SAP’s True Business Object

By Sam Sliman
President, Optimal Solutions Integration, Inc.

Recent popular commentary that SAP’s acquisition of Business Objects is predominantly a defensive reaction to Oracle’s purchase of Hyperion and IBM’s Cognos takeover, or little more than a move by SAP to secure additional revenue by buying a piece of the BI market, is as shortsighted as it is ill informed.

While the BI consolidation frenzy may have accelerated SAP’s acquisition timeframe, and while Business Objects revenue will assuredly help SAP sustain growth over the next several years as the transition to NetWeaver plays out and Business ByDesign takes hold, the overarching, more business-meaningful modus operandi of SAP’s Business Objects purchase comes into clear relief when this deal is viewed in the context of SAP’s well articulated product roadmap and strategy for addressing the burgeoning BI market.

Sizing up the BI market

According to AMR, sales of BI software increased 10%, to $6.35 billion in 2006, and sales of "scorecard" software that helps executives digest key numbers shot up 26% to $5.2 billion. Datamonitor estimates the global BI market in 2006 was worth just under $4 billion in license revenue alone, and predicts this market will double by 2012, performing at a compound annual growth rate of 12.5 percent.

The markets for corporate performance management (CPM) and governance, risk and compliance (GRC)—close cousins of BI—are also experiencing rapid growth. Gartner forecasts the CPM market to reach $3 billion by 2011, up from $1.5 billion in 2006, and AMR pegs GRC spending at $29.9 billion in 2007, up 8.5 percent from 2006.

All industry pundits agree that over the next several years the demand for data-powered, decision-driving BI apps will outpace that of traditional enterprise apps such as ERP, CRM and SCM. Moreover, it is generally agreed that the BI market is expanding faster—in terms of both revenue and scope—than what vendors of embedded BI, such as SAP, can organically accommodate. This is the backdrop against which SAP’s BI vision and mission, including its purchase of Business Objects, is best understood.

SAP’s top-to-bottom BI play

In SAP’s product taxonomy, BI is grouped together with GRC and CPM, which are all classified as business user applications and placed under the rubric of SAP’s newly created Business User Development Group. SAP’s market strategy, well underway and already bearing fruit, is to develop and sell business user applications as a discreet set of apps that are separate from its established ERP, SCM, and CRM suites and its existing technology stack.

Traditionally, the CFO has been the primary BI customer, tapping BI, CPM, and GRC applications to better plan and control costs of key business processes, establish budgets and forecast financial results, and maintain compliance with regulatory and legislative mandates.

It is here, with an assault on the office of the CFO, where SAP’s BI strategy begins.
SAP’s continuous refinement and expansion of its comprehensive portfolio of GRC solutions—including numerous service-oriented architecture (SOA)-based applications such as GRC Repository, GRC Process Control, GRC Risk Management, and the recently announced integration capability of SAP’s GRC Access Control and Identity Management solutions—has helped the company establish traction as well as a strong bond of trust with CFOs and CIOs responsible for measuring performance and assuring compliance. SAP’s acquisition of GRC-focused Virsa Systems in 2005 and more recent acquisitions of CPM vendors Pilot Software and OutLookSoft further fortified SAP’s GRC/CPM market leadership. Gartner names SAP a leader in its 2007 Magic Quadrant for CPM.

SAP’s stated mission, however, is to extend BI beyond the traditional C-level bastion to front-line information workers such as sales people and product managers. To this end, SAP markets NetWeaver BI, which allows companies to integrate data from across the enterprise and transform it into practical, timely information exposed in the applications information workers use on a daily basis. It is here, at the business user application level, where the aim of SAP’s Business Objects acquisition becomes clear.

But before looking at how Business Objects will help SAP’s initiative with business user applications, it is worth noting SAP’s formidable success with BI prior to and independent of its Business Objects buy. In a report entitled “Market Share: Business Intelligence Platforms, Worldwide 2006,” Gartner records that SAP NetWeaver BI grew fastest among all embedded BI platform vendors, with SAP’s BI sales increasing 60 percent in 2006. As of spring 2007, SAP had 13,000 production SAP NetWeaver BI implementations worldwide, and this number has been growing steadily. Clearly, Business Objects strengthens SAP’s BI offering, but by no stretch of the imagination can the deal be viewed as a desperation move by SAP to buy its way into the BI space.

According to SAP, Business Objects will remain an independent business unit and will be folded into SAP’s Business User Development Group. In the immediate future, Business Objects’ offering, particularly its CPM products, will provide additional ammo for SAP Business User Group’s current assault on the ‘office of the CFO.’ Moving forward, however, SAP will use tools and technology acquired from Business Objects to build out its suite of business user applications designed specifically for information workers.

As companies look to derive further value from the enterprise applications they've already invested in and the growing volume of data generated by these applications, SAP stands ready with a portfolio of top-to-bottom business user applications that is now bolstered by the addition of existing and future Business Objects BI apps. Moreover, and this is no small point, because SAP’s business user applications are built on the SOA-enabled NetWeaver platform and Business Objects BI applications are (and will remain) platform independent, the vast majority of SAP’s business user applications will sell across SAP’s entire customer base—from its existing large enterprise customers to its newly targeted mid-sized customers.

Seen in this light, SAP’s acquisition of Business Objects transcends simplistic explanations such as fending off a competitive threat or the short-term fattening of company coffers. It appears much more plausible that the true business object behind SAP’s acquisition of Business Objects is the creation of new streams of sustainable revenue for the software giant, and an expanded offering of intelligent solutions that drive business innovation for SAP customers.