The news that software powerhouse SAP (Walldorf, Germany) plans to acquire Business Objects (Paris) for $6.78 billion again points to the growing importance of business intelligence (BI) to financial services. Industry watchers are chattering about the significance of the deal, noting that SAP, which typically is very conservative when it comes to acquisitions, has deviated from its organic growth strategy in order to bring BI functionality in-house.
"The deal makes sense from the standpoint of marrying business intelligence technology with ERP [enterprise resource planning] applications," says Boris Evelson, principal analyst, BI, for Forrester Research (Cambridge, Mass.). "The deal is surprising in the sense that SAP has long insisted that its growth strategy is organic and that it would not make major acquisitions to gain market share. The Business Objects deal is by far the largest SAP acquisition to date, comparable in scope to Oracle's acquisitions of PeopleSoft, Siebel and Hyperion."
In an official statement, the two companies said the deal aims to enhance SAP's existing business software, including a full suite of banking solutions, with Business Object's BI capabilities. Bernard Liautaud, founder and chairman of Business Objects, echoed that goal in the release announcing the acquisition. "The combination of Business Objects and SAP means that we can truly amplify the reach of business intelligence -- from the C-suite to Main Street," he said.
The move highlights the ever-increasing importance of BI in a company's IT toolbox. "From the BI perspective, the deal does make a lot of sense," says Forrester's Evelson. "BI sits atop business and IT investment priorities."
The Domino Effect
Most of the major software providers, including Microsoft (Redmond, Wash.), Hewlett-Packard (Palo Alto, Calif.), IBM (Armonk, N.Y.) and Oracle (Redwood Shores, Calif.), already have gobbled up or partnered with existing BI providers. "The business intelligence space is undergoing massive changes," observed Gartner (Stamford, Conn.) analyst Andreas Bitterer on CNNMoney.com. "Oracle's acquisition of Hyperion was the first domino to fall. SAP's deal with Business Objects is the second one. Now the question is: Which will be the next domino to fall?"
Many insiders are looking to one BI provider -- Cognos (Ottawa) -- as the next likely candidate for acquisition. "Cognos will likely be bought eventually by someone wanting to offer a broader product line," says Adam Honore, Aite Group (Boston) senior analyst. "But I don't think it will have a major impact on financial services implementations."
Meanwhile, activity in the BI space continues. The day after SAP annouced its acquisition of Busines Objects, Cary, N.C.-based SAS, another large BI provider, and data warehouse analytics provider Teradata (Dayton, Ohio) annouced they would integrate their products for faster data analysis.
So what impact will the SAP-Business Objects deal have on banks? Forrester's Evelson says that existing Business Objects users will gain from SAP's domain expertise. "Domain expertise and industry-specific solutions are key differentiating factors for any enterprise software vendor," he asserts.
"[BI] is a big focus across the industry right now," Aite's Honore adds. However, "These big enterprise BI tools are similar to the classic big CRM implementations -- integration is expensive, the failure rate or user acceptance rates are not astronomical, and capital markets trends do not lean toward enterprise applications. ... Instead, reporting and BI are coming out in smaller projects like risk management and customer profitability measurements."