SAP-Business Objects deal raises customer issues

SAP AG’s announcement Sunday that it will acquire business intelligence software vendor Business Objects SA for US$6.78 billion is “a positive” for both companies’ Canadian customers, according to an IDC Canada analyst.

The France-based business intelligence vendor will add momentum to SAP’s push into midmarket companies – of which Canada is primarily comprised, said IDC’s vice-president of enterprise software research, Joel Martin, in a research report. “By offering customers a greater selection of business process and analytic applications to drive more customer-centric activities across the organization, SAP becomes an increasingly attractive choice for organizations seeking a solution used by firms around the world.”

Also, the union means customers can reap the benefits of business intelligence within the industry-specific applications that SAP offers, said Martin.

Rival BI vendor, Cary, NC.-based SAS Institute Inc., said the acquisition may mean SAP will have BI tools to go along with its ERP software, but that won’t be enough to remain competitive. Business Objects won’t bring all the necessary BI capabilities, specifically predictive analytics, like data mining, forecasting and optimization, said SAS Canada’s Michael Turney, manager of strategy and market development.

The company also foresees the challenge of a “mismatched ERP environment” when a large ERP provider acquires another company, similar to those problems encountered by non-Oracle shops following Oracle’s acquisition of Hyperion. “If they’re an Oracle application shop, will they want to do business with SAP? If they’re an IBM DB2 shop, are they going to want to do business with Oracle?” asked Jim Davis, senior vice-president and chief marketing officer with SAS Institute.

One issue that arises, in particular, is whether a non-SAP customer will be forced onto SAP’s NetWeaver platform, said Ray Wang, principal analyst with Forrester Research Inc. “It’s not necessarily the best platform for business intelligence today, and so if they’re going to ask customers to go on to NetWeaver, they’d better provide a clear roadmap and direction in the next 12 months.” (SAP NetWeaver is a service-oriented application and integration platform.)

Wang said customers should find out how SAP intends to evolve business intelligence onto the NetWeaver platform, or whether they’ll be able to take advantage of Business Objects’ offerings separately.

According to Turney, SAP’s approach in Canada will likely begin first with its existing customer base. “That’s how we’ve seen it in Canada. SAP has a very strong presence here and that has been their route to market, to leverage their install base as they bring new capabilities, whether through acquisition or through their own capabilities that they’ve developed.”

News of SAP’s acquisition presented concerns for at least one Canadian customer of Crystal Decisions, a BI firm acquired by Business Objects in 2003. Since then, licensing and maintenance costs have spiralled, said Marie Howran, manager of application support with Peterborough Utilities Commission and the City of Peterborough in Ontario.

“This is the fourth transition in that software in six years that I’m aware of. That’s a fairly significant impact to companies if they’re depending on the Crystal Reports engine as their reporting engine for any sort of business intelligence reporting in their organization,” said Howran.

Budget planning can get tricky with continual restructuring of pricing and licensing with each new ownership, she said. “And that’s what has continually happened.”

Howran said she can only hope that SAP “will stabilize that product and its pricing and that they’ve recognized the investment there.”

Moving forward, said Wang, existing Crystal Decisions customers should consider negotiating license and maintenance contracts because “sales reps are quite motivated to finish out the quarter, and there probably will be some good deals.”

At any rate, SAP has been trying to improve the install base in Canada and Crystal Decisions base is large enough to give the ERP vendor “another leg up” in bolstering its Canadian presence, said Wang.

Given that Business Objects is to remain independent, Wang said it will be a “wait and see” around whether SAP will streamline its pricing policies relative to Business Objects.

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