Business enterprise vendor Oracle Corp. renewed its strategy ofgrowth through large acquisitions late last week, with a $3.3billion cash deal to buy Hyperion Solutions Corp., a leader in thefast-growth market for business performance management (BPM) andbusiness intelligence (BI) systems.

Unlike Oracle's earlier hostile takeover of rival PeopleSoft,the Hyperion acquisition–priced at $52 per share–was agreed to onfriendly terms. The move signaled the wide technical gapbest-of-breed BPM vendors like Hyperion and Cognos have establishedthrough specialized financial systems for planning, budgeting andforecasting purposes over larger enterprise resource planning (ERP)vendors like Oracle and SAP AG, which have attempted to duplicatetheir technology with their own modules. “This is a good fit forOracle,” says Paul Hamerman, vice president of enterpriseapplications at Forrester Research. “They have not been successfulin the financial business performance product category. They have agood transactional platform but not for planning and consolidationapplications, and Hyperion is the market leader.” Hamermanestimates the BPM sector is growing at about 15% a year, comparedwith 6% for the ERP segment dominated by Oracle and SAP.

But the deal also highlights the threat that even largeindependent vendors are under as large ERP vendors add morefunctionality through acquisition or, in the case of SAP,partnerships. “It's getting more and more difficult to operate as astandalone, niche vendor,” says Jim Shepherd, senior vice presidentat AMR Research. “Buyers want to buy single suites and standardizearound large vendors.”

In a letter to customers on the day of the announcement,Hyperion president and CEO Godfrey R. Sullivan stressed that theOracle purchase will provide important benefits to both sets ofcustomers. “Coupled with Oracle's BI tools and pre-packagedanalytic applications, the combination redefines businessintelligence and performance management by providing the firstintegrated, end-to-end enterprise performance management systemthat spans planning, consolidation, operational analyticapplications, BI tools, reporting, and data integration, all on aunified BI platform.” He added that Hyperion has more than 12,000customers worldwide, including 91 of the Fortune 100.

Oracle executives pointed to the fact that the deal will broadenthe company's reach into the customer base of its core rival, SAP.“Thousands of SAP customers rely on Hyperion as their financialconsolidation, analysis and reporting system of record,” saidCharles Phillips, president of Oracle, in the press releaseannouncing the acquisition. “Oracle's Hyperion software will be thelens through which SAP's most important customers view and analyzetheir underlying SAP ERP data.”

Hyperion's rivals also began making their own moves soon afterthe Oracle deal became public. Finance and BPM solution providerCartesis announced a “change is best” offer for Hyperion customerswilling to migrate to Cartesis, including a discount of up to 50%for editions that integrate with Microsoft SQL Server 2005 as theirBI platform. A spokesman for larger rival Cognos said that therewas “no decision yet” as to whether the company would offerdiscounts to Hyperion customers willing to switch. Such offers arecommon during software acquisitions, says Forrester's Hamerman, butsince the costs of switching systems tend to be high, they usuallydon't spark mass movements. That may not apply to legacy customersof both Hyperion and Oracle with older versions of the financialsolutions. “There's an opportunity for competitors to take some ofthese legacy customers that face some fairly significant upgradecosts,” says Hamerman. A lot will depend on how Oracle pricesupgrades for existing customers going forward. “That will be aninteresting thing to watch,” says Hamerman.