Playing Monopoly With Enterprise Software: Will SAP And BOBJ Build Hotels On Broadway Or Go To Jail?

by Boris Evelson.

SAP and Business Objects today announced that the companies have reached an agreement for SAP to acquire Business Objects for approximate sum of slightly above 4.8 billion euro. Forrester has been predicting this continued market consolidation for some time — see our Microsoft Buys Proclarity and Oracle Buys Hyperion research documents, as well as a couple of my earlier blogs on the subject. SAP must be feeling a lot of pain and pressure to make such a significant move — SAP executives have been telling the world for years that they prefer small, tuck-in acquisitions. The deal though does make a lot of sense. In one transaction SAP gets the best of breed set of BI tools with full BI stack capabilities, everything from data integration tools like ETL and data quality to reporting, OLAP, dashboards, text analytics and many others. This deal has multiple implications to enterprise software users, especially for those 30-40% from the common SAP/BOBJ customer base:

Positive implications:

  • Business Objects users will gain from SAP’s domain expertise. In the era of increasingly commoditized products and services, domain expertise and industry specific solutions are key differentiating factors for any enterprise software vendor.
  • NetWeaver BI (formerly SAP BW) has traditionally compared unfavorably to competition. No ETL tool to speak of, poor performance (partially solved with the new SAP BI Accelerator appliance) and scalability, instability, and inflexible reporting often make SAP users turn to 3rd party BI solutions such as the ones from Business Objects. Now these SAP ERP customers will have fewer incentives to look elsewhere for BI solutions and can get best of breed ERP and BI apps from one vendor.
  • SAP/BI combined entity has the opportunity to lead the pack in the convergence of the worlds of data and process. BI vendors have traditionally thought of the world as being data centric. It is not – our world is process centric and data exists only as a byproduct of processes and rules. SAP understands this concept very well and has been practicing  and implementing workflow based industry specific processes with embedded BI for a long time.
  • SAP and Business Objects have always been known for their ability to ingest and analyze structured data from relational databases, in order to discover patterns and trends that help guide business decisions. Conversely, text mining vendors like Inxight, recently acquired by Business Objects, specialize in extracting information from unstructured text — such as emails, documents, blog sites, and Web pages — and then automatically tag and quantify it for analytical purposes. SAP/BOBJ/Inxight now have a powerful combination for applications like fraud detection, enterprise risk management, quality improvement, and a host of other information-intensive initiatives within organizations.

Issues and challenges:

  • The roadmap for SAP/BOBJ Performance Management or Business Performance Solutions is murky. There’s nearly 100% overlap in the PM capabilities of SRC and Cartesis (BOBJ) vs. Outlooksoft (SAP) and profitability applications from Armstrong Laing (BOBJ) vs. Acorn Systems (resold by SAP). Until both companies go through a formal product road map exercise, which may take at least a few months, it is unclear which products will remain front and center of SAP’s Performance Management strategy and which ones will be relegated to the “second class citizen” status. See more on the subject from my colleague, Paul Hamerman.
  • Even though Business Objects continues to work on product integration and made good progress in XI release, it still suffers from incompletely integrated set of products: Crystal, full client BI, WebIntelligence, Voyager, etc. While these products share metadata, security and other integrated features, one cannot easily move a report developed in one tool to another. Moving some of the BOBJ R&D resources to SAP product integration will not make internal BOBJ product integration effort any easier. To make matters worse, BOBJ XI release requires complete retest and sometimes even redesign of every single report. Some customer have been struggling with this upgrade and even used the requirement to upgrade (BOBJ will stop supporting all prior versions sometimes in 2008) as an opportunity to consider other BI tools. SAP has to be very careful not to make this situation worse and potentially loose some BOBJ BI customers.
  • SAP has a bit of a mess on their hands after Informatica (which has a multi year OEM agreement with SAP) was awarded a permanent injunction preventing Business Objects  from shipping Informatica's patented data transformation technology in the Business Objects Data Integrator product (acquired as part of BOBJ acquisition of Actaworks, company originally formed by ex Informatica employees). SAP now needs to figure out how Informatica and BOBJ will play nicely in one sandbox.
  • And last, but not least, Oracle, SAP’s archenemy, has numerous partnerships and joint development efforts with Business Objects. BOBJ is Oracle’s largest BI partner and provides tight data base integration as well as data integration and data quality solutions for Oracle eBusiness applications. This relationship is going to be strained at the very least, and quite possibly severely reduced in scope.

What does it mean to the rest of the market? Remaining pureplay BI vendors (Cognos, IBI, Microstrategy, SAS, Actuate) will most probably treat this as a non-event, and will possibly even try to spin a positive story - the less independent BI vendors left on the market, the more opportunities they have to go after customers who want stack independence. As far as recommendations to enterprise BI users - I say take quick advantage of uncertainties in the product roadmap, lock down maintenance contracts and sweetheart deals while you can to get a good deal from BOBJ before SAP really takes over.

