Tech IT Easy

Yesterday was a landmark in the young history of the European software industry. World leader in enterprise resource planning software, Germany-born and global company SAP, stroke a USD 7.5bn bid for Paris outskirts-born and global company vendor Business Objects - also a San Jose CA-headquartered world leader on the business intelligence market (USD 1.7bn turnover in 2006).

Splitting parts with the invincible “good or bad?” question, this deal has a number of direct implications on the technology landscape. Here are a few notes in this respect.

• Acknowledgement of the Shai Agassi ‘globalization’ legacy…

Or, put it bluntly, the victory of Silicon Valley guys over the old guard from Walldorf. Shai Agassi, a young computer wizard who had made its way to the job of CTO at SAP AG before leaving the company in March 2007 to start an renewable energy startup in Israel, had worked hard to ‘globalize’ development teams. Many feared the so-so recent results of SAP would urge the Board to centralize R&D. In some ways, the acquisition of global software vendor BO acknowledges the legacy of Shai Agassi. Successfully manage a distributed software company is a very tough challenge (even Microsoft doesn’t do it yet) that I’m sure SAP is prepared enough for.

• Puts SAP on the map of potential acquirors

Some excitement to expect from SAP on the investor side

Fresh air in strategic exit scenarii on the enterprise software market

Good for the enterprise software market as a whole, especially from an emerging software ecosystem view point (venture capitalists + startups)

• SAP - Oracle - Microsoft - IBM now at loggerheads: towards an ‘oligopolization’ of the enterprise market? Maybe not - see next bullet point!

Oracle sells its own databases; Microsoft embeds business intelligence capabilities in its databases; SAP, a long time rival to Oracle, has no database but just acquired a business intelligence company that competes directly with Microsoft. IBM wants to renew its aging DB2 database offer and enter the business intelligence market - maybe through M&A, Cognos maybe? Consequence: strategic relationships @ and cross-selling (eg SAP ERP with Microsoft databases & BI components; or Microsoft ERP with Business Objects BI suite) between these 4 companies are likely to shrink. I think this situation is good for none of the protagonists, including clients. Hope a sense of realpolitik will make software giants look beyond immediate product competition and punctually co-opete on innovative projects rather. My 2 cents on IBM: the more IBM enters the application software market (front end), the more it loses. However, IBM is a great middleware company so it definitely has a role to play (database, etc.) in this consolidation.

• Enterprise software architecture value chain integration implies there is room for independent database vendors & independent innovative business intelligence solution vendors: you always need alternatives
  

I am to purchase stock of any database (MySQL?) or business intelligence (KXEN?) vendor that goes public. Industry structure and dynamics makes of it a no brainer: in this market, you’re either huge or unsignificant. So there’s room for large specialists of one market.

• M&A as value-creation drivers in the software industry

It’s sad to say because I don’t like making the case for acquisitions rather than building companies to grow and last - but figures don’t lie. I see this acquisition, looking beyond price, as a smart pre-emptive move by SAP against Oracle, and an even smarter move by Bernard Liautaud, Chairman of the Board and cofounder of Business Objects, who had acquired Cartesis as soon as Oracle purchased Hyperion: SAP could then only turn to BO to build an Oracle competitive solution. I’m not quite sure SAP would’ve acquired BO had Business Objects not eaten Cartesis the blitzkrieg way. Hence the drawing for this post…It’s a fish-eat-fish world.

• Deal will damper the French software industry? Not quite…

Anyone saying loosing France’s #2 software vendor is bad for France doesn’t know how it’s been like to work at BO recently. Speak with anyone at Business Objects and you couldn’t avoid talking acquisition by Oracle or SAP or IBM right away, usually the first or second sentence: BO guys couldn’t stand not being acquired yet. Many employees must be relieved: the company is 17 years old so it’s likely most stocks have vested and employees will either join other startups to ‘do it again’ (good for startups), start their own software companies (even better for the economy), or, for the wealthiest, become business angels in the business of software (great, we badly need them). On top of that, all BO developers or consultants I met were crème-de-la-crème people: Business Objects is one of the top software developer schools in the world, and I believe this is why SAP AG agreed to pay a premium to acquire this business intelligence company.

CEGID is likely to be acquired some time soon as well. Again, the decentralized structure of the company will make it likely to foster the birth of many software startups. Which at the end of the day is good for the industry and the economy.

By the way, as far as I’m concerned, since my job consists in spotting the next Dassault Systèmes, CEGID or Business Objects, to enhance its growth through leveraging the MS technology stack, I’m happy to realize I’m not out of a job yet…

Last point: after business intelligence, I see CRM as the number one software consolidation playing field. Don’t ask why.