High-tech vendor consolidations often take place in waves. Sometimes, consolidations are just a matter of too much restless capital searching for the next big score, regardless of whether there’s a sound business rationale. Other times, however, a sudden storm of mergers and acquisitions (M&A) signals the coming of a new industry order, with far-reaching consequences for business users everywhere.
High-tech vendor consolidations often take place in waves. Sometimes, consolidations are just a matter of too much restless capital searching for the next big score, regardless of whether there's a sound business rationale. Other times, however, a sudden storm of mergers and acquisitions (M&A) signals the coming of a new industry order, with far-reaching consequences for business users everywhere.
That is the case with the rash of headline-grabbing M&A deals in the business intelligence (BI) arena over the past year. In rapid succession, we've seen Oracle acquire Hyperion, SAP snatch up Business Objects, and IBM take over Cognos — not to mention acquisitions of smaller BI and corporate performance management (CPM) application vendors by most of those firms
It's far too easy to misinterpret these recent events as just more of the same M&A-stoked empire-building that we've come to expect from large IT solution vendors. Indeed, whenever the likes of Oracle, IBM or Microsoft makes a splashy acquisition, it causes a collective Pavlovian response in vendors, investment bankers, regulators and analysts everywhere. The entire IT world is primed for further consolidations, hence further business opportunities to seize, or competitive threats to defend against — or simply to comment on for any concerned customer or deadline-frantic reporter.
Much of the recent industry commentary has revolved around a theme that doesn't stand up to close scrutiny — the so-called “demise of the BI pure play.” Yes, Business Objects, Cognos and Hyperion are (or shall we say, “were”) in the top tier of BI pure plays by market share. But, even with their absorption into big-vendor motherships, they leave behind a long list of BI rivals — including SAS Institute, MicroStrategy, Information Builders, Actuate, JasperSoft, and Pentaho — that remain very much independent (though, clearly, any vendor has its price and many no doubt are courting potential suitors).
Just as important, new vendors continue to emerge across all segments of the BI universe — such as reporting, online analytical processing (OLAP), dashboarding, predictive analytics, data mining, text analytics, intelligent search and complex event processing (CEP) — with many of the new players differentiating through focus on software as a service, open source, appliances and other nouveau approaches to delivering BI functionality.
What's actually driving this recent M&A activity is growing vendor recognition that BI is the crown jewel in any comprehensive service-oriented architecture (SOA) solution portfolio. Though Oracle and SAP (and, to a lesser degree, IBM) already had decent BI wares in their respective SOA portfolios, none of them were on any enterprise's short list of name-brand BI solution providers — until, that is, each of them decided to grab a leading BI pure play.
SOA suites cannot be considered feature-complete unless they incorporate a comprehensive range of BI features. Some SOA application and middleware vendors have strong BI offerings in their current solution portfolios. In addition to Oracle, IBM, and SAP, Microsoft has noticeably beefed up its own BI portfolio over the past year, rolling out the new Office PerformancePoint Server 2007 as the strategic CPM centerpiece of a BI stack that includes SQL Server (Analysis Services, Reporting Services, Integration Services), SharePoint Server (a portal with which many third-party BI/CPM tool integrate out of the box) and the Office application suite (of which one component, Microsoft Excel, is a de facto standard client interface supported by most third-party BI/CPM vendors).
However, even after the pending acquisitions are finalized, the leading SOA suite vendors will still lack strong BI in various functional areas, such as data mining, text analytics and CEP. Moreover, many SOA suite providers — including BEA, Tibco, Progress Software, Software AG and Red Hat/JBoss -- still have little to offer in the BI/CPM market, a deficiency that will almost certainly drive further M&A activity for several years to come. To date, most of these SOA vendors, both large and small, have had to partner with BI/CPM solution providers in order to offer customers a full set of requisite reporting, query, OLAP, scorecards, predictive analytics and other BI tools.
Industry observers can draw up their own lists of SOA vendors needing BI, and BI pure plays that could benefit from incorporation into comprehensive SOA suites. Expect an echo of this year's M&A activity in hookups among second-tier SOA and BI/CPM vendors in 2008 and beyond. As sure as there is investment capital looking for the next big play, and as sure as there are shareholders and executives who can't refuse a great offer, there will be buyouts and sellouts galore as these closely aligned markets continue to shake out.
But don't succumb to the fear, uncertainty, and doubt (FUD) that will continue to be spread by remaining BI pure plays, which are eager to encourage defections by customers of the vendors being acquired. Considering the arms-length treatment that Oracle has been giving to Hyperion, and the likely autonomy that Business Objects and Cognos will receive from their future corporate overlords, no current customer of those BI/CPM vendors need worry that their investments are in jeopardy.
Indeed, Oracle and IBM each has an established track record of preserving and strengthening acquired brands across diverse product segments. Chances are that most of these established BI brands will survive and thrive under new ownership, situating them in a more powerful SOA framework for partner -- and customer-driven integration and extensibility.
And SAP -- which has never made a fill-in acquisition as large or diversified as Business Objects -- will almost certainly allow the firm, as an internal product group, considerable latitude to strengthen its dominance of the BI arena while blazing new trails in CPM, software as a service, appliances, midmarket offerings and other growth areas. In fact, it's likely that Business Objects will become a critical nerve center in its new parent’s ongoing tussle with SAP for the top tier of the packaged business application market.
Keep in mind that many “we're independent and proud of it” BI/CPM pure plays are simply operating in sour-grapes mode until somebody makes them a decent buyout offer. Another transparent ploy is their contention that the acquiring vendors will shut off interoperability with rival BI/CPM solutions. If anything, SOA vendors will maintain and occasionally expand their partnerships with rival BI/CPM vendors, as evidenced by IBM's expanded bundling/licensing relationship with Business Objects, which was announced a few weeks after SAP's deal with Business Objects and not long before IBM turned around and announced its offer for Cognos.
Indeed, leading SOA vendors will need to maintain strong, standards-based multivendor BI interoperability because they themselves will be juggling two or more BI/CPM product lines for the foreseeable future. Oracle has its Oracle-, Hyperion-, and Siebel-branded BI offerings, and has not announced any plans to converge them any time soon. Likewise, SAP will be adding Business Objects' extensive product catalog to its own BI product, which is an embedded solution module within its NetWeaver SOA suite. And IBM's Cognos acquisition will take up residence alongside its existing Alphablox and Omnifind offerings in its BI portfolio.
SOA without strong BI is becoming inconceivable. The corporate BI infrastructure, and the rich analytic CPM applications that leverage it, is the platform through which the SOA fabric feeds directly into decision support and other business processes. In this new industry order, BI has become, both literally and metaphorically, the user's primary “dashboard” to data warehouses, packaged business applications and other distributed sources of key operational data.