Oracle's Hyperion Buy Marks BI Sea Change

Yesterday's blockbuster announcement confirms the trend toward consolidation in the business intelligence and performance management markets. Here's a look at the impact on BI competitors and Hyperion products.
Oracle's blockbuster bid for Hyperion Systems Corp., announced yesterday, didn't seem to shock anyone in either the business intelligence or the larger technology industries, but it had plenty of competitors scrambling to offer their opinions. A sampling of those perspectives yielded plenty of good questions about the deal's impact as well as the fate of Hyperion BI technologies, which took a back seat to performance management (PM) in yesterday's announcements.

To a fault, every Hyperion rival we spoke to spun the news as a positive development for independents, suggesting it will effectively take one of the top-five BI/PM pure-play vendors "out of the market." Of course, Hyperion will continue to sell its products, but the argument is that the challenges of completing the deal and integrating the Oracle and Hyperion product lines will, at the very least, bring short-term disruption and confusion that rivals will exploit. That's a temporary phenomenon at best, and Oracle can point to last year's fast turnaround in integrating Siebel Analytics into its Oracle Business Intelligence.

Another argument was that Hyperion products and applications will somehow be stripped of their ability to play well in heterogeneous environments, suggesting that Oracle will inevitably force existing Hyperion customers down an all-Oracle path for databases, infrastructure and applications. But why would you make acquired technologies including Siebel Analytics and Sunopsis centerpieces of your BI/information management portfolio, as Oracle has, if you didn't plan to exploit their strengths in integrating diverse applications and data sources?

There should be no doubt that Oracle can handle and will continue to support heterogeneous environments. The question for Hyperion customers is, will the company gradually promote upgrades and migrations to its own applications and infrastructure or will it employ strong-arm tactics like killing off products? (More on that in a moment.)

The Oracle/Hyperion combo should not be looked at in isolation, but rather as "the first of many" BI/PM consolidations likely to play out in the next couple of years, says Russ Cobb, senior director of global marketing at SAS. "We've been doing scenario analyses for about a year, understanding that the business intelligence space is high growth and relatively high margin, and we've been expecting larger competitors to buy their way in," he says. "We looked at potential buyers including IBM, SAP, Oracle and Microsoft and targets including Hyperion as well as Business Objects, Cognos and Microstrategy." (For more on the competitive impact on SAP, read Mark Smith's blog.)

Cobb insists that SAS, which is privately held, is not for sale. "We couldn't serve our customers any better, and would probably serve them less well, if we were part of a larger enterprise," he adds. Executives at Business Objects, Cognos and Information Builders echo this theme. "We can innovate more quickly [in BI and performance management] because that's our sole focus," says Mychelle Mollot, vice president of market strategy at Cognos. "What we deliver is not tied to big projects like [Oracle] Fusion, so we can respond to market requirements quickly because we're not tied to the next release of an ERP system or infrastructure or a database."

In announcing the deal, Oracle's President, Charles Phillips, presented the flip side of that argument, saying, "we have the most comprehensive business intelligence product line. Competitors such as Cognos and Business Objects tend to focus on either BI tools or a poor BI foundation with few analytic applications with no database and no transactional systems."

Might consolidation play well in a future in which BI is envisioned as being infused in applications, transaction systems and business processes rather than run in more conventional ways by BI experts? And if further consolidation takes place, will the remaining standalone vendors look vulnerable? Over the last five years these same market dynamics have lead to massive consolidation within the enterprise content management market, which is now dominated by IBM, Open Text, EMC and Oracle, with a handful of independents filling niches and Microsoft dominating sales among small and midsize firms.

Several observers pointed out that Oracle focused almost exclusively on Hyperion's performance management capabilities, including planning and consolidation. This makes sense given that "Hyperion's classic BI business is very small with two notable [legacy] products, Essbase and Brio, and Essbase is invariably sold to finance departments for finance-based cube applications," says Gerry Cohen, president and CEO at Information Builders. "The deal may put them more strongly into the performance management market, but there are a lot of vendors in that market today."

Getting back to the question of Oracle strong-arm tactics, Cohen and others wonder what will become of existing Hyperion products, specifically Essbase. "I think the industry deserves a statement on Essbase because 10 years ago Oracle took one of the most popular and first OLAP databases, Express, and basically destroyed it by rewriting it," Cohen says. "As of today there are no other databases inside any Oracle product other than an Oracle database."

Oracle and Hyperion could not be reached at press time to comment on the likely fate of Essbase and other Hyperion BI products, but a FAQ document released by Oracle yesterday stated "Oracle customers will have access to Hyperion's performance management solutions that enable an organization to define its business strategy; to model different scenarios; to define enterprise plans aligned with its strategy; to consolidate financial results from enterprise resource planning systems to measure financial performance; and to compare financial performance against key performance indicators... These performance management capabilities complement Oracle Business Intelligence Suite... Additionally, Oracle customers will be able to use the multi-source Hyperion Essbase OLAP server for scalable, high-performance, hybrid analytic processing."

Certainly many of these questions can only be answered over time. But in the same way that Oracle's PeopleSoft and Siebel acquisitions marked sea changes in the ERP and CRM markets, respectively, the purchase of Hyperion—should it go through in the second quarter as expected—marks a turning point and confirms changes that were already well underway in the business intelligence and performance management markets.