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Is SAP-Yasu the start of business rules management consolidation?

Business rules management products have improved greatly in the past five years and demand is growing, leading some analysts to speculate that market consolidation is coming.

With relatively small vendors and quickly improving products, the business rules management market is ripe for consolidation, and SAP's acquisition of Yasu was just the first step, according to one analyst.

SAP's decision to purchase Hyderabad, India-based Yasu Technologies greatly improves its business rules management capabilities, according to John Rymer, a principal analyst for Cambridge, Mass.-based Forrester Research Inc. The move also fits with SAP's "tuck-in" strategy of purchasing smaller companies to fill gaps in its functionality.

Other large vendors would be wise to follow SAP's lead in the business rules market, Rymer said.

"If you look at the big vendors, they're all going to need this technology," he said. "[SAP's] competitors are going to have to step up to these requirements also."

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Business rules management helps companies automate complex tasks, like insurance policy or credit card applications. The technology has been around for 30 years, but functionality has started to ramp up and become more important for businesses in the last five, according to Rymer.

The credit card approval process is a classic example of where business rules management software is helpful, Rymer said. With credit card approvals, a business rules management product makes an inference about a person's creditworthiness based on a large set of rules, including factors such as age, credit status and income.

"These algorithms are quite powerful because they can automate decisions that otherwise would have to be made by human beings -- who are slower and more prone to error," Rymer said.

Business rules management products now also allow people to design these rules in a more user-friendly, visual manner than typical programming.

"There's been huge progress in the last five years in creating tools that allow non-programmers to write, maintain and change rules," Rymer said. "A person can actually sit down and write English statements, and not angle brackets and all the other stuff that comes along with a programming language."

Increasing demand, plus the spotty results of homegrown business rules products from large vendors like Microsoft and Oracle, should contribute to consolidation, according to Rymer. Most business rules management vendors are also still on the small side, which makes acquisition that much easier.

"I've been waiting for consolidation to happen," he said. "I hope so; the customers need it."

Two companies that are particularly appealing targets are Ilog and Corticon, Rymer believes. Ilog Inc., based in Gentilly, France, is one of the market leaders in business rules functionality and market share, but it counts only about $125 million in yearly revenue, Rymer said. One potential stumbling block is that it is based in France, which could present some legal issues. Redwood Shores, Calif.-based Corticon Technologies Inc. is also small but has very good technology and tools, he said.

Moreover, business rules management and business intelligence and analytics are becoming more intertwined.

"It's encouraging that SAP bought Business Objects and is now buying Yasu," Rymer said. "We're seeing requirements to link business rules and business intelligence or analytics. SAP has told us they have seen these requests, and we're encouraged that SAP is now acting."

Yasu a good fit

Rymer sees Yasu as a good buy for SAP. Yasu was focused on building products and had no sales or marketing organization to speak of before being bought. It was also known to have relatively low price points, according to Rymer.

"One of the complaints about this market is that the cost of these products is quite high," he said. "So Yasu provided a really good alternative to the big vendors in this market because it had good features that were available at comparatively low cost."

Although Rymer largely applauded SAP's purchase, there are still questions to be answered.

He noted that SAP already has OEM relationships with two other business rules vendors -- ILog and Ruleburst. Likewise, Yasu has OEM relationships with Sun Microsystems, Versata Inc. and Savvion Inc. Customers will have to watch to see what becomes of those relationships.

Then there is the question of how SAP will integrate Yasu into its current offerings. Rymer speculated that Yasu's Java-based products could be plugged into NetWeaver as a set of modules, but he wondered about Yasu's .NET history.

"SAP doesn't sell software for .NET, so does that version go away?" he asked. "Anything is possible; it's just software."

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