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

Unlike Oracle's earlier hostile takeover of rival PeopleSoft, the Hyperion acquisition–priced at $52 per share–was agreed to on friendly terms. The move signaled the wide technical gap best-of-breed BPM vendors like Hyperion and Cognos have established through specialized financial systems for planning, budgeting and forecasting purposes over larger enterprise resource planning (ERP) vendors like Oracle and SAP AG, which have attempted to duplicate their technology with their own modules. “This is a good fit for Oracle,” says Paul Hamerman, vice president of enterprise applications at Forrester Research. “They have not been successful in the financial business performance product category. They have a good transactional platform but not for planning and consolidation applications, and Hyperion is the market leader.” Hamerman estimates the BPM sector is growing at about 15% a year, compared with 6% for the ERP segment dominated by Oracle and SAP.

But the deal also highlights the threat that even large independent vendors are under as large ERP vendors add more functionality through acquisition or, in the case of SAP, partnerships. “It's getting more and more difficult to operate as a standalone, niche vendor,” says Jim Shepherd, senior vice president at AMR Research. “Buyers want to buy single suites and standardize around large vendors.”

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

Oracle executives pointed to the fact that the deal will broaden the company's reach into the customer base of its core rival, SAP. “Thousands of SAP customers rely on Hyperion as their financial consolidation, analysis and reporting system of record,” said Charles Phillips, president of Oracle, in the press release announcing the acquisition. “Oracle's Hyperion software will be the lens through which SAP's most important customers view and analyze their underlying SAP ERP data.”

Hyperion's rivals also began making their own moves soon after the Oracle deal became public. Finance and BPM solution provider Cartesis announced a “change is best” offer for Hyperion customers willing to migrate to Cartesis, including a discount of up to 50% for editions that integrate with Microsoft SQL Server 2005 as their BI platform. A spokesman for larger rival Cognos said that there was “no decision yet” as to whether the company would offer discounts to Hyperion customers willing to switch. Such offers are common during software acquisitions, says Forrester's Hamerman, but since the costs of switching systems tend to be high, they usually don't spark mass movements. That may not apply to legacy customers of both Hyperion and Oracle with older versions of the financial solutions. “There's an opportunity for competitors to take some of these legacy customers that face some fairly significant upgrade costs,” says Hamerman. A lot will depend on how Oracle prices upgrades for existing customers going forward. “That will be an interesting thing to watch,” says Hamerman.

Instant Insights /

Eat or be eaten when it comes to financial systems

Related Stories

Recommended For You