SAP Kills Marketing Deal With Business Objects

SAP is ending a long-running licensing and reselling alliance with Business Objects that brought bundled functionality from Business Objects' Crystal Reports to SAP's NetWeaver BI (Business Intelligence) product. While Business Objects and SAP will no longer cross-sell their wares, the two companies say they'll continue to integrate and certify Business Objects' business intelligence software on SAP's ERP applications.

Business Objects' reseller agreement with SAP fell apart just a few months after the companies fired off a press release last November heralding the deal's renewal. Still, both sides cast the alliance's recent dissolution as a relatively friendly falling out.

"It had run its natural course," said Jill Henry, Business Objects' director of European alliances.

The partnership originated in September 2001, when SAP reached a deal with Crystal Decisions to resell Crystal Reports and license some of its components to fill out the formatted reporting capabilities of SAP BW (Business Warehouse). Business Objects inherited the contract through its 2003 purchase of Crystal Decisions and subsequently extended its contract with SAP several times. But SAP later decided it could better serve its customers by baking in its own reporting tools.

"Due to a strong drive towards standardization, customers increasingly demanded formatted reporting capabilities to be offered natively with SAP NetWeaver BI. SAP effectively addressed this customer demand with the introduction of the latest release of SAP NetWeaver," SAP spokesman Jason Loesche said in a written statement. "As a result of this product enhancement, SAP decided to no longer resell/OEM product from Business Objects."

The alliance will officially end Sept. 30, according to Business Objects, which slipped news of the deal's cancellation into its most recent quarterly report filing. A German magazine, is report, subsequently reported and confirmed the news.

Business Objects said in the quarterly filing that it does not expect the SAP alliance's dissolution to materially affect its OEM revenue — though it also warned that other major OEM partnerships could similarly hit the skids. The company currently has deals in place with Microsoft, IBM and Oracle, all of which are sharpening up their own BI product lines and intensifying their rivalry with Business Objects.

"If Microsoft, IBM or Oracle reduces its efforts on our behalf or discontinues or alters its relationship with us, as SAP has done by notifying us of the pending termination of the OEM/reseller agreement ... our reputation as a technology partner with them could be damaged and our revenues and operating results could decline," Business Objects warned in the filing's boilerplate doom-and-gloom section.

Business Objects is struggling through a rough patch right now. Its share price plunged 22 percent on Friday to close at $21.02 on the Nasdaq exchange after the company issued an earnings warning late Thursday. A lower-than-expected close rate on large deals last quarter resulted in revenue below the company's public forecasts, CEO John Schwarz said in a written statement. Business Objects is scheduled to release its full second-quarter results and future guidance on July 26.