Last autumn, Financial Director interviewed Chris Liddell, CFO of Microsoft, during a particularly frenzied period of industry consolidation. The news at the time was that German software giant SAP had just agreed to buy Business Objects, a business intelligence (BI) software company. That news came hot on the heels of Oracle’s agreed purchase of Hyperion, another business intelligence software company.
During the interview, Liddell gave a “no comment” response when asked whether Microsoft would snap up Cognos, one of the last remaining independent business intelligence players. As it turns out, Microsoft didn’t. But that didn’t really matter, because IBM duly obliged.
While all those deals from the second half of 2007 were not in the same league as Microsoft’s recent $45bn courting of Yahoo, they were substantial nonetheless. Business Objects went for almost $7bn, Cognos for almost $5bn and Hyperion $3.3bn. As a result, the big four software vendors Oracle, SAP, IBM and Microsoft now boast a huge proportion of the business intelligence market.
“Mega-vendors are beginning to dominate the business information market,” explains Gartner analyst James Richardson. “In less than one year, Microsoft, Oracle, SAP and IBM will have gone from accounting for one-quarter of the market to owning more than two-thirds of it.”
Muscling in
So how has this seismic shift in the enterprise software market affected life for finance directors? In the short term, at least, probably not a great deal. But, in the long term, Oracle sees the Hyperion acquisition as a real opportunity to muscle in on its fierce competitor, SAP.
“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers,” Oracle’s president Charles Phillips said at the time of the acquisition. “Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis and reporting system. Oracle already has PeopleSoft HR, Siebel CRM, G-Log, Demantra, i-flex, Oracle Retail and Oracle Fusion Middleware installed at SAP’s largest enterprise research planning customers. Now Oracle’s Hyperion software will be the lens through which SAP’s most important customers view and analyse their underlying SAP ERP data.”
The statement was one of intent: Oracle, and in particular its aggressive chief executive Larry Ellison, has the German software company firmly in its sights.
Stifling innovation
Following IBM’s acquisition of Cognos in November 2007, the spate of consolidation quietened down. And for good reason: there were not many BI businesses left to buy and not many buyers to pick them up. The choice runs to Microsoft, Oracle, SAP or IBM. One of the biggest concerns about this is that innovation may well suffer as a result. Corporates that are now locked into buying software previously bought from relatively small, nimble providers, suddenly find themselves buying from companies with market caps that rival many east European countries, with extremely powerful shareholders to boot.
A rare exception is the SAS Institute – one of the largest independent enterprise software companies in the world. SAS enjoys annual revenues in the region of $2bn and is still a wholly-owned private company. As a result, the founders are able to run the company exactly as they see fit, without pressure from institutional shareholders. Consequently, the company dedicates up to one-quarter of its revenues to research and development – a figure well above the industry average and the reason many industry commentators offer for its success.
Spending one-quarter of revenues on product development is unlikely to be the type of approach that the SAPs, Oracles, Microsofts and IBMs of this world take to their recently acquired technologies. Integration overheads and a focus on getting the best out of corporate synergies are likely to be their first co ncern.
And these are also likely to impact on how reactive they are to customer requests for improved features, performance and support of their products. In spite of this, Gartner believes the BI sector will still go from strength to strength, reaching compound annual growth rates of 8.6% until 2011.
Last autumn, Financial Director interviewed Chris Liddell, CFO of Microsoft, during a particularly frenzied period of industry consolidation. The news at the time was that German software giant SAP had just agreed to buy Business Objects, a business intelligence (BI) software company. That news came hot on the heels of Oracle’s agreed purchase of Hyperion, another business intelligence software company.
During the interview, Liddell gave a “no comment” response when asked whether Microsoft would snap up Cognos, one of the last remaining independent business intelligence players. As it turns out, Microsoft didn’t. But that didn’t really matter, because IBM duly obliged.
While all those deals from the second half of 2007 were not in the same league as Microsoft’s recent $45bn courting of Yahoo, they were substantial nonetheless. Business Objects went for almost $7bn, Cognos for almost $5bn and Hyperion $3.3bn. As a result, the big four software vendors Oracle, SAP, IBM and Microsoft now boast a huge proportion of the business intelligence market.
“Mega-vendors are beginning to dominate the business information market,” explains Gartner analyst James Richardson. “In less than one year, Microsoft, Oracle, SAP and IBM will have gone from accounting for one-quarter of the market to owning more than two-thirds of it.”
Muscling in
So how has this seismic shift in the enterprise software market affected life for finance directors? In the short term, at least, probably not a great deal. But, in the long term, Oracle sees the Hyperion acquisition as a real opportunity to muscle in on its fierce competitor, SAP.
“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers,” Oracle’s president Charles Phillips said at the time of the acquisition. “Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis and reporting system. Oracle already has PeopleSoft HR, Siebel CRM, G-Log, Demantra, i-flex, Oracle Retail and Oracle Fusion Middleware installed at SAP’s largest enterprise research planning customers. Now Oracle’s Hyperion software will be the lens through which SAP’s most important customers view and analyse their underlying SAP ERP data.”
The statement was one of intent: Oracle, and in particular its aggressive chief executive Larry Ellison, has the German software company firmly in its sights.
Stifling innovation
Following IBM’s acquisition of Cognos in November 2007, the spate of consolidation quietened down. And for good reason: there were not many BI businesses left to buy and not many buyers to pick them up. The choice runs to Microsoft, Oracle, SAP or IBM. One of the biggest concerns about this is that innovation may well suffer as a result. Corporates that are now locked into buying software previously bought from relatively small, nimble providers, suddenly find themselves buying from companies with market caps that rival many east European countries, with extremely powerful shareholders to boot.
A rare exception is the SAS Institute – one of the largest independent enterprise software companies in the world. SAS enjoys annual revenues in the region of $2bn and is still a wholly-owned private company. As a result, the founders are able to run the company exactly as they see fit, without pressure from institutional shareholders. Consequently, the company dedicates up to one-quarter of its revenues to research and development – a figure well above the industry average and the reason many industry commentators offer for its success.
Spending one-quarter of revenues on product development is unlikely to be the type of approach that the SAPs, Oracles, Microsofts and IBMs of this world take to their recently acquired technologies. Integration overheads and a focus on getting the best out of corporate synergies are likely to be their first co ncern.
And these are also likely to impact on how reactive they are to customer requests for improved features, performance and support of their products. In spite of this, Gartner believes the BI sector will still go from strength to strength, reaching compound annual growth rates of 8.6% until 2011.
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