Oracle targets CFOs with Hyperion acquisition
After much speculation as to which IT vendor would make a move to acquire one of the major business intelligence software vendors, it is interesting to see Oracle announce its US$3.3 billion acquisition of Hyperion. This continues Oracle's strategy of growing its revenue and customer base through major acquisitions.
To my mind, this acquisition of Hyperion makes perfect sense. Databases may have historically contributed to most of Oracle's revenue, but market growth has slowed and in order to capture a larger share of the enterprise application market Oracle is now capitalising on the fast growing and lucrative Business Intelligence (BI) segment. Whilst Oracle has been trying to build its own BI business, these tools have been typically aimed at its traditional customer base, and have tended to be focused purely on reporting on data—rather than looking at overall informational requirements. With the continued enhancements to database rivals such as IBM DB2 Viper, and Microsoft's new version of SQLServer, Oracle needed to take action.
This move is aimed squarely at toppling SAP, who has long been the leader in the enterprise application market. Hyperion provides Oracle with a market leading financial analytic solution for budgeting, planning and consolidation, along with strong strategic relationships with CFOs and enterprise finance departments. Many SAP customers use Hyperion for their financial consolidation, analysis and reporting. With Oracle having already bought many other application vendors (including JD Edwards, Siebel and PeopleSoft), Oracle has moved deeper into SAP accounts and this acquisition will enable them to leverage Hyperion's account relationship with the finance group for future growth. Whether the move will have a profound impact on SAP remains to be seen. Companies with large investments in ERP do not switch vendors lightly, and although SAP commits itself to organic growth, it is also highly probable that SAP will also have a BI vendor shopping list.
So could this spell the start of further merger activity in the lucrative and fast growing business intelligence market? Both Business Objects and Cognos are potential candidates and potential buyers could be IBM, Hewlett Packard, Microsoft and SAP, as mentioned. Meanwhile, SAS another major BI player, is privately owned and likely to remain independent. Smaller, emerging players (such as Spotfire, Tableau, QlikTech, Panopticon and others) may be a technology focus buy, but the larger incumbent companies bring existing customers with them—something that may be of more critical concern to a large purchaser.
Oracle, which has announced almost 30 acquisitions since 2005, again faces the challenge of integrating the products and employees of yet another large company. A number of Hyperion's technologies compete with those found in Oracle's Siebel analytics. Project Fusion, aimed at bringing the various application offerings from Oracle together, has been bearing fruit and seems to have calmed the nerves of those customers of the acquired companies that were a little wary of Oracle's approach, which was initially one of "acquire and bury". Hyperion customers will be looking to see whether the functionality is to be buried within Fusion or kept as a separate solution, which will still be long-term viable outside of an Oracle application host.
So, we need to watch this spot: is this the beginning of the final aggregation of the BI market?; which IT vendor will be next to join the BI race?; and what does it all mean for existing customers? I recommend waiting for the dust to settle—but putting specific questions to your account managers—such as whether the solution will remain available as a separate offering—for answering as soon as they possibly can. Failure to provide a reasonable answer within a reasonable time scale should force customers into looking to review their position—but to be wary of jumping from one acquisition to the next target.