Divining Oracle’s Latest Gambit

By snapping up Hyperion, Oracle intensifies its war with SAP, even as it pledges to play nice with others.

Further, Hyperion’s BPM products have “a very loyal following among CFOs,” says Kathleen Wilhide, IDC’s research director, adding that there is a subculture across finance departments of Hyperion advocates who depend on these solutions. “Hyperion is many times the default ‘go-to’ vendor for finance users,” she says.

A year ago, Oracle’s management shifted its focus from products that work only in Oracle environments to those that offer best-of-breed solutions that work with heterogeneous information sources. But that new spirit of cooperation did not diminish its intentions to compete fiercely with SAP.

John Hagerty, vice president and research fellow with AMR Research, says that only 10 percent of SAP’s customers (about 4,000 firms) use Hyperion. Many of these are SAP’s blue-chip clients, though, so Oracle’s purchase of Hyperion puts “a little chink in SAP’s armor.”

Oracle has opened a second battlefront with SAP in court. Weeks after the Hyperion deal was announced, Oracle sued its archrival, alleging that the German company had illegally and systematically entered Oracle’s computerized customer-support systems, downloading more than 10,000 software and support materials. SAP denies the allegations, which date back to its purchase of a software-support company founded by former PeopleSoft Inc. executives. SAP’s acquisition occurred at about the same time Oracle bought PeopleSoft. As the bad blood between the two companies increases, expect competitors to suggest that customers will suffer. “You’re CFO and you have two strategic suppliers locked in a dogfight,” says Cartesis chief marketing officer Crispin Read. That can’t be good, he argues, because you want your suppliers to work together to make you successful.

“Art, Science, and Luck”

The Hyperion deal is the latest in a 27-company shopping spree that started with Oracle’s PeopleSoft acquisition in January 2005 (see the chart at the end of this article). Targets ranged from search products to call-center applications to database technologies. Oracle’s drive to thrive in a mature industry through external growth has boosted its annual revenue in two years from $11.8 billion to an estimated $16 billion for the year ending May 30, 2007.

For its part, SAP has chosen mostly organic growth, and prefers strategic partnering, a spokesman says. “We don’t believe this [Oracle] strategy of trying to buy customers and market share is working,” he adds. SAP maintains a substantial market-share lead in enterprise applications and claims to be the true “end-to-end” provider. “Our competition’s approach — to move into the applications market by acquisition — leaves it to customers to cobble together and integrate software solutions that operate on different code bases,” he says. “Hyperion customers will face this same challenge.”

The bid for Hyperion was hardly a surprise. “Consolidation in the business-intelligence (BI) market has been anticipated for at least 18 months,” says Hagerty, and acquiring customers was the only way to grow. Given how much time and money companies invest in implementing BI products, few switch vendors without a compelling reason.

Some see no reason to switch. “We see the acquisition as a major benefit for us in the long run,” says Keith Hall, CFO of Lending Tree LLC, which uses Hyperion financial-reporting applications and is installing PeopleSoft accounting applications. “Presently, it requires a bit of art, science, and luck to coordinate our Hyperion and PeopleSoft systems. I would expect Oracle to merge the best of both lines together for a ‘killer app’ combination of accounting and financial-reporting software.”

Indeed, while more upheaval in the market is likely as the acquisition binge continues, there’s no need for finance customers to panic or act impulsively, says AMR Research’s Hagerty. He recommends that any shift in IT strategy or providers reflect a change in the user’s business, not in who owns the vendor. “Unless there’s a compelling reason to change your strategy,” he advises, “sit tight.”

Karen M. Kroll is a freelance writer based in Minnetonka, Minnesota.

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