SAP-Business Objects combo ready to roll

This morning, after digesting Oracle's acquisition of BEA and Sun's consumption of MySQL, I headed down SAP's Palo Alto offices to hear how the enterprise software giant will digest its latest acquisition, Business Objects.

SAP CEO Henning Kagermann said Business Objects gives his company number one leadership in one of fastest growing markets--business intelligence and business performance optimization. According to IDC, Business Objects has 17 percent market share in its space, 50 percent more than its closest competitor. The deal is expected to close in about a week.

"Our key competitive differentiator is that we are building our portfolio on the most open platform, and we are the only one that can offer business performance optimization in a closed loop," Kagermann said. "If you have a broad portfolio of business intelligence applications you can define the strategy, break it down into KPIs, monitor and make decisions faster, but at the end of the day you want to take immediate action...our business suite and business intelligence close the loop. You have faster and better insight and you can transform it immediately into actions."

Rival Oracle grabbed its own business intelligence company, Hyperion, last year. SAP predictably believes that Business Objects offers a more capable platform. I asked Kagermann if Hyperion would work as well with SAP as it would with Oracle's stack. He said, "No."

"While we will work closely with SAP, we also have to be careful not to be so tied in that we couldn't provide same set of solutions on non-SAP solutions. We will be as good as oracle as on SAP," said John Schwarz, current and future CEO of Business Objects. "We are not going to limit access to our platforms to our partners. We are welcoming SAP ecosystem and Business Objects ecosystem to stay on board."

SAP and Business Objects have a combined ecosystem of 6,000 partners that will be developing products and services and developing the market, Schwarz said.

The two companies will hit the ground running by the end of this month, said Leo Apotheker, SAP Deputy CEO, rolling out nine joint offerings, such as Financial Performance Management; Visualization and Reporting; and Data Integration and Data Quality Management. The packages will be sold by the sales organizations of both entities. In addition, Business Objects product will be baked into SAP Business All-in-One and the SAP channel will sell Crystal Report Server.

Kagermann said that SAP's forthcoming on demand mid-market suite, Business ByDesign, is "keen to take something from Business Objects portfolio and merge in with its platform." He said that SAP needs to work on the sales and TCO proposition to ensure that it can build a profitable business. "Our promise was to prove in 2008 we could build a profitable business," he said in response to a question as to when Business ByDesign would be generally available.

Business Objects also has a foot in on demand, with over 70,000 subscribers to its multitenant platform, Schwarz said.

The two companies have about 40,000 customers each, but only about 15 percent overlap, Schwarz said.

"We are building our common vision working together. It will be all about transforming the way business work by connecting people, people to information and by connection people and information and business to businesses," Schwarz explained.

SAP CTO Vishal Sikka described the three layers of the company's new business intelligence (BI) platform. At the bottom is enterprise information management--entering structured and unstructured data; common data management; and text analysis (using Business Objects' Inxight Software acquisition). The middle layer consists of the SAP's enterprise Business Warehouse and Business Objects departmental RapidMarts, and technologies such as in-memory database management. The top layer is query interfaces, reporting, analysis and visual representations.

Sikka said the BI platform would expand to include more collaboration capabilities, such as joint decison making, annotation, tags and ranking. Given the current economy, SAP might have some uphill climbing to do to get off the ground quickly with Business Objects.

"The finance sector has had a difficult second half of the year," Schwarz said. "It's difficult to predict how long it will persist. Solutions help people improve performance, especially in tough times. We won't see a dramatic impact in selling our solutions."

Kagermann added that business intelligence provides a way to increase productivity or get better information to outsmart competitors. "Therefore even in downturn we have a chance with these kinds of applications to have a good business."

Apotheker said the fourth quarter results show healthy demand for SAP offerings. We are extremely well balanced regionally and by size of company. A global cataclysm to have slowdown everywhere...I'm not Alan Greenspan so I can't predict, but the dynamics are there. The last time there was a recession it was pretty good for us. Many companies decided it was extremely important to be very performance driven.

"Global competition will not allow companies to stop investing," Kagermann added. He expects developing countries to invest in improving their software infrastructure.

Doug Merritt, the head of SAP's Business User Development and a corporate officer, will join the Business Objects group and report to Schwarz.

Kagermann was asked about other acquisitions. "Organic growth is number one at SAP, but you need business opportunities to expand the market and capabilities. If an acquisition makes sense to shareholders and customers, we would do [make an acquisition].