SAP acquires retail software vendor

Robert Westervelt, News Director
In a move that further highlights the increasing friction between Oracle and SAP in the retail market, SAP announced plans to acquire Khimetrics Inc., a retail software vendor with expertise in profitability forecasts and pricing strategies.

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It's a step in the right direction, as it definitely fills a gap that SAP didn't have, but SAP still needs to fill in more gaps in its retail solution.
Noha Tohamy,
principal analystForrester Research Inc.

Scottsdale, Ariz.-based Khimetrics Inc. makes demand analysis software for retail, consumer-packaged goods and financial services firms. The firm has the most experience in pricing optimization for grocery stores and food markets. Khimetrics' analytics software uses internal and external customer data to produce reports for forecasts, promotions and pricing.

Financial terms of the transaction were not disclosed. The acquisition is expected to be completed in January 2006 and is subject to regulatory approval.

The merger is on the heels of SAP rival Oracle Corp.'s successful July acquisition of ProfitLogic, which produces similar demand intelligence software for pricing, markdown and merchandising analysis. ProfitLogic's expertise has been mainly with clothing retailers.

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Retail has represented the frontline in the SAP and Oracle battle, as the two vendors swapped offers for retail software vendor Retek Inc. The bidding war for Retek ended in March with Oracle's successful $670 million purchase of the company.

Retek gave Oracle a big boost among retailers. Retek had about 200 customers in more than 20 countries around the world; its 2004 annual revenue was $174.2 million.

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Retailers have traditionally used best-of-breed software to conduct analysis and run IT systems, according to analysts. But the SAP acquisition could signal the end of best-of-breed in the retail market, said Noha Tohamy, principal analyst at Cambridge, Mass.-based Forrester Research Inc.

"It's a step in the right direction, as it definitely fills a gap that SAP didn't have," Tohamy said. "But SAP still needs to fill in more gaps in its retail solution."

SAP's retail software continues to lack merchandising management, assortment planning and allocation planning features, Tohamy said. Retailers depend on those capabilities to position products in the right stores at the right time, she said.

SAP is also building on its acquisition of Toronto-based Triversity, which makes point-of-sale software for the retail industry. The Triversity acquisition could have been made to block Oracle from building a fully featured retail suite, Tohamy said.

Retail has been an area where the SAP's organic growth strategy has taken a back seat to acquisitions, according to Paul Hamerman, vice president of enterprise applications at Forrester.

"SAP's approach has been to build these kinds of features into their software," Hamerman said. "It's possible that SAP may make more acquisitions in the retail space, as they're increasingly becoming locked in a head-to-head battle with Oracle."

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