At a price tag of $6.8 billion, SAP's Business Objects SA acquisition seems to go against SAP's previous "tuck...
in" acquisition strategy, which generally focused on purchasing smaller companies. Business Objects also has a larger installed base than many of SAP's previous acquisitions, with 44,000 customers currently running its business intelligence (BI) products. These are just two of the issues that may have sent SAP's stock down 4% on Oct. 8, the day the deal was officially announced.
To clarify some of these topics and understand how the deal will proceed and affect customers, SearchSAP.com interviewed Doug Merritt, SAP's corporate officer, a member of its executive council and the head of SAP business-user development.
Does the Business Objects acquisition represent a change in SAP's tuck-in strategy?
Doug Merritt: The approach that SAP has been taking to date has been much more centered on the core business suite and the core repetitive transactions, and the high throughput and reliability necessary in that world for success. This new knowledge worker/business-user world is much more about driving value within organizations by automating different, very important business processes that historically have been difficult to automate.
So while this is a large acquisition for SAP, all of our focus and positioning has been that this is a way to continue to fuel the open space we see in and around business users, and my division has been largely crafted through a combination of acquisitions -- Virsa, OutlookSoft and Pilot -- grabbing some existing composite applications internally -- things like global trade services or emissions management -- and some key third-party partnerships, companies like Cisco or Acorn in the CPM [corporate performance management] space. So it has been a rapid to-market strategy to build an extremely strong, revenue-generating division, and we see this as the next step of endorsement of the opportunity in this category.
From our perspective, it's really constructing the future rather than what I think Oracle has been much more focused on: consolidating the past or the current.
How is this deal different from Oracle's Hyperion acquisition?
Merritt: The challenge with Hyperion is that it's a last-generation application code base in the consolidation, budgeting and planning realm. And it's an extremely weak middleware technology.
They never claimed to be a super-strong BI or enterprise information management player. So even then I viewed it as an application consolidation play -- really a last-generation applications consolidation play. We focused on OutlookSoft because it was a next-generation, smaller, less-revenue, less-customer count, but an unbelievably exciting approach that fit into our framework for business users.
Is there any timeline for product integration customers can look for?
Merritt: Because of where we are in the acquisition cycle right now and the regulatory approvals, we can't discuss product roadmaps, or even personnel and HR roadmaps, until after the transaction concludes.
Going forward, how will Business Objects customers be supported?
Merritt: Our focus is to bring together my business user team, which is about 1,100 employees, with the Business Objects team to make sure that we have that platform we're talking about to drive even more rapid market acceleration of business user-oriented offerings.
I think the assurance for the Business Objects customer base is that we're willing to spend a lot of money, retain the Business Objects management team and merge in critical senior teams -- high revenue-producing teams -- from SAP to that team with the whole intention of accelerating what we believe is strong market opportunity.
How will the acquisition affect post-XI releases from Business Objects?
Merritt: Not only is it hard for us to talk about that, but for me on the SAP side, it's almost impossible.
Will Business Objects users be pushed onto NetWeaver in the near future?
Merritt: Not at all.
After news of the acquisition was released, SAP's stock took a bit of a hit. Why do you think that is?
Merritt: I'm reading the same reports you are [laughs]. We view this as a continued investment in an area that we've been bullish on for the past year and a half. In the realm of leading that business-user category, we believe that the most important thing to do is to get the best people, the best technologies [and] the easiest user experience so that we gain the market share and customer loyalty that we need in that sector.
I just view this as a very exciting and bold move for SAP to keep investing in an area [in which] we've been seeing very positive financial and market share returns.
Why announce the news on a Sunday and before a U.S. holiday?
Merritt: I think it was just the basic timing of information disclosure and approvals internally. It's a strict technical trigger that kind of forced our hand.
Since the deal isn't finalized yet, what are the next steps, and how long before it closes?
Merritt: A huge chunk of it is kind of out of our hands, because it requires regulatory approval in a number of different countries [in which] we have major points of presence. We're hoping and anticipating that we can drive this to a conclusion in Q1 of 2008.
Shareholder approval on both sides of the organizations is another potential roadblock. We obviously have the capital to conduct this. We're super-excited about the combined offerings. There's all the post-merger work of integrating the teams and the products, etc. But I think the major roadblock to concluding the acquisition is regulatory approval, then also getting the shares tendered from the Business Objects shareholders.