
• While IBM seems a likely suitor for a large transaction, IBM told us on numerous occasions that they view BI and BPS as "applications" and IBM does not want to be in the application game. I do not see IBM doing a large BI/BPS acquisition — they are more likely to acquire small BI/BPS "tools" vendors (similar to their Alphablox acquisition) and keep slowly enriching their portfolio of business optimization products.
• I place Microsoft in similar category as IBM — it's very unlikely in my opinion that they will buy a large BI vendor. Microsoft will most likely continue to execute relatively smaller acquisitions such as ProClarity, Active Views, Great Plains and others. Microsoft has a unique SMB market position, a tremendous partner/reseller network, and increasingly popular SharePoint Server (a necessary BI portal and collaboration component). They do not need to surprise the market, they can afford to move at their own pace.

As I mentioned back in my March '07 blog, an orthogonal move could come from EMC or Sun, who have been information management players for years, with BI being a natural addition/extension. Notably absent from all the rumors is Teradata, which in our opinion has to diversify into more layers of the BI "stack" beyond data warehousing to keep its competitive position.