Even though SAP CEO Henning Kagermann said as recently as yesterday evening that he wasn’t under “any pressure” to make an acquisition, today there is news to the contrary.

After making a cash offer of 42 euros per share for Business Objects (BO), the SAP CEO said that the two companies could continue to expand in the mid-market segment through their network of more than 5,000 channel partners. “We are building a capacity in Asia as we want to reach out to more countries in this region. A cross-pollination of our capacities will benefit us,” Kagermann stated.
In a press release, SAP said that the cost of the outstanding BO shares, along with transaction costs, added up to slightly more than 4.8 billion euros. Current valued at $10 billion worldwide, the business intelligence (BI) market is growing at 10 percent.
According to analysts, SAP needed to add more capabilities to its business software to increase sales and prompt customers to buy new versions.

Said Andreas Bitterer, research VP for the BI group at Gartner, “It is certainly a reaction to Oracle’s Hyperion acquisition.”

One of the objectives behind the Hyperion acquisition by Oracle was to aim at SAP since many SAP customers relied on Hyperion as their financial consolidation, analysis and reporting system of record. The BO acquisition by SAP will nullify the advantage gained by the Oracle to a large extent.

“The acquisition is somewhat of a strategy shift for SAP since they have either built their own analytic tools or acquired relatively small companies. The purchase of OutlookSoft was a sign that this could be changing. The Oracle buys of Hyperion and Siebel, and the Microsoft BI announcements, were putting pressure on SAP since their BI story was comparatively weak,” said Nilotpal Chakravarti, senior analyst for Springboard Research.

BO is by far the market leader in India in the BI space following its acquisition of Crystal Decisions for $820 million. Currently, SAP has about 1,400 customers in India who account for about 3 percent of its global customer base.

“With this acquisition, the company will leverage BO’s expertise in the BI space to boost its customers here. With industries such as retail, banking, insurance and manufacturing booming in the country, SAP’s strengthening of its product portfolio will give it an obvious advantage over its rivals. Many of SAP’s target industries in India are also big potential users of BI,” he said.

Explaining the acquisition Kagermann stated that as market leader SAP did not want to acquire companies “that did not make business sense,” and that the only reason for the present acquisition was that BO had certain capabilities in which SAP is weak.

BO has been the third-party reporting solution for SAP R3, SAP BW. “In fact its product roadmap has been closely aligned with SAP. Last year it released BO BI 2 for SAP solutions. Many SAP R3 users in India have deployed BAPI from BO as it gives them access to data not only within SAP but also non-SAP applications,” said T R Madan Mohan, Director, Consulting Information Communication & Technology Practice, Frost & Sullivan.