Indigestion for SAPBy Sara Driscoll | Posted 2007-10-08 Email Print
WEBINAR: On-demand webcast
Take Advantage of Cloud Backup to Kick-Start Your Disaster Recovery REGISTER >
The integration of technology and processes will be difficult as SAP digests Business Objects acquisition, analysts warn.
Warnings of integration challenges and technology conflicts have already begun, as analysts warn SAP's $6.78 billion acquisition of Business Objects will be hard to swallow.
The deal, announced early Oct. 8, will combine SAP's business analytics with Business Objects' BI (business intelligence) technology. It is SAP's largest to date.
Judith Hurwitz, CEO at Hurwitz Associates, said, "SAP clearly understands that customers need to be able to leverage their enterprise data to make better business decisions. Therefore, it is not surprising that SAP would look to a company like Business Objects for their BI and overall analytical software capabilities."
However, she added, "A lot of the revenue from companies like Business Objects comes from renewal of existing licenses. Once a company has hundreds of users trained in the use of [its] software, migration is very unlikely. The deal does seem expensive. The key question is what does SAP really gain that couldn't have been gained from a tight partnership?"
David Bradshaw, principal analyst at Ovum, also said the firms' existing, joint working arrangement would be put at risk, alongside SAP's other vendor agreements.
"Two issues for SAP in the acquisition will be conflict with its existing BI capabilities and its relationship with other BI vendors," he said. "SAP's own BI platformSAP Netweaver BIcompetes with BI vendors in around 30 percent of deals, but SAP also operates in a landscape of 'co-opetition' with the leading BI vendorsincluding Business Objectsto complement and broaden the reach of Netweaver BI. Some SAP customers had success with Netweaver BI, but others had problems, for example, with integrating non-SAP and SAP data sources and the complexity of SAP's analysis front end [BEx]."
He added that there are huge areas of overlap between the two vendors' product sets. "How well it can carry on 'playing nicely' with competing BI vendors after it acquires Business Objects remains to be seen, but it will have no choice but to try."
Richard Ptak, principal analyst at Ptak, Noel & Associates, said further challenges would result in the integration of the two companies. "It will be interesting to see SAP try and swallow something of Business Objects' size, having had no previous experience of an integration this big," he said. "It is certainly a reaction to Oracle's Hyperion buy earlier this year. However, Oracle has the added advantage of having been through this kind of integration before."
Ptak said other concerns centered around whether it was possible to run Business Objects as a separate entity inside of SAP as both firms announced, because of the cost of maintaining two sales forces and two marketing departments, alongside all the other back-end processes.