SAP snaps up Business Objects

SAP has made its biggest purchase ever with the approximately $6.8 billion acquisition of business intelligence firm Business Objects.

In a dramatic departure from its previous strategy of relying on organic growth, SAP, the world's largest business software company, announced yesterday that it was buying Business Objects in what it termed a ‘friendly takeover'.

"It's the unique combination of two market leaders," SAP CEO Henning Kagermann said on a conference call yesterday to news agency Bloomberg. "We like the open-ended, independent business-intelligence platform of Business Objects. We found out in our talks with Business Objects that we can enter the market directly."

Following completion of the transaction, the Paris, France-headquartered firm will operate as a standalone business within the SAP group, with neither company expected to undertake significant restructuring as a result of the deal, SAP said.

The purchase of Business Objects represents a clear change in strategy for SAP, Thomas Hofmann, an analyst at Landesbank Baden-Wurttemberg told Bloomberg. "They're really moving toward the direction of Oracle and maybe that's because they're feeling Oracle is coming closer," he said. Known as one of the most acquisitive firms in the software industry, SAP rival Oracle last March bought business intelligence tool developer Hyperion Solutions for $3.3 billion.

Currently controlling around 20% of the market, Business Objects ranks as market leader in the business intelligence software market, according to Gartner.

Its customers in the region include KSA automotive dealer UMA, the Commercial Bank of Dubai, and telecoms provider du.

Despite denials from its CEO John Schwarz in June that the firm was considering a takeover, reports surfaced last month that Business Objects was looking for a buyer.

"The combination of Business Objects and SAP means that we can truly amplify the reach of Business Intelligence," said Bernaud Liautaud, chairman and founder of Business Objects, in a statement.

The business performance solutions market is expected to grow 11% through 2010, according to Forrester Research.

The capture of Business Objects is part of a growing trend in the business intelligence industry away from pure business intelligence vendors.

Cognos, a Business Objects competitor, has also been the subject of speculation that it is a takeover target. In an interview with ITP.net last year, the firm's Cognos MEA president Ad Voogt said the firm was not interested in being acquired. "Our company strategy is to stay independent," he said.

SAP's acquisition of Business Objects is expected to close within the first quarter of 2008.