Business Objects' VARs could lose deals or be swallowed up by larger SAP VARs, channel sources said following the merger of the two software vendors.

After the announcement Oct. 8 of SAP's $6.78 billion acquisition of Business Objects, the two vendors said they would combine their channels to leverage the cross-selling opportunity.

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"We intend to leverage each other's offering in on-demand and there is a big potential in the mid-market space where we have our partner ecosystem that we can leverage to each other's benefit," SAP CEO Henning Kagermann said in a news conference Oct. 8.

John Schwarz, CEO of Business Objects, which has headquarters in both Paris and San Jose, Calif., added: "We have about 3,000 channel partners and SAP has roughly the same, so we can substantially accelerate by combining our products and uniting our channel as one."

However, there will be challenges to operating a joint channel strategy, according to Richard Ptak, an analyst at Ptak, Noel and Associates. "It will be interesting to see how the two firms develop their joint channel and how they set up a way for both sets of partners to get marketing and technical support," Ptak said. "If handled correctly, it could help SAP and Business Objects take advantage of the acquisition."

Because SAP, of Walldorf, Germany, is larger and more sophisticated, its partners will likely have more advantages over those of Business Objects, he said.

"It's more likely that in a competitive situation SAP's solution providers will win out," Ptak said. "The biggest impact for both sets of partners will be how quickly the vendors set up an easy way for them to start cross selling."

Martin Mutch, CEO of Rocela, one of the largest Oracle VARs in the United Kingdom, said the SAP-Business Objects deal was partly in reaction to Oracle's Hyperion buy in March and partly a continued natural industry consolidation.

"This consolidation will now trickle down, and there will be a rash of SAP solution providers buying up Business Objects or BI [business intelligence] VARs," he said. "Competition could also be stifled because the smaller BI solution providers will have to compete against the bigger SAP VARs."

Greig Codd, business development manager for SAP BusinessOne at U.K.-based solution provider Sapphire, said that in "competitive situations [much] would depend on what size the VAR was. Resellers selling BusinessOne, it's unlikely they'll be bigger than the BI reseller, but the VARs selling MySAP would be bigger, with greater potential."