SAP versus Oracle: The saga continues…

Taking a page out of rival Oracle Corp.’s playbook, Germany’s SAP AG announced late Sunday that it had agreed to acquire France’s business intelligence (BI) and analytics powerhouse Business Objects S.A. for $6.8 billion. The surprise move is almost certain to trigger further consolidation in the near future as smaller players and large ones, such as Microsoft Corp., reassess their strategies to take on the established enterprise resource planning (ERP) giants.

Not only does this acquisition echo Oracle’s $3.3 billion purchase of business performance management (BPM) and BI leader Hyperion in February for $3.3 billion, some consultants see it as a concession by SAP that organic growth alone will not be able to produce enough growth to meet the company’s ambitious goal to double its customer base to 100,000 by 2010. “SAP has always insisted that growth would be internal. Just last spring, the chief executive told us that the company could not justify an acquisition of this magnitude,” says Paul Hamerman, Forrester Research Inc. vice president of enterprise applications. Oracle CEO Larry Ellison, by contrast, has always boasted of his company acquisition lust.

“It’s interesting to see two very different strategies bring SAP and Oracle to the same place,” says Bruce Myers, managing director at financial advisory firm AlixPartners. “SAP was always promoting its “Built by SAP” slogan, promising all the functionality in one integrated package.”

It wasn’t as surprising to consultants that Business Objects, with dual headquarters in San Jose, Calif. and Paris, was in play—despite its pronouncements that it would preserve its independence. “We just figured that someone else, like Oracle, IBM or {Hewlett-Packard}, would make a bid for it,” notes Hamerman.

So who’s next on the eat-or-be-eaten menu in the rationalization of financial information technology? All eyes are on the potential buyout of Cognos Inc., the only remaining publicly traded performance management and BI company, and the other contenders in the ERP space—IBM, Hewlett-Packard and Microsoft. “The acquisition of Cognos may very well be a way for the smaller ERP companies to move up,” suggests Myers. “It would certainly expand their customer base and make them more appealing to larger corporations.” The three contenders have focused on providing software to small and midsize companies.

For SAP, the acquisition of Business Objects is expected to add revenues from small and midsize companies that use Business Objects software without an ERP system base, but it could also over time help them to expand their base of multinationals to include those that use Business Objects but not SAP.

In announcing the agreement, SAP CEO Henning Kagermann said Business Objects would operate as an independent subsidiary. While no immediate restructuring is planned, consultants reckon that over time SAP’s Business Information Warehouse suite would be eliminated to reduce the overlap with BI product lines.

Besides performance management, the acquisition also strengthens the overall dashboarding and BI capabilities for SAP¹s governance, risk and compliance (GRC) offerings, although some analysts believe that, to be fully competitive with Oracle GRC, SAP will still need to fill gaps in its enterprise content management platform and BPM functionality.

If you are not worried about fraud, clearly you should be.

Corporate fraud is rampant across the globe, with four out of five senior executives reporting varying levels of threats at their companies, according to Kroll Inc.’s first annual fraud survey. And who is most responsible for uncovering fraud? Finance managers, according to about 60% of those that responded to the survey. In most other cases, it’s the chief risk officer, chief compliance officer or the legal staff.

The survey shows that the most widespread strategies implemented to combat fraud and corruption are, not surprisingly, financial controls (used for this purpose by 79% of those polled) and information technology security (used by 70%). That means, of course, that a worrisome 21% and 30% don’t use financial controls or IT security, respectively. And that’s why international U.S. companies should be concerned, says David Hess, managing director of Kroll’s forensic accounting practice.

Many of the companies lacking controls and security are located abroad, with regulatory mandates such as the Sarbanes-Oxley Act and the Foreign Corrupt Practices Act lessening fraud at home. And with globalization increasing U.S. corporations’ relationships with suppliers and partners in more unsophisticated countries abroad, fraud risk should be a top concern, says Hess.

“Risk assessment must be a subset of enterprise risk management, even in foreign markets, he says. “You need to do proper due diligence of third-party suppliers and partners.” Such an evaluation should include fraud indexes, like transparency initiatives, and controls monitoring, at the very least, says Hess.

