Taking a page out of rival Oracle Corp.'s playbook, Germany'sSAP AG announced late Sunday that it had agreed to acquire France'sbusiness intelligence (BI) and analytics powerhouse BusinessObjects S.A. for $6.8 billion. The surprise move is almost certainto trigger further consolidation in the near future as smallerplayers and large ones, such as Microsoft Corp., reassess theirstrategies to take on the established enterprise resource planning(ERP) giants.

Not only does this acquisition echo Oracle's $3.3 billionpurchase of business performance management (BPM) and BI leaderHyperion in February for $3.3 billion, some consultants see it as aconcession by SAP that organic growth alone will not be able toproduce enough growth to meet the company's ambitious goal todouble its customer base to 100,000 by 2010. “SAP has alwaysinsisted that growth would be internal. Just last spring, the chiefexecutive told us that the company could not justify an acquisitionof this magnitude,” says Paul Hamerman, Forrester Research Inc.vice president of enterprise applications. Oracle CEO LarryEllison, by contrast, has always boasted of his company acquisitionlust.

“It's interesting to see two very different strategies bring SAPand Oracle to the same place,” says Bruce Myers, managing directorat financial advisory firm AlixPartners. “SAP was always promotingits “Built by SAP” slogan, promising all the functionality in oneintegrated package.”

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

So who's next on the eat-or-be-eaten menu in the rationalizationof financial information technology? All eyes are on the potentialbuyout of Cognos Inc., the only remaining publicly tradedperformance management and BI company, and the other contenders inthe ERP space–IBM, Hewlett-Packard and Microsoft. “The acquisitionof Cognos may very well be a way for the smaller ERP companies tomove up,” suggests Myers. “It would certainly expand their customerbase and make them more appealing to larger corporations.” Thethree contenders have focused on providing software to small andmidsize companies.

For SAP, the acquisition of Business Objects is expected to addrevenues from small and midsize companies that use Business Objectssoftware without an ERP system base, but it could also over timehelp them to expand their base of multinationals to include thosethat use Business Objects but not SAP.

In announcing the agreement, SAP CEO Henning Kagermann saidBusiness Objects would operate as an independent subsidiary. Whileno immediate restructuring is planned, consultants reckon that overtime SAP's Business Information Warehouse suite would be eliminatedto reduce the overlap with BI product lines.

Besides performance management, the acquisition also strengthensthe overall dashboarding and BI capabilities for SAP?s governance,risk and compliance (GRC) offerings, although some analysts believethat, to be fully competitive with Oracle GRC, SAP will still needto fill gaps in its enterprise content management platform and BPMfunctionality.