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Comments

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Extending BI to ERP could prove to enhance the success SAP has had in the erp space. With such a well known brand forming part of the SAP stall of product offerings, this should prove to be accelerating SAP dominance in the market.

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Regarding your Informatica statement: "...preventing Business Objects from shipping Informatica's patented data transformation technology" reads as if there would not be an ETL tool at Business Objects anymore. But this is outright wrong. It was one feature they complaint about and it required a few lines of code changes. That's all. And was done six months ago. Needless to say that I, as Business Objects employee, do not rate this feature important nor is the despute over yet.Oh, btw, the company Acta was founded by two Sybase employees. No relationship to Informatica at all.regardsWerner

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Werner, all I meant is that SAP will have to make some hard decisions on pushing Informatica vs. BOBJ ETL as their mainstream ETL tool. A few key employees at Acta indeed came from Informatica, and that's what the litigation was all about. Keep blogging, I appreciate your comments and feedback!

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Boris seems to forget that Oracle / BO relationship was potentially strained already since Oracle acquisition of Hyperion. In a market attacked by Microsoft in the mid market, increasingly polarised by the large ERP vendors in the enterpise market, the move make good sense for BO. I guess SAP obtains what it tried to achieve but wasn't able to deliver to customers with BW: easy and scalable approach to BI.

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Boris, it seems your vision of this market is coming true ... Being in this industry as service provider, I wonder if one day we will still have a "portfolio" of platforms and solutions or it will be all about choosing the right ERP at first.Small BI/BPM players will now trying to sell their goods asap to the big guys left ... what do you think?

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Matteo, BI is quite unique and differs from other enterprise apps because there's just so much room still left to invent and innovate. So while the market will continue to consolidate, I foresee continued emergence of startup companies and continued success of midsize BI vendors exploring new ways to handle broad data sets (thoughsands of dimensions), connecting sentiment analysis from unstructured content with patterns in structured data, and many other unexplored opportunities.

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Very nice summary of what is going on. I have predicted consolidation to take place and as former CEO for a BI company, I would not expect this trend to continue. I did put an entry into my blog http://telluspublication.blogspot.com/2007/02/business-objects-unveils-a... about the fact that traditional BI players would have to find their growth by merging or acquisitions.

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

A good overview of the positive and negative aspects of this deal. I want to add another dimension from a European perspective.There are hundreds of SAP SEM ECCS (Enterprise Consolidation) /BPS (Business Planning) users in Central Europe and many are in the process of contemplating upgrades to SAP SEM BCS/IP (the "next generation BW based SEM tools). It strikes me that until the SAP road map is clear for the many Business Performance Management applications SAP now own it is not sensible for anyone to invest further in such upgrades or implementations? Indeed, by purchasing OutlookSoft and BOBJ (with its Cartesis products) there is a strong argument for speculating that the whole SAP SEM environment is due to die a slow death and to be replaced by SAP, the question is replaced with what?We will be urging our European clients looking at consolidation and planning solutions from the SAP stable to move with great caution regarding these products until SAP issues a clear and unambiguous product road map for its portfolio of Business Performance Management applications.I suspect in the short term this will only play into the hands of Oracle-Hytperion, Cognos and MicroSoft (with Performance Point), whose product road maps are currently much clearer and thus less confusing and lower risk.At least that will be our advice until the next merger in this space takes place! The only question is will it be MicroSoft/Cognos, IBM/Cognos or even Oracle-Cognos! All have some logic, particularly for a market that now seems to believe Performance Management Applications are the great growth engine for the Enterprise software industry over the next 10 years!

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

Interesting overview but as somebody working with BusinessObjects (but not for) while I agree with some of your points I disagree quite strongly with others and question how up to date you are with Business Objects.As others have commented the DI infringement issue is old news and a single minor feature long since removed.XI migrations in 99% of cases are straight forward. We have done 35 migrations and rarely redesign reports other than out of choice. Average time is just 2/3 weeks per migration. Not sure who you have been speaking to?On integration, XI offers multiple report formats for different purposes. The question I would ask is why would anybody want to convert them? If Bobj do bring out such integration I cannot imagine many people using it and it will be purely to satisfy selection process tick boxes and analysts!In terms of the positioning of pure-play vendors in the market I would not want to be a sales person trying to push Cognos, Microstrategy et al into SAP accounts (which is a big portion of the enterprise market). Therefore can hardly be described as a 'non event'...

re: Playing Monopoly With Enterprise Software: Will SAP And BOB

There maybe a solution after all.http://www.erp-link.com