On October 7, 2007, SAP has offered to acquire Business Objects for €4.8 billion ($6.8 billion) in a friendly takeover.

While this news is not really a surprise – rumors regarding an acquisition of Business Objects had been amplifying in the last few weeks – who the acquirer would be was still up in the air. SAP was of course regarded as a strong possibility.

Business Objects was historically focused on selling reporting solutions to large accounts, and this is what made it a successful company. Over the past few years, with large accounts becoming increasingly saturated with BI products, and the market becoming more and more competitive, Business Objects made the decision to shift its focus toward the mid market. This resulted in two important acquisitions: Crystal for reporting and Acta for data integration (the Acta technology became Business Objects Data Integrator – BODI). It is worth noting that despite the Acta acquisition, Business Objects remained primarily a BI company, with over 80% of its business coming from reporting. The Enterprise Information Management (EIM) products – a fancy name for data integration – represented only $160 million (out of a $1.5 billion total revenue), but was growing quickly.

As a result of these efforts, Business Objects was starting to make headways into the mid market and to grow its channel in this segment. The SAP acquisition is going to change all this. Indeed, despite repeated efforts to address the mid market, SAP still is selling almost exclusively to large accounts. All attempts to sell to smaller companies have failed – probably as much for image reasons as for technology reasons. With SAP taking control of Business Objects, all of the recent efforts by the latter to extend in the mid market are highly at risk. The management and organizational structure of SAP are not equipped to work properly with the mid market and the channel.

Conversely, because of the nature of SAP’s market (large enterprises), a majority of SAP customers are also Informatica’s users (SAP and Informatica had a close partner relationship). With the Business Objects acquisition, SAP account managers will now have an incentive to sell BODI. As a result, SAP’s relationship with Informatica will suffer, and over time Informatica will loose its preferred access to SAP’s installed base.

This acquisition is the first large one for SAP. Unlike Oracle, SAP’s management does not have experience in absorbing large companies. Internal politics are already kicking in at Business Objects, with middle management and staff looking for way to preserve their jobs – or to jump ship. Even though SAP pretends Business Objects will continue to operate independently, all it will take is a bad quarter for SAP management to take over (and Business Objects issued a profit warning the same day the takeover was announced). We predict that in the next 6 to 18 months, Business Objects will be fully absorbed by SAP.

In conclusion – the acquisition of Business Objects by SAP is bad news for Business Objects clients – but good news for Talend in several ways:
- It will weaken Business Objects, and especially BODI, in the mid market and channel
- It will weaken Informatica who will see its partnership with SAP loose ground quickly
Furthermore, this acquisition reinforces the position of open source in general, which alleviates the dependency of customers on takeovers, while promoting interoperability between solutions thanks in particular to consortiums such as the OSA.

And the final question is: who will take over Informatica? The hunting season is not over…

Bertrand