German software giant SAP has announced plans to acquire business intelligence (BI) solutions vendor Business Objects, at a cost of 4.8bn Euros. This is SAP’s largest acquisition yet and follows Oracle’s recent purchase of Hyperion, another large player in the BI space.

The firms believe that through their combined expertise, customers will be able to gain significant business benefits from a fully integrated information management platform. Announcing the deal Henning Kagermann, chief executive of SAP said the acquisition will provide companies with end-to-end support and automation, while increasing the productivity of businesses throughout.

SAP’s strategy has been to grow organically and make minor acquisitions but the purchase of Business Objects was an exception because of its crucial leadership in the BI market, Kagermann said.

John Schwarz, chief executive of Business Objects, described the partnership as an “unbeatable combination,” which will bring more opportunities for both to gain market share. As well as Business Objects being able to follow the penetration made by SAP into Asia, both companies will have access to new industries, Schwarz said.

Whereas Business Objects is traditionally strong in areas such as finance, SAP has particularly solid foundations in areas such as utilities, he added.

Although the firms' business models offer a complimentary frame-work, Business Objects will remain a stand-a-lone entity in order to keep exploiting horizontal markets, according to a released statement. Business Objects has been building broad and heterogeneous applications to work with many platforms and this will be protected, Schwarz said. Business Objects had not sought to be acquired and the decision had come from SAP, Schwarz said.

Alys Woodward, a programme manager at research firm IDC, agreed, saying that SAP would have chosen to bring in Business Objects’ expertise to ensure it had a BI solution that really suited the end-user. This type of understanding is not needed in developing application solutions and is an area SAP has struggled with, she explained.

The acquisition is bad news for other independents, Woodward said, as many would have liked to benefit from the large customer base a tie up with SAP would have given them. SAP has been expected to move into the BI market for a while with “every business intelligence vendor wanting to be in on SAP deals,” Woodward said.

However, Andreas Bitterer, research vice-president at analyst Gartner, believes the agreement could only have been a very recent decision, because otherwise the BI specialist would not have recently acquired Fuzzy Informatik, a data quality expert, to penetrate the German speaking market. Likewise SAP is unlikely to have entered into an OEM agreement with Informatica Corporation, a leading provider of data integration software, he added.

Questions also arise on the future of both SAP and Business Objects performance management applications, which both companies acquired with recent purchases. SAP recently acquired OutlookSoft while Business Objects purchased Cartesis. The duplicate performance management solutions might mean that one of the recent purchases will be sold, although this is unlikely, Bitterer said.

It will be more likely that the similar solutions will be integrated over a long time frame, or the duplicates will be moved to another platform, as Oracle did in its BI acquisition, Bitterer explained.

Commentators agree on the impact the acquisition holds for the market, acknowledging that Business Objects is likely to push use of the SAP platform to its customers, rather than Oracle’s. However the fact that the SAP Business Warehouse platform is based on an Oracle platform will mean Oracle and SAP need to continue to work together, Bitterer noted.

The BI market continues to get smaller, and Bitterer estimated that Cognos will probably be the next vendor to be acquired. It's main competitors, Information Builders and SAS, are privately held and thus are not so likely to be purchased, he said.