A whole lot of dough just to get BO

// October 10th, 2007 // Business Intelligence, The business of IT, The Future of IT

Well the big news this week is the acquisition of Business Objects (they don”t like it shortened to BO, but it’s just natural to do so) by ERP giant SAP. (SAP buys Business Objects) SAP paid dearly to get BO, $6.8 billion to be precise. The question is where are the synergies and will they make their money back! BO is an SAP business partner and have constructed their products to access the SAP databases directly. SAP has their own line of analytic tools that they hawk to their ERP customers, but I suspect that will slowly be phased out in favour of the superior BO products.

Apparently, SAP is looking to grow it’s install base for it’s main ERP platform, and believes that existing BO customers will be a captive market for it. SAP needs to grow it’s foothold in the SMB market and sees BO as a way to expand it. However, it’s a bit like the tail wagging the dog. Smaller companies who can and do leverage the BO product suite will not necessarily want to be burdened with the expense and overhead of an SAP ERP. In fact, it’s probably a safe bet, that any company that is utilizing the BO tools effectively, already has some sort of ERP or other sophisticated solutions managing their business. After all, the analytics don’t help you if your data is crap, and to have good data requires good systems (and good people to use them).

So, will SAP penetrate the SMB market via BO? Probably a little but, but I doubt it will move many SMBs off their existing systems. They are saying, initially, BO will remain a separate operating unit, but with that much invested, you know that won’t stay that way for long. I hope they are not foolish enough to build in special features and functionality in the BO suite that will only work if you have the SAP ERP in place. That would be suicide. To me this is an act of desperation as the market for the big bang ERPs like SAP wanes, and the market for improved analytics grows.

Unfortunately for SAP, the availability of low cost alternatives to BO will force prices down. BO’s new SaaS offering is a good go forward strategy, but with the relatively low cost of Compute power and Network access that is available, they will soon have competitors in the SaaS space as well. That, combined with the growth in the open source market will spell less and less licensing revenue in the long term.

I wish SAP luck, and I hope they are successful, but I hope they kept a little bit of money in the bank to buy some deodorant if the BO gets too bad.

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