ERP/SCM: SAP's Planned Business Objects Buy Signals Strategic Shift

ERP/SCM: SAP's Planned Business Objects Buy Signals Strategic Shift


SAP's plan to buy Business Objects will put SAP into the lead for revenue from business intelligence platform products. However, many integration and execution challenges lie ahead.

Event

On 7 October 2007, SAP announced its intention to buy Business Objects for 4.9 billion euros. SAP expects to close the transaction in 1Q08. Business Objects will be run as an independent business unit under current CEO John Schwarz, who will have a seat on the SAP executive board.


Analysis

Following this announcement, SAP gave few indications of product strategy, but said it will release more details after the transaction completes. SAP did not announce product road maps and pricing changes; it said it would continue to support existing products.

With this planned acquisition, SAP will expand its presence into the "business user" market, which it defines as business roles involved in analytical and information-intensive activities. This acquisition will be larger than other SAP acquisitions and would fill a significant gap in its query and reporting tools.

Gartner believes that the proposed acquisition creates some management challenges for SAP. SAP's NetWeaver Business Intelligence (BI) product overlaps with several Business Objects products, including data integration and corporate performance management (CPM) suites. Both companies have overlapping sales forces, support organizations, channel partners, independent software vendors and midmarket initiatives. These challenges won't be addressed by simply running Business Objects as an independent business unit.

Nevertheless, in the long term, the merger should make for a powerful combination, as Business Objects leverages SAP's vertical and industry expertise. The integration will exploit market demand for integrating BI closer into business processes and applications. SAP and Oracle will now place more focus on BI and CPM as competitive differentiators.

Recommendations


- SAP business applications customers that have invested in SAP BI and CPM products (for example, NetWeaver BI, Strategic Enterprise Management and OutlookSoft) or customers considering such investments: Until SAP clarifies its pricing and product road map, continue with tactical and incremental investments, but don't initiate any new strategic investments.
- Business Objects customers: Continue investments as planned, but document product capabilities and map them to the stated product road maps — when SAP announces them — for indications of shifts, substitutions and replacements within product lines.
- Companies in an OEM relationship with Business Objects: You face little short-term risk; however, OEMs that also compete with SAP should consider evaluating alternative BI platforms for BI application development.

Additional research contribution and review: Kurt Schlegel