SAP To Acquire Hybris — What Does It Mean?

After repeated false starts of trying to build its way into the enterprise eCommerce space, SAP has finally decided to do a U-turn on its strategy and buy its way in. For years there has been intense speculation that SAP might acquire hybris, and behind the scenes there has certainly been much umming and ahing over the enterprise software giant’s commerce strategy. Hybris has been on a tear recently, and until today was widely expected to file for an IPO in 2014; however, the firm’s destiny has for some time been in the hands of its VC investors (Huntsman Gay Global Capital, Meritech Capital Partners and Greylock Israel). The decision to sell to SAP was likely influenced by these VC firms who, between them, have a controlling state in the firm. The value of the acquisition has not been disclosed, but given hybris’ strong earnings over the past four quarters (the bulk of which was directly from license revenues) and with the looming path of an IPO, we can speculate that SAP paid a substantial price tag — although the terms of the transaction are likely complicated.

So the big surprise is not why, but why now? There is no single answer to this question — but we can look at the factors that have increasingly piled on the pressure for SAP to change direction and pull the trigger on this acquisition:

  • SAP’s WCEM product was simply too far behind the market leaders. In Forrester’s last evaluation of B2C commerce suites in September 2012, SAP’s WCEM (Web Channel Experience Management) solution fell far behind the leaders (IBM, Oracle, hybris and Demandware). Although over the past 18 months SAP had certainly made strides in the right direction, two major problems continued to constrain the success of this product in the market: 1) The product simply could not complete on functionality, and 2) it was too tightly coupled with and dependent on SAP’s CRM product, severely limiting its appeal outside of SAP’s CRM install base. Forrester expects SAP will wind down development of WCEM and put all its eggs in the hybris basket going forward.
     
  • Hybris has recently been treading on SAP’s traditional ERP turf. One of the core strengths of hybris lies in its mature B2B commerce capabilities. It’s a great solution for manufacturers and distributors who use it to drive their B2B (and B2C) eCommerce revenues, but these firms face complexities as they find duplication of capabilities (catalog management (PIM), pricing, offers, promotions, personalization, order management) between hybris and their SAP ERP. To this end, hybris has at times been describing itself as the “ERP of the Front-End.”
     
  • SAP had a huge void in its portfolio against IBM and Oracle. The lack of a credible enterprise commerce platform has made it hard for SAP to compete against its arch rivals IBM and Oracle, which respectively have invested billions of dollars in their own eCommerce acquisitions over the past three years. This situation simply came to a boiling point. SAP finally reached the conclusion that catching up via a build strategy was not working.

With this acquisition, the enterprise commerce technology landscape is now dominated by four large software companies: SAP, IBM, Oracle and eBay. There are other smaller players, notably: Demandware, Digital River and Intershop, all of which have long been publically traded. The acquisition of hybris brings to a close a multi-billion-dollar, three-year spell of intensive M&A and IPO activity in the enterprise commerce technology space. There will be future acquisitions for sure, but there are few independent vendors left now. The enterprise commerce space has entered a new phase of maturity and is now firmly entrenched as a strategically key product line alongside ERP and CRM.

So what does the acquisition mean for existing hybris customers and partners?

For now it’s business as usual. SAP plans to operate hybris as independent business unit (which would have been a very important factor in the negotiations for the hybris founders and management team) so we can expect the management, development and sales teams to remain mostly intact. Investment in the solution will continue at the same feverish rate as before. Most importantly, however, hybris will continue to be offered to the market as a standalone product suite. There will be no forced dependencies on SAP’s existing ERP and CRM product lines, which will ensure that hybris continues to be an attractive choice for customers regardless of their current flavor of ERP or CRM back-office. Over the next 18 months we can expect SAP to make significant investments integrating the hybris suite with ERP and CRM, making it easier for existing SAP customers to use hybris in an integrated fashion. Furthermore, I expect that we will see SAP leverage assets like Hana to bring exciting new capabilities to hybris in the future. Put simply, existing and prospective hybris customers have little to worry about and those who are also existing SAP customers will likely have much to get excited about as the joint strategy and road map are unveiled.        

Hybris has a large network of 250+ technology and commerce service provider partners. Many of its premier partners like Sapient, Accenture and Deloitte are also major SAP partners. So for them, this convergence will be compelling in terms of their ability to offer a cohesive solution to clients. For hybris’ smaller partners, the future may be a little hazier. On paper, it is business as usual: hybris will continue to support all partners and will sell the solution stand-alone from other SAP assets. However, over time, it is possible that the complexity of working with hybris as an entity of SAP will become a burden for some smaller niche eCommerce implementation partners.

The acquisition also leaves in doubt the future of hybris’ partnership with Adobe’s CQ5. SAP lacks a web content management platform in its product portfolio but with this acquisition, it has just gained extensive capabilities in digital customer experience through the personalization, content management, site search and merchandizing capabilities of the hybris platform. Forrester expects these digital experience capabilities to become strategically important to SAP going forward.

Learn how to support an increasingly diverse set of commerce-enabled touchpoints — all while providing both a consistent user experience and a structured back-end commerce platform — with this complimentary report, Integration Challenges For Mobile Commerce.

I recommend that Forrester clients who have questions or concerns about this acquisition to schedule an inquiry with me to discuss the implications.

Thanks,

Peter

Comments

Thanks a lot Peter for that

Thanks a lot Peter for that very quick analysis. I totally agree with most of your conclusions. The only thing I want to mention is that I don't think that SAP really gained too much with respect to site search capabilities. Hybris' built-in search tool is the well-known open source Solr library - nothing SAP needs to pay money for.
Having seen more than 30 hybris projects in the past 5 years, site search was always the one weakness that almost everyone mentioned. It will be exciting to see if they now try another round of build strategy to achieve an outstanding and not only me-too search solution. As SLI has just gone public last week, another potential candidate for aquisition has left the playground.