The survey, conducted in cooperation with the Economist Intelligence Unit, showed that the larger companies are bigger targets. On average, they lose six times more money to corporate fraud than smaller ones. Corruption varies widely. The highest threat is in the Middle East and Africa, where 39% of the executives reported fraud. North America reported the least fraud: 9%.

The 892 senior executives who responded to the survey were equally split between the Asia-Pacific, Europe and North and South America.

What mortgage meltdown?

Investment managers remain bullish on the financial markets despite equities’ roller-coaster ride this summer and the subprime mess, according to Russell Investment Group’s third-quarter Investment Management Outlook.

About 85% of the more than 340 respondents consider stocks fairly valued or undervalued. “The most basic attitudes of investment managers toward U.S. equity markets have not significantly eroded,” says Randy Lert, chief portfolio strategist, Russell Investment group, according to the survey taken between Aug. 27 and Sept. 4.

Still, interest in fixed-income investments soared. Bullishness for corporate bonds more than doubled to 31% from 15% in the second quarter. High-yield bonds increased to 21% from 12%, while U.S. Treasuries recorded one of the most bullish scores of the past 14 quarters, increasing to 33% from 19% in the same periods a year-earlier.

People on the Move

Best Buy Co., Inc. named Jim Muehlbauer interim CFO of $36 billion consumer electronics giant, with headquarters in Richfield, Minn. Muehlbauer, 45, succeeds Darren Jackson, who has been appointed to the newly created position of executive vice president of Customer Operating Groups. Muehlbauer has been with Best Buy for the last five years, most recently serving as CFO of Best Buy U.S. He joined the company in 2002 as CFO of Musicland. In 2003, he was promoted to senior vice president of finance and then became CFO of Best Buy U.S. in 2006. From 1992 to 2002, he held numerous senior financial positions with increasing responsibility, including vice president and worldwide controller at the Pillsbury Co.

The ServiceMaster Co., the $3.4 billion provider of residential and commercial brands including, TruGreen, Terminix and American Home Shield, announced that Ernie Mrozek, the company’s CFO will be retiring effective February 29, 2008. Mrozek, 53, joined ServiceMaster in 1987 as vice president of accounting. In 2000 he was named president of commercial and consumer services. Two years later he was promoted to president and COO, then in 2002 he accepted his current position as president and CFO in 2004.

Oxford Industries, Inc. promoted vice president and head of the internal audit department, Anne M. Shoemaker vice president of capital markets and treasurer of the $1.1 billion producer and marketer of branded and private label clothing for men, women and children, with headquarters in Atlanta. Shoemaker succeeds J. Reese Lanier, Jr. who has decided to resign in order to pursue other opportunities outside of the apparel industry Shoemaker began her career with Oxford seventeen years ago as a staff accountant and has since held various accounting and finance positions throughout her career, including managing the credit department.

Forest City Enterprises Inc, announced that effective April 1, 2008, current CFO Thomas G. Smith is slated to retire, from the $1.2 billion real estate company, based in Cleveland. The company has named Robert G. O’Brien Smith’s successor. O’Brien came to Forest City in 1988 as vice president of project finance in Forest City’s commercial group. He was named president of Forest City Finance Corp. a subsidiary of Forest City, in 1994 and stayed in that role until 2000. O’Brien will handle leadership of financial activities on February 1, 2008 and will assume the roles of executive vice president and CFO concurrent to Smith’s retirement.

Flower Foods Inc., the $1.9 billion producer and marketer of packaged bakery goods, with headquarters in Thomasville, Ga., appointed Vandy T. Davis vice president and corporate controller. Davis, 51, succeeds R. Steve Kinsey, who was promoted to senior vice president and CFO August 27. Davis’s career with Flower Foods has spanned over 29 years, where he has held a variety of positions within accounting and financial reporting. In 1978, he joined the company as a staff accountant. Then, in 2005, he was named assistant corporate controller.