Oracle-Hyperion Deal: What Lies Beneath!

Enterprise software giant Oracle made public the acquisition of business intelligence (BI) software vendor Hyperion, a fortnight ago. However, the market is still abuzz with opinions and speculations as to what could be the repercussions of the buyout on Oracle, as well as the overall BI market dynamics.

For many, the acquisition by Oracle has been a long time coming. Ever since last year, Oracle announced its BI vision and future strategy for the market, one could easily sense that it was sizing up BI vendors for a buyout. It was just a question of who will it go for and why?

**Why Hyperion?**Â
Well, there are a number of reasons for choosing Hyperion. But before we let our imaginations run wild, let’s go through Oracle CEO Larry Ellison’s statement on his company’s acquisition.

“The acquisition of Hyperion makes Oracle the category leader in the high growth enterprise performance management market. Hyperion’s EPM software coupled with Oracle’s Business Intelligence (BI) tools and analytic applications form an end-to-end performance management system that includes planning, budgeting, consolidation, operational analytics and compliance reporting.”

So does this mean that Oracle will now come out with a “killer” business dashboard for customers and put other pure play BI vendors like Business Objects, SAS, Cognos out of business?

Well, not exactly. For according to Gartner’s Ted Friedman, “There are some weaknesses in Oracle’s offerings around corporate performance management and financial analytics and Hyperion’s portfolio of CPM solutions is expected to fill those gaps and strengthen its capabilities.”

But is that it?
Is this the sole reason that compelled Oracle to shell out $ 3.3 billion for Hyperion?

Hardly! Oracle’s move is a well thought strategy to position itself more strongly against arch rival SAP and “surround” it by offering complementary capabilities.

Since a majority of SAP customers use Hyperion tools such as financial consolidation software and planning modules to close their books, Oracle is certain to gain some critical mass in all those SAP customer accounts, by acquiring Hyperion.

Hyperion purchase also works out to be the most economically viable for Ellison and company. According to Ray Wang of Forrester, Hyperion deal at $3.3 billion is considerably lucrative for Oracle, given what it would’ve paid for other vendors namely SAS, Business Objects or Cognos.

“By purchasing Hyperion, Oracle has prevented SAP from buying the smallest vendor (Hyperion) at $3.3 billion. The other vendor valuations would be between the $7 to $9 billion range and that would be quite difficult to digest for SAP given their current revenues at $10 to $11 billion,” claimed Wang.
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How will SAP respond?
Can we really expect SAP to respond to Oracle’s move through an acquisition?

SAP for the last few years has maintained a fairly “organic” growth strategy. Also, in a recent interview, SAP VP Bill Wohl revealed that he doesn’t consider Oracle’s move as a threat and that despite its recent buying spree, Oracle still has a long way to go before it can catch up with SAP.

Nevertheless, Forrester’s Wang believes, “SAP will have to see if its current strategy is still valid in today’s market. If the focus is to grab customer base, than SAP should reconsider efforts to acquire a mid-market customer base as that is where the future growth is. If the effort is to match a BI play, I believe an acquisition no longer makes sense for SAP, unless they bid for Hyperion.”

However, Gartner’s Friedman predicts SAP may announce a major buyout in the coming months. “It is possible that SAP would do a major acquisition in the BI space—BO or Cognos— in order to further extend its BI capabilities, and now to address Oracle’s attack in this area.”

Only time will tell if SAP goes in for an acquisition, but for now, BI market is where the action is. The deal has raised the valuations of the BI vendors in a big way and so the next buy out could be a juicy one to watch out.

A number of other major players such as IBM, HP and Microsoft have their vested interests and can always be counted on when it comes to having the purchasing power.