Interview: Business Objects CEO Bernard Liautaud

Business Objects Chairman and CEO Bernard Liautaud recently engaged in a far-ranging talk with CRN West Coast Bureau Chief Rochelle Garner on the state of the business intelligence market, the company's reasons for acquiring Crystal Decisions and the role of the channel. This is an excerpt of that conversation.

CRN: You're based in Paris, yet Business Objects runs much of its operations out of its San Jose, Calif., office. Can you explain the company structure?

Liautaud: I am the CEO. In California I have a CFO, Jim Tolonen, reporting to me, as well as John Olsen, the president and COO. Also the general counsel is in California. The head of R&D is based in Paris. We're a very decentralized team, with people in both sides of the Atlantic. We're listed on both countries. It's always been a fundamental characteristic of the company to have a transnational identity between the United States and Europe. It's very much a part of the DNA of the company to be international.

CRN: How is the company doing?

Liautaud: Revenue grew significantly compared to the same quarter a year ago by 83 percent. The reason we grew so fast is the Crystal Decisions acquisition, which doubled our size in terms of sales and increased overall revenue by more than 80 percent. That makes us the fastest-growing company in business intelligence. Our organic growth is 20 percent, and that still makes us one of the fastest, especially among the leaders in our market.

CRN: This quarter you did report disappointing profits. Can you explain?

Liautaud: We had some issues with currency exchange, but they did not affect the operating results. We had to move cash from different places around the world to pay for the acquisition, and there was a lot of [currency] fluctuation that generated a $6.8 million loss. The company was profitable and we continue to make money. The results for our earnings per share was lower than what the Street was expecting, although we were still in the range of what we said we would do.

CRN: What did you see as you looked out over the business intelligence [BI] landscape that prompted you to acquire Crystal Decisions?

Liautaud: We saw the BI market becoming more and more important. The concept of BI is becoming more well-known. It's the thing companies do when they have their ERP applications up and running There's been a natural evolution. Companies put in a database, then automate that with ERP and other systems. Then they think this is great but they still don't have a complete view of the enterprise. They need a BI system. So BI is becoming fully strategic, and more and more companies are ready for BI. Plus you have an explosion of data, and more pressure on businesses for corporate compliance and reporting, which forces companies to have a better understanding of their business. These push the need for reporting. So BI is an attractive market and becoming more visible.

Second, we saw companies wanting to reduce the number of suppliers they have in IT. They don't want five different BI suppliers. They have already started to standardize in other layers, like having one database. But they realize they need to consolidate BI so they can look at all different data sources with one system.

We said the market needs a peer leader and we have the opportunity to become that leader by becoming the safe choice customers can standardize on. We saw that we had a lot of capabilities already, with ad hoc reporting, BI analytics, data integration. But we did not have enterprise reporting--the production tool that creates standard reports. And Crystal Decisions was among the fastest-[growing], most successful companies in BI, and it was ready to go public. We went to them and said we think we have an opportunity.

CRN: How is this strategy different from that of Cognos, which also has a popular reporting tool with ReportNet?

Liautaud: We are focused on BI. Cognos has taken the tack of diversifying into finance applications and, most specifically, budgeting. Which is why they acquired Adaytum. Their strategy was to go into other areas outside of BI. We think it's a mistake. It's not their core competency, and it's dominated by companies like SAP and Hyperion. So now Cognos has to fight a war on two fronts: On one side they have to compete against companies that are bigger than they are in the financial market, and now they have to fight against Business Objects, which is twice their size in business intelligence. We are focused, they are diversified.

By buying Crystal, we have grabbed the No. 1 spot. The difference in market share is becoming very large. In terms of license revenue, we have become 60 percent-plus bigger than Cognos in the last 12 months.

CRN: I keep seeing reports saying ReportNet is grabbing market share from Crystal Decisions. Can you comment?

Liautaud: I think that's not true. ReportNet is a replacement product for an old product from Cognos. They show fast growth but they're taking money from the left pocket and putting it in the right. So they're replacing their own revenue. If ReportNet is growing then something else is decreasing. But to me real growth is when you are faster than your competitor, and we are. We are far bigger. We are 60 percent bigger [in BI] and growing faster, so we're decreasing the gap between the two companies.

CRN: So now what are your plans for Crystal Decisions?

Liautaud: We communicated after the announcement that we want to continue the Crystal Decisions business. They have had a fabulous run, and have become the ubiquitous reporting standard for most developers. We don't want to kill that business. We want to keep Crystal Decisions, we want to keep the Crystal Decisions brand, but we want to integrate parts of the line between Business Objects and Crystal Decisions. So as part of this strategy, we are utilizing components of Crystal Decisions in the Business Objects offering, and also the reverse, to have a common infrastructure between the two lines. It's a very exciting project. It will be the first platform that truly integrates the best reporting with the best ad hoc and performance-management tools.

CRN: When will that merged platform be available?

Liautaud: The end of this year. We will have the first integration appearing in the release coming the end of this quarter. And then the common platform will be available the end of this year. That's a big deal.

