Oracle Deal For Hyperion Shakes Up Business-Intelligence Market

By paying such a premium for Hyperion, Oracle shows it means business, and it's aiming straight for the knees of competitor SAP.
It was only a matter of time before one of the big IT vendors made such a move. Oracle's $3.3 billion acquisition of Hyperion, announced Thursday, highlights both the growing pressure on businesses to better use information to their strategic advantage, and IT vendors' interest in grabbing more of that lucrative market for business-intelligence software.

And by paying such a premium for Hyperion -- at more than three times the $765 million revenue it grossed in fiscal 2006 -- Oracle is showing it means business. At the same time, it's aiming straight for the knees of staunch competitor SAP.

What BI vendor will be acquired, and who will do the acquiring, has been fodder for IT industry gossip for months, with BI industry leaders Business Objects, Cognos, and Hyperion considered the most likely candidates. Business Objects and Cognos are both running at an annual revenue rate of more than $1 billion; if the Hyperion acquisition sets the standard, they could go for $4 billion or more.

"The Hyperion acquisition will make it much harder for anyone to buy Cognos or Business Objects," says Gerry Cohen, CEO at business-intelligence vendor Information Builders. "One could argue potentially there may not be a whole lot of consolidation in BI after this. It sets a very high bar for the rest of the industry."

And at such a high price, Oracle may be trying to stave off a counterbid from SAP, says Mark Smith, CEO of Ventana Research. Large acquisitions aren't SAP's style, but Hyperion's technology is often used with SAP's technology, and the acquisition by Oracle presents a notable threat.

For one, it gets Oracle closer to CFOs within businesses that use Hyperion's applications and, of course, sign off on all major software purchases or platform transitions. Even more so than analytics and query tools, Hyperion is known for software that's alternatively called "business process management" or "enterprise process management," catch-all terms for software that's primarily used for financial management and reporting.

What's more, Hyperion technology is in use at many companies that also use SAP ERP. Oracle sees the Hyperion acquisition as a way to squeeze out SAP, by offering an expanded portfolio of BI applications, potentially closer technical ties among BI, BPM, and ERP and databases, and, of course, a chummier relationship with the BPM-using CFO.

Oracle's bigger vision became apparent in a snarky statement president Charles Phillips made in a press release about the acquisition. "Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis, and reporting system of record," Phillips said. "Oracle already has PeopleSoft HR, Siebel CRM, G-Log, Demantra, i-flex, Oracle Retail, and Oracle Fusion Middleware installed at SAP's largest ERP customers. Now Oracle's Hyperion software will be the lens through which SAP's most important customers view and analyze their underlying SAP ERP data."

SAP didn't take the blow lying down. "Oracle has always had a presence in SAP accounts. The customer's strategic value comes from its business process solutions, not from the tools around those applications," said a spokesman in an e-mail. "The customers chose to invest in Hyperion -- you'd have to ask them whether they see Oracle's strategy as one that helps them or just shoves them into the quagmire of $20 billion dollars of acquisition strategy."

Indeed, the Hyperion acquisition raises the question of how Oracle will digest yet another large acquisition. A number of Hyperion's technologies compete with those found in Oracle's Siebel analytics. Some analysts specializing in helping businesses negotiate IT budgets say they've heard grumblings about poor service from Siebel and PeopleSoft customers following those acquisitions.

It's a bold and bullish move in the style of Oracle, but as with the other acquisitions, the question remains on how well it will all come together.

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