Subba’s Serendipitous moments

May 10, 2007

SAP counters Oracle, though weakly

Filed under: Business,Competition,Strategy — Subbaraman Iyer @ 5:05 pm

I did talk about Oracle’s acquisition of Hyperion and hinted that SAP would react in one of my blog posts . Oracle’s recent acqusition of Hyperion gives them (Oracle) the advantage to move beyond the Enterprise ERP application to high end analytics and corporate performance management (CPM) applications, like planning, budgetting and forecasting. It also gives them access to the CFO community and in some cases access to the Board.

This posed a definite threat to SAP, and now SAP has responded by acquiring OutlookSoft,– a much smaller company but nevertheless has a product portfolio similar to that of Hyperion. Run by ex PeopleSoft executives, OutlookSoft’s product enables collaboration and real-time analytics capabilities across the enterprise.

OutlookSoft has about 250 employees and and about 700 customers and though the terms of the deal are not clear, though my guess is that SAP must have spent $100-150 million on this acquisition.SAP has done that by acquiring OutlookSoft — a company with about 250 employees and about 700 customers. It is run by ex-PeopleSoft executives.

Having following this space for sometime, I think Hyperion has a great mindshare especially amongst the CFO community and commanded a price premium of about 25-30% compared to other similar products and hence had a great competitive advantage. It is only natural to expect that the Oracle sales force would aggressively push this further.

SAP definitely needed a similar product line, and has hence acquired a much smaller, though innovative company. SAP clearly seems to avoid buying big companies, and believes that smaller companies are easier to integrate. At this stage, I am not sure whether OutlookSoft will provide SAP with the much needed fire power to combat Oracle. It is very likely that the Oracle-Hyperion combination will be more powerful than the SAP-OutlookSoft combination.

This round of industry consolidation will have its effects on other pure play Business Intelligence vendors as well. SAS– the industry leader with various analytics applications has been finding it difficult to become the leader in the CPS segment for a long time. SAS has also avoided making acquisitions and given the likely industry consolidation, will find itself isolated. It certainly needs a major change in its strategy and approach. It also needs a more focused and aggressive approach if it has to be a contender.

Business Objects and Cognos have been busy revamping their technology platform, and though they have been trying to build products for this segment, they have been only marginally successful. The other BI players like Microstrategy, Informatica etc. are not serious contenders. My guess is that all these players are quietly talking M&A amongst themselves or courting IBM and other big Enterprise software vendors.

Hence an interesting battle is ahead with Oracle and SAP as the prime contenders yet again. SAS with a changed approach may also be a serious contender.

The market for this segment is likely to grow at more than 20%, in the large Enterprise area. If one looks at smaller / medium enterprises, the growth rates are much higher. SAP with its pronounced strategy to take a leadership position in the SMB segment, may find the OutlookSoft solution the perfect product and reap extensive benefits.

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