About three years ago I asked Business Objects how they intended to address corporate performance management (CPM), especially as its chief rivals Cognos and Hyperion Solutions were both aggressively targeting this fast growing segment of the business intelligence (BI) market. I was told unequivocally that the right strategy was to remain a "neutral" and "pure-play" business intelligence platform provider that supports best-of-breed CPM applications from partners.
Fast forward several years, and that strategy has been quietly binned. Business Objects, recognizing the high-growth potential of CPM applications over BI tools, not to mention that it was quickly running out of CPM partners, was stirred into action and snapped up SRC Software in July 2005, ALG Software in September 2006, and last week Cartesis.
SRC and ALG handed Business Objects a sound technological foundation for a competitive CPM portfolio. So why did Business Objects feel a need to dip into its pockets once again? What Business Objects CPM lacked was a stronger focus on financial consolidation and management reporting. Cartesis now fills that gap with a set of industrial-strength inter-company consolidation and reconciliation tools.
The acquisition is really a competitive response to another recent consolidation event. The 800-pound gorilla in financially-oriented CPM is Hyperion, which is now being bought by Oracle. Cartesis' acquisition seems like a tactical counter move, targeting the same CFO audience that Hyperion is going after. It is also a clear signal to Oracle and other CPM rivals that Business Objects is ready to make strategic acquisitions to compete in financial CPM space. The acquisition also continues to diversify the company product strategy – taking it "up-market" beyond its core reporting tools business, which is stagnant, to more strategically focused and higher-value analytic applications.
Rivals of course haven't pulled any punches in trying to put a dampener on the deal, arguing that Business Objects is playing catch-up in CPM and now faces a stiff challenge rationalizing a "Noah's Arc" of overlapping functionality between Cartesis and Business Objects' current CPM products, especially in the areas of consolidation, budgeting and planning, as well as integrating its CPM assets into its core XI BI platform.
But then again Cognos and Hyperion have both struggled with the same issues themselves and have only just now started to unify their CPM and BI platforms after five-odd years of articulating a vision of an integrated platform.
Competitor snipes aside, there are a lot of other positives to this deal. Business Objects has a fairly decent track record of absorbing companies and their technologies from a customer perspective – think Acta Technology for data integration and Crystal Reports for enterprise reporting.
Business Objects also struck a good deal. The purchase price of $300m is less than two and half times revenue – not what you'd call a premium price-tag when you consider that Hyperion went for 3.7 times its revenues. But it's quite expensive when you think it paid only $100m for SRC.
The French history of Cartesis should make it a good cultural fit for Paris-based Business Objects. Like Business Objects, Cartesis demonstrates a mix of European and US values and many of its sales and marketing staff will now re-join their former employer – which could be a good or bad thing for them.
Finally Cartesis will now benefit from Business Objects' strong marketing which promises to unlock the full potential of its financial CPM suite.
Leave a comment