SAP announced it has acquired iLytix XL Reporter, an Excel-based reporting and budgeting tool. The product is aimed at small/medium-size businesses (SMB’s) and is positioned as easy to deploy, use and maintain. XL Reporter integrates with many SMB accounting packages. We see the acquisition as part of SAP’s effort to increase its presence in this tier of the financial applications market where it competes against Microsoft Business Solutions (Great Plains, Solomon, Navision and Axapta), Sage Software (Sage, Best, Act!) and other vendors that distribute through resellers, as well as Epicor, Mapics and others that mainly sell direct. SAP also acquired Business One (then called TopManage) in 2002, to be able to address the SMB market. Ventana Research sees SAP’s acquisition of iLytix as having limited market impact for the next several years. Its penetration will depend on SAP’s success in building its Business One channel, in our judgment. In its current form, we think the product competes more against standalone spreadsheets and the built-in capabilities of ERP systems to a greater degree than the more capable offerings from FRx. It is not clear yet whether SAP intends to keep XL Reporter simple or extend it capabilities.