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SAP's Business Objects deal presents opportunities, pitfalls for customers

SAP's planned acquisition of Business Objects presents opportunities but also challenges for SAP business intelligence users.

SAP's plan to buy Business Objects SA presents customers of both companies with the opportunity to save money and improve their business intelligence (BI) software, according to analysts.

On Monday, Oct. 8, SAP announced plans to acquire Business Objects, of San Jose, Calif. and Paris, an established leader in analytical software, for $6.8 billion.

Analysts agree that, in many ways, Business Objects' BI products are superior to SAP's, and following the acquisition, customers who bought SAP BI may have a "golden opportunity" to move to Business Objects.

"My belief is that many SAP customers will want to move from SAP BI to Business Objects," Howard Dresner, founder of New Hampshire-based BI consultancy Dresner Advisory Services LLC, said in an email. "I also believe that Business Objects offers a much richer BI product line and would likely be the natural victor should product rationalization occur."

At least one SAP customer echoed Dresner's belief.

"We're SAP BI customers, but Business Objects offers a great deal in terms of tools and capabilities," Dan Lubin, director of information technology for Danvers, Mass.-based manufacturer Abiomed, said. "If the acquisition gives us better [or] cheaper access to some of those it'll be of great benefit to Abiomed as we look for more ways to mine and utilize the data we collect in SAP."

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But as with any merger, SAP's purchase of Business Objects presents customers with certain challenges as well, including overlapping product portfolios to sift through, an unclear roadmap for integration and concerns about the fate of the smaller company's software. Despite these challenges, however, analysts agree that savvy customers stand to gain much from the acquisition.

SAP has indicated that Business Objects would be run as a separate business. Once the integration is complete, SAP BI customers can look forward to better and easier-to-use business intelligence products, according to Paul Hamerman, vice president of business process and applications at Cambridge, Mass.-based Forrester Research Inc. He added that the integration could take one or two years to complete.

Sweetheart deals

The acquisition also presents the opportunity for current Business Objects customers, many of whom run SAP, to save on costs by securing sweetheart maintenance deals on Business Objects products before the company officially becomes part of SAP, added Boris Evelson, a principal analyst with Forrester.

"Any kind of merger typically leads the leading company to push their pricing strategies onto all of their subsidiaries, so I would imagine SAP will very quickly try to change Business Objects' pricing structure," Evelson said. "So, whatever customers can get from Business Objects today, they should take advantage of that now."

This is especially true now that Business Objects will further encourage customers to upgrade to XI -- the latest version of its software -- by the end of next year via the strategy of dropping support for all prior releases, according to Evelson.

"That's a very big upgrade for customers -- every single report, every single attribute needs to be touched somewhere," he said. "So, unfortunately for Business Objects, some clients were looking at this as an opportunity to look elsewhere."

Given the acquisition by SAP and the XI upgrade, Business Objects would be wise to offer deals to lock in customers, according to Evelson.

The performance management challenge

SAP's planned acquisition of Business Objects seems to stand in stark contrast to its past "tuck in" strategy. Recent SAP acquisitions have ranged from less than $10 million, in the case of Maxware and Wicom Communications, for example, to approximately $200 million for OutlookSoft. With its larger price tag, product set and customer base, the Business Objects acquisition does present some challenges.

One of those challenges is dealing with product overlap. Forrester's Hamerman says the biggest potential for product overlap between Business Objects and SAP is in the area of corporate performance management (CPM).

SAP and Business Objects had geared up for competition with each other in the performance management market, as well as with Oracle, Cognos, SAS and Microsoft, Hamerman said. As a result, the companies have many similar CPM products.

"The combined performance management portfolio has two or more products in planning, consolidations, profitability management, performance measurement and strategy management," Hamerman said. "SAP will have to develop a clear product roadmap that resolves these overlaps."

SAP and Business Objects have made other performance management acquisitions recently. SAP bought OutlookSoft and Pilot Software, and Business Objects bought Cartesis and ALG Software -- resulting in many products being joined in a now-combined portfolio.

Analysts say users should be concerned about what will become of Business Objects' products after the merger is complete.

"I watched IBM buy Informix and essentially kill the product," said Justin Burmeister, an SAP NetWeaver administrator for Springfield, Mass.-based MassMutual Financial Group. "So it will be interesting to see if SAP keeps it going or tries to get customers on BI Report Designer in BI 7.0, [which is] not ready for prime time in our experience."

Hamerman added that customers that use other BI products with SAP -- such as Cognos or SAS users -- should be able to maintain the status quo for at least the next few years.

"But eventually the acquired BI technology will become embedded within SAP NetWeaver and the applications, potentially forcing replacements," Hamerman said.

For its part, SAP says it will not force BI customers onto NetWeaver in the near future.

"We've got to be open," said Doug Merritt, corporate officer and member of its executive council, head of SAP business user development for SAP. "Our job is to make sure that we've got the best-in-class applications with the best-in-class abstraction technology layer that allows us to run anywhere that collaborative, information-rich and ad hoc processes live within organizations."

A solid strategy revealed

SAP customers that had previously chosen Business Objects rather than SAP products for their BI needs must be feeling vindicated in light of the acquisition, added Ray Wang, a principal analyst at Forrester.

"Basically, SAP just validated [most BI technology buyers'] strategy of going with Business Objects over [SAP] BI," Wang said in an email. "Business Objects built a great product, and XI on NetWeaver may prove to be quite solid and a significant improvement to SAP BW [Business Warehouse]. There is a reason why so many self-proclaimed SAP-only shops run Business Objects."

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