Resistance is Futile: You Will Be Assimilated

Tony Wanless | | Published: October 12, 2007

Some months ago, I wrote a Game Plan column on how business intelligence giant Business Objects (BOBJ) was coping with the threat to its business by the really big guys in the business software world, Oracle, Microsoft, IBM and SAP AG.

The monsters of the swamp were moving into the $18-billion Business Intelligence (BI) sector, I said, and their aim was to expand their business offerings to include software like that offered by BOBJ. At the same time, dozens of little companies were offering pieces of BOBJ's software lineup as web-based on-demand software.

The response from BOBJ, which is France-based but became one of Vancouver's biggest tech firms by buying up Crystal Decisions in 2003, was to revamp its entire operation to fight back at both ends of the spectrum.

It converted to a consulting-type of software provider for its larger enterprise customers and created a division based on the old Crystal Reports software that would offer smaller companies a type of on-demand software. Crystalreports.com has become enormously popular among mid-tier companies that can't afford very expensive top-tier software.

BOBJ figured it had found the secret to warding off the predators.

It was wrong. On Thanksgiving weekend, it was announced that SAP was buying BOBJ for US$6.8b. The acquisition, said SAP chief, Henning Kagermann, would enhance the private company's own growth strategy.

It appears that BOBJ's strategy may have in fact made it more of an acquisition target. It's wasn't just some schlump company: In its most recent quarter, it increased revenue by 23 per cent to US$363 million, which probably made it even more attractive.

Also, it wasn't as big as the big enterprise resource planning (operational software backbones for very large companies) companies like IBM, SAP, and Microsoft who have been eyeing the fast growing BI market for some time.

They know that their customers are demanding more from their backbone software, like data mining and analysis capabilities. And they have no qualms about buying that capability instead of building it. Oracle took out BI company Hyperion in May for US$3.3 billion, signaling that the consolidation race was on.

So it wasn't a surprise that BOBJ was taken over: what was a surprise was who did it. BOBJ has been increasingly partnering with Microsoft and IBM of late, so I expected they were the most likely candidates.

However, SAP is German and BOBJ started in France, so they have a natural affinity and together will likely dominate the fast-growing European (and Asian) market.

How is this sudden buy going to affect the BC tech industry, and the 1500 or so workers

in Vancouver? Right now, probably not much. The local tech industry adds a very large worldwide software company to its community, enhancing its stature for sure. As for local workers, SAP says BOBJ will continue to operate much as it has been.

But, eventually I expect we could see increasing repatriation of Vancouver work to Europe. It would be a natural evolution.

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