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Oracle's Hyperion acquisition - How will SAP respond?

Oracle's acquisition of Hyperion has led to much speculation as to what SAP will do next. Many see SAP making an acquisition of its own in the future -- but who?

Oracle fired the latest shot in the battle for supremacy in the enterprise applications market with its acquisition...

of Santa Clara, Calif.'s Hyperion Solutions Corp. last week. The spotlight now falls on SAP and whether it will respond to its Redwood Shores, Calif.-based rival with a big acquisition of its own.

SAP has said repeatedly that its strategy is to develop capabilities organically and "fill in" functionalities with targeted purchases. For example, SAP recently added strategy management functionality with its purchase of Pilot Software. Some analysts do not expect the company to change course, and SAP indicated as much in a statement after the Hyperion announcement.

"I don't think SAP wants or needs to make acquisitions in its areas of expertise, and only tends to make such acquisitions if they have a tactical need, like [making] a big customer more comfortable, which was probably the case with Pilot," said Dennis Byron, analyst for Dennis, Mass.-based IT Investment Research. "An acquisition like TopTier [in 2001] differs in that portal was an area where SAP needed to build expertise."

Regardless of SAP's intentions, the Hyperion acquisition does potentially change the market, according to Byron.

"The financial community is all abuzz that the Oracle-Hyperion deal demonstrates that all the other BI vendors are undervalued and are all 'in play,' " he said.

Should SAP get into the acquisition game, the list of potential targets is long, according to David Yockelson, vice president of research operations at New York's 451 Group.

More on the acquisition
Read more about the Oracle-Hyperion deal

Check out some details of SAP's acquisition of Pilot Software

See what SAP had to say from the searchSAP.com editorial blog

Get more thoughts on the deal from searchOracle.com's blog entry

He puts Teradata and Cary, N.C.-based SAS Institute Inc. at the top of that list. In the past, stumbling blocks have included Teradata's being owned by Dayton, Ohio-based NCR Corp. and SAS's reluctance to sell, but he believes those factors could change. Earlier this year, NCR announced that it will spin off Teradata as a public company, fueling speculation that it will be acquired.

"This has truly become a seller's market, and with the deep pockets of IBM and HP possibly entering the acquisition fray, [Teradata and NCR] could be swayed," Yockelson said.

He believes that Sybase Inc. and New York's Information Builders Inc. are two other potential targets.

Headquartered in Dublin, Calif., Sybase is a public company with a market cap of more than $2 billion. Yockelson believes that its mobile and financial applications business could generate interest, along with its customer base, which includes 80 of the Fortune 100 companies.

Information Builders is a privately held BI and analytics company that is rumored to be up for grabs. Its portfolio of analytical applications is not as broad as Sybase's, according to Yockelson, but it has a large customer base as well as a decent middleware/integration portfolio.

"I'm not suggesting that either of these would be the best fit for SAP," Yockelson said, "but in the scheme of analytics-related companies out there that have significant size, both dollar- and customer-wise, they would have to be considered."

The target that may make the most sense is Ottawa-based Cognos Corp., according to other observers.

"I believe that SAP's best response would be to acquire Cognos, a longtime favorite of SAP clients," said Michael Doane, chief intelligence officer of Peachtree, Ga.-based Performance Monitor LLC. "This would both 'match' Oracle's move and strengthen the installed base that already has Cognos."

Yockelson agreed that an SAP-Cognos acquisition would most closely mirror Oracle-Hyperion, but he said that San Jose, Calif.-based Business Objects SA and McLean, Va.'s MicroStrategy Inc. could also fit.

However, Joshua Greenbaum, principal for Berkeley, Calif.-based Enterprise Applications Consulting, doesn't think that Cognos is on the same level as Hyperion.

"[The Hyperion acquisition] is a pretty dramatic move. I think any move SAP could make that could be considered comparable, such as Cognos, would be a mistake," he said. "Cognos and Business Objects are more reporting tools than packaged applications."

Smaller, more targeted vendors such as Cartesis, Panorama, and ETI could see interest as well, but the main action will probably be on larger targets, according to Yokelson.

"I suspect that the major vendors will look to make major moves here for account control," he said, "as much or more than for technical capabilities."

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