Yep, the need to rethink commerce...

Peter, this goes back also to your points regarding order orchestration and omni-channel commerce, agility and better integration.
Clearly, there is a fundamental need for a new commerce system of record that cannot be covered by ERP or CRM - and SAP saw the need to rethink commerce, hence this acquisition.
Good analysis btw & liked also that you mentioned Hybris' ecosystem of partners - that also must have played a role in the acquisition. I'm sure also Brian's strategic guidance had something to say, too :-)

Digital Experiences

> Forrester expects these digital experience capabilities to become strategically important to SAP going forward.

What often happens with acquisitions like this is that product integration shifts to focus on integration with other portfolio products. This is what happened to Oracle, who is still trying to integrate its ATG and Endeca acquisitions with the rest of the Oracle technology stack. Endeca had a great vision for the future of search-driven commerce, but it seems some of that vision died post-acquisition. Will the same happen to hybris?

For this deal to succeed, hybris will need to remain focused on the customer experience, which happens at the intersection of content, community, and commerce. The Adobe CQ partnership filled a big gap in the hybris story, and if that partnership goes away the combined SAP/hybris story is weakened.

Tom, I absolutely agree. The

Tom, I absolutely agree. The "independent" hybris story looks great on paper, but only time will tell if politics come to play and hybris starts spending too much time building complex and costly integration's into the CRM and ERP suite. Keeping focused on the importance of digital experience is key to the future success of hybris.

you said: "This is what

you said: "This is what happened to Oracle, who is still trying to integrate its ATG and Endeca acquisitions with the rest of the Oracle technology stack."

Isn't that what should be happening to attain true "agile" or "omni channel" commerce? leveraging the other valued assets of a larger company? Oracle Commerce is now ATG and Endeca, integrated, as i understand it. And yes, other integrations to Oracle CX/CRM assets are happening, to reinforce the "360 degree view" of the customer. Surely a company with the resources of an Oracle, IBM, or SAP can handle both an integration effort AND attention to the core commerce product suite.

SAP und hybris...Wunderbar!

Peter -- Nice analysis. Well done.

Some additional commentary:

First, Deloitte is not currently a partner of hybris, due primarily to the audit relationship that exists between Deloitte and the Hunstmann Corporation. However, now that this is no longer an impediment, I believe Deloitte will become a more substantial player, particularly given its very strong SAP presence, while other large SI firms who already work with SAP will 'double down' on hybris. This is a great acquisition if you're a large SI used to doing SAP work as this rounds out your portfolio of offerings and give you something new to provide.

Second, the hybris ecosystem in North America is not nearly as robust as in Europe, especially Germany. Accenture's recent acquisition of Aquity (hybris' NA Partner of the year for two years running) just made the pickings even slimmer. However, for those boutiques who are interested in selling at 3-5X revenues, now would be a good time to start seeing who's interested. Still, I would guess that Accenture is going to get first looks at every enterprise-class hybris deal in NA until someone else comes in with an equivalent or comparable team.

Third, don't underestimate the power of Oracle and IBM. They have been selling in this space for a long time and offer very robust and comprehensive solutions stacks -- far more so than hybris. While I believe this acquisition helps SAP move closer to the ball, it's a moving target and both Big Red and Big Blue keep getting bigger where it counts.

Congrats to Carsten, Ariel, Moritz, Steve and the rest of the team. See you on the slopes of Switzerland next January!

Tschuss!

And what does it mean for OpenText ?

Opentext is historically a big partner for SAP

If Hybris now lead the WCM components and why not the DAM tomorrow, what does it mean for opentext ?

I guess they will not only cover the document management system

SAP cannot make it and buy

SAP cannot make it and buy it. hybris is a complicated solution to be leveraged and integrated depend on the scale and complexity. Good fit as both solution are very complicated.

Can my Hybris Cockpit help me configure SAP in Future ??

Pete, I would agree to all your points. But as per my ongoing experience with a Super Major customer, I believe there is a lot more which is dependent on the GTM strategy which Hybris and SAP might take in the next two months.

1. What happens to my Cockpit?? - Hybris's cockpit provides a cutting edge business control to customers, which competitor products like ATG and WCS are yet to provide end to end. The biggest aspiration that I have now from Hybris, is that will my Hybris Cockpit help me configure pricing/promotions and merchandising from Hybris to SAP ERP or not. If yes, then will SAP make changes for this. If no, will customers still be paying DOUBLE MONEY to SAP for configuring and integrating all transactional threads integration and customization.

2. Considering it a decoupled product, what benefit/business value a customer might even get from this acquisition. Most of the B2B commerce implementations will need upgrades and need reliability of the product. Which just became risky because of this acquisitions. One could just hope that it still continues and there is some plan defined for that.

3. Hybris Extend Program - Many innovative solutions from Hybris extend are overlapping to SAP Core features like loyalty management,

4. Omni Channel - Who drives my channel now. e.g. Live chat. SAP CRM might have some chat support and Hybris as others. Arent the solution duplicated now? if yes, then for the best value to customers, are channels planned for end to end implementation.

Above all, if I were a customer, I would still wait for an immediate GTM plan from SAP to ensure that my 100 million dollars which is at stake due to this acquisition, is well planned for sustainability and I am not paying double for anything which I am doing with SAP ERP / SAP CRM and now so called SAP Hybris. Should I put my B2B hybris commerce strategy on hold until i get more clarity ??

Point is....we all need clarity ?

Anand