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Business Objects to Acquire SRC Software: The Reasons, Results and Ramifications

Business performance management has become a high priority and will drive the adoption of business intelligence tools which forms the basis for the merger.

This article originally appeared on the BeyeNETWORK

Why would a large, successful, business intelligence vendor acquire a small budgeting and consolidation application vendor? One reason: business performance management (BPM). It is becoming apparent that enterprise-wide adoption of business intelligence tools will be driven by the high-priority requirements of business end-users. Business performance management has become that high priority. Business performance management is a corporate-wide, strategic initiative that is accelerating the growth of BPM applications (budgeting, consolidation, scorecards/key performance indicators (KPIs)) and supporting business intelligence tools (report & query, extract, transform and load (ETL), OLAP and dashboards).

Business Objects, while a strong business intelligence tools vendor, until now had participated directly in just the dashboard aspects of business performance management. Before you populate a dashboard, your fundamental data processes need to be in place to collect and translate data, handle inter-company eliminations and consolidate actual data. You also need a system more robust than stand-alone Excel to create a budget, against which you can measure performance. This goes beyond just aggregating data in a data warehouse. SRC provides these applications but they lacked the marketing and strong global distribution reach of Business Objects.

Is this a marriage made in heaven? Perhaps. Now the combined Business Objects/SRC is in the same league as Hyperion and Cognos. It’s interesting to note that Business Objects had some challenging comments when Cognos went down this same path several years ago. However, as business performance management has become a major market force, Business Objects recognized that it’s time to recognize the benefits of the Cognos strategy. While all of these companies offer a nearly complete BPM suite from tools to applications, they also suffer from the same achilles heel: lack of full integration (user interface, data and metadata).

Despite this shortfall, acquisition is the right strategy for the larger vendors. Our annual BPM Pulse Survey consistently shows that end-users have a strong preference for buying packaged applications with the domain expertise already incorporated. The next largest group of survey respondents wants packaged applications, but they also want a toolset to extend the existing applications and develop custom capabilities on top of them. The Big Three of Hyperion, Cognos, and now, Business Objects can address the needs of both of these groups. 

Additional confirmation that the market is headed this way comes from Applix. They have been a small, but successful tools vendor with a good understanding of the needs of BPM users. That’s why they recently introduced both a planning and a consolidation application framework; now they offer the combination of tools and applications that the BPM market wants. Other tools vendors are making inroads into the applications space as well, primarily through partnerships.

Now let’s get back to the specifics of the Business Objects/SRC combination. While there is certainly product integration work to be done, they have a head start—the two companies have been partners in the past and have already done some of the basic work required as part of their merger. However, there is still the large matter of integrating the companies. All mergers are complex, but this one combines a tools vendor and an applications vendor. This presents unique challenges. You only have to look back to the merger of Hyperion Software (applications) and Arbor Software (tools) in 1998 to see what can go wrong. While Hyperion is stronger than ever today, it did lose momentum for several years following the merger while it focused on internal issues and the loss of a significant number of employees from both sides of the merger. In this type of merger there are some fundamental issues to address. First and foremost is the sales model itself. Business intelligence tools vendors sell primarily to IT, application vendors sell primarily to business users and in the case of business performance management—general business users often with a finance slant. This takes different selling skills. Do you keep the sales groups separate? Do you cross-train each group on the other methods, terminology and product set? How do you determine whether to sell tools, applications or both to each prospect? This is especially difficult if the sales forces don’t know each others’ products. Tools vendors also do a good amount of business through channels, while the typical application vendor is less dependent on channels. This is definitely true in this case: Business Objects has many partners, while SRC is more limited in the partnership area.

This leads into questions around support as well. Tools vendors are typically supporting their channel partners or in-house developers. A good amount of their time is spent solving complex issues and putting out fires. Applications vendors use their support groups to design and customize their packaged applications for the business end-user. Again, a different set of skills and a different background is required. How do you combine these groups? Where does the channel itself fit in the new sales and support model? These are tough decisions. While deciding in favor of one model or the other, the company risks alienating and losing a set of employees.

In summary, we believe the combination of Business Objects and SRC is good for both companies, as well as their current and prospective customers. However, no one should underestimate the amount of effort required to make it all work as intended. For customers and users, the real test of this consolidation is how successfully the merged companies carry out the task of delivering an integrated product set from a unified company.

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