SAP Buys Sybase For USD 5.8 Billion: Analysts React

SAP made a bold move early today by announcing a definitive agreement to acquire Sybase for $5.8 billion. Sybase will operate as a standalone unit under the name ‘Sybase, an SAP Company.’ Sybase’s management team will continue to run the business.

“With this transaction, SAP will dramatically expand its addressable market by making available its market-leading solutions to hundreds of millions of mobile users, combining the world’s best business software with the world’s most powerful mobile infrastructure platform,” claimed Bill McDermott, Co-CEO, SAP and member of the SAP Executive Board.

Most analysts thought it was a smart move on SAP’s part. Dane Anderson, CEO of Springboard Research said there were risks present with this acquisition like any other. “But we believe the Sybase acquisition is a good move for SAP. The premium being paid is high and there is some risk of alienating other database providers, but this acquisition will not change the fact that SAP will continue to support clients using Oracle, IBM and Microsoft databases. Moreover, SAP’s position in the market and centrality to many companies’ computing environments makes it highly unlikely that any of its existing external database partners can choose to stop partnering with SAP,” he said

With this acquisition, SAP claims it will accelerate the reach of its solutions across mobile platforms and drive forward the realisation of its in-memory computing vision.

Ray Wang, Partner - Enterprise Strategy, Altimeter Group, LLC wrote in his blog that Sybase has proven itself with its IMDB (In Memory Database) offerings and financial services pedigree. “Another key reason for moving to IMDB – SAP resells an estimated $1 billion in Oracle databases every year. Any effort to stop funding SAP’s largest competitor is a proactive and perfect reason to move to IMDB.”

Anderson went on to say that in environments and solutions where SAP can steer the database decisions toward Sybase offerings they most certainly will. “This acquisition also provides SAP with a boost in the fast-growing mobile device database market that should provide strong expansion opportunities for many years ,” Anderson added.

Praveen Bhadada, Engagement Manager, Zinnov Management Consulting, said that SAP’s acquisition of Sybase was directed towards enhanced and efficient mobile applications to help customer access mission critical and business critical applications on the move. “With mobile increasingly becoming a key form factor to access applications, this acquisition will provide efficient delivery of CRM, SCM, PLM, and other such business applications on the handset. In a converging world, where mobile is being increasingly looked as one and the only one device that anyone would need to carry to enable business, entertainment and communication, this acquisition is key for SAP to enable its customers access the world class SAP applications on mobile, while SAP is betting heavily on mobile computing to stay ahead of the game from its rival Oracle,” he felt.

Wang added, “SAP has broken its promise of no more big acquisitions after the BusinessObjects deal. However, these acquisitions make sense toward the path of next generation applications. Mobile, cloud, in-memory provide the tools required to support the elements of next generation applications. More importantly, they also gain access to the financial services and public sector markets. On the geographic front, Sybase has strong presence in the China market, an area where SAP sees future growth.”

Wang also felt that SAP can take advantage of the advances made by the Sybase team to support both private and public cloud environments. “The private cloud capabilities deliver a must have requirement to meet strict European privacy laws and mitigate concerns of public sector customers. Sybase is unique in being able to provide the same database management technologies in both the private and public cloud,” he explained.

On impact of the acquisition on India, Bhadada said: “With India becoming the 2nd largest base of mobile handset devices shipped annually, SAP may as well see great opportunities in India market. Since many mobile services are being delivered via the Internet, this could be a key growth driver for SaaS-enabled application sales in India as well as other geographies. While the India software product market is expected to cross $6 billion by 2015, cloud applications will account for about 10 percent of the total market. As such cloud services (including infrastructure services) will account for a more than $1 billion opportunity by 2015.”

The SAP Executive Board plans to propose to the Supervisory Board to appoint the Chairman and CEO of Sybase to SAP’s Executive Board.