CRN: You have said you want Business Objects to be among the top 15 software companies in the next three years. How's that progressing?

Liautaud: We have given guidance of about $935 million for the whole year. We are planning to grow, and I think we are on track to reach that goal [of reaching the top 15] in the coming few years. This is an exciting journey for us, and Crystal Decisions is a big part of this. The synergies are extraordinary.

CRN: Where will most of the business come from in the rest of the year?

Liautaud: We think the mix is about what it is now. The United States is close to 50 percent, Europe is 40 percent and the rest comes from Asia.

CRN: You have a huge enterprise presence. What of the SMB market?

Liautaud: We have a very strong presence in the SMB space. We started in that market several years ago, and it's the fastest growing part of our business. We have dedicated selling structures for that market, with a mix of direct and indirect sales people. We really leverage channel partners for the small and midsize market. And the Crystal acquisition gave us a huge boost in SMB because it's in thousands of accounts. We have 24,000 customers and a lot of these are in the midmarket. We have more customers than most application vendors. And we do 40 percent of our business through indirect channels. So that's always been a core focus

CRN: With Crystal and Business Objects, you have two very different channel structures. What are your plans for the channel?

Liautaud: Both companies had successful partner programs, with different models, different strengths. If you look at the Business Objects model, it's been more VAR and systems integrators and some resellers. Crystal has been an OEM program, plus reseller and distribution. On the OEM side they did a fantastic job, with hundreds of small OEM vendors as well as relationships with most of the bigger ones, like Microsoft and SAP.

What we will announce next week [at the company's Global Partner Summit in Palm Springs, Calif.] is the unification of the global partner program. With that, all partners can go to one place and find the right program and products for their needs. What we want to avoid, is if your requirements are fulfilled by a Crystal engine then you have to go through a Crystal partner program. We want a completely unified view where partners can have access to the combined product portfolio. I think it will be very powerful. Partners who didn't feel Crystal Decisions went far enough into analytics can now extend their capabilities using the Business Objects functionality.

So say you are an application company, and have used Crystal as a reporting product inside the application. Now they would like have their full set of users have access to dashboards and scorecards. Crystal Decisions didn't do much in this area but it is a core strength of Business Objects. This unified view will make this possible.

CRN: What should partners know about their role in your strategy?

Liautaud: Business Objects is a partnering company. It is the company in BI that has done the most with partners. That can be confirmed by the number of partners--and we have 1,500, more than anyone else--as well as the variety of partners, from tiny companies, to VARs, OEMs, to [systems integrators]. We have also the largest amount of revenue derived from partners. That means we know how to deal with partners and partners are essential to us. They can reach out to where we cannot. They are a critical part of our ecosystem. And we want to grow that even further.

Second, we provide a platform with which a partner can do many things. They can include us for reporting, move to high-end analytics and provide all sorts of services around it.

And third, because we are the leader in BI, the work for them is easier. When they want to promote a solution of Business Objects, they don't have to convince the customer it will be great. Chances are the company already has our products.

CRN: Just about every BI company out there talks about putting reporting and BI tools into the hands of every user. But few solution partners say this is actually occurring. Where's the disconnect, do you think?

Liautaud: You have to provide capabilities that meet the need of every part of the population. For that to resonate to the enterprise, the software needs to respond to the needs of that large group of people. They want the information they need when they need it. They want something simple that gets them the data they want, easily. So has to be easy to use, deploy and very scalable. The three characteristics are the ones Crystal Decisions Enterprise had brought on the market. That's another reason we were attracted to it. We have managed to grow to large deployments; the largest today is 70,000 users.

CRN: You're describing an enterprise scenario. What will happen inside midmarket companies?

Liautaud: The midmarket has different requirements. What a small or midsize company wants is a prepackaged, well-integrated stack that does end-to-end business intelligence. They don't want to mix and match and integrate products and engines. They say give me something that's turnkey and integrate all of the pieces. What we can say to them is this is packaged and priced to their needs in one box. It includes the data integration piece to bring the data in from different sources and put it into a data mart or warehouse, along with all of the reporting pieces. They get the full functionality in a package that's end to end. They care less about the large deployment capabilities.

CRN: How do you see the business intelligence market evolving for midsize customers?

Liautaud: BI needs to bring the data into a coherent place, like a data mart or warehouse. If you don't offer it, you don't offer the full stack. What's involved in bringing business intelligence into a company? A lot is defining the data, where to put it, how we model it--before we put the front end on it. The midmarket especially requires the integration of the two pieces, the data integration piece--such as extract, transform, load--and the BI tools, which take the data out of the mart to present it to the user. When I say end to end, I mean the customer can buy one package that extracts the data, puts it in a mart and presents it to the users with all sorts of analysis functions.

CRN: This sounds like you're saying the market is moving toward massive consolidation.

Liautaud: BI is poised to consolidate. I won't predict the disappearance of certain companies. But the market is looking for leaders--for companies that can provide a broader market portfolio and can be a safe choice for them. We are there and have taken that lead.