It’s been clear for a while that Oracle needed to elevate its standing with corporate finance organizations, so few observers were surprised when the Redwood Shores database giant announced on March 1st that it will acquire Hyperion Solutions Corp. When it comes to Finance, Hyperion is, after all, the strongest presence in the market in terms of customers, revenue and product line.

Oracle’s intention to acquire Hyperion is further proof that market consolidation is in full swing. It also emphasizes the increasing importance of the CFO and the finance organization. It should be obvious to both Oracle and its chief competitor, SAP, that they dare not underestimate the CFO’s power to influence the management of budgets and strategic decisions on technology investments. Once upon a time, “technology investments” meant enterprise resource planning (ERP) systems, but the influence of ERP has been waning in recent years; these systems still perform key transactions but no longer are strategic to the finance conversation.

Of course, how Hyperion will fit into Oracle remains to be seen. The finance components of Hyperion’s offerings will complement Oracle’s financial applications, but integrating its business intelligence (BI) line may not be as simple. After all, Oracle made its strategic bet clear with the release of Oracle BI Enterprise Edition, a product that came courtesy of the earlier acquisition of Siebel. Hyperion BI will provide a starting point from which to build a future migration path. But what happens to Hyperion’s BI customers in the meanwhile?

The ball now is in Oracle’s court – and we know that in previous acquisitions it’s been somewhat slow to return the serve. I believe that if – repeat, if – Oracle can deploy dedicated sales and service organizations that have skill sets and competencies in the area of performance management for Finance, then it can successfully retain and build loyalty among those customers and become a BI force to be reckoned with.

The most interesting questions generated by this announcement, though, concern not Oracle but SAP. If Oracle successfully moves forward with Hyperion, SAP has a problem. It doesn’t have as much depth in BI or performance management as Oracle will. That will make it difficult for SAP to have a strategic dialogue with CFOs or CIOs of large and midsize organizations, at least until it shores up and fills the gaps in its product- and customer-facing organizations. It helps that SAP acquired Pilot Software, which addresses the strategic needs of Operations and Finance for strategy and initiative management and the use of scorecards – but not financial applications or BI.

That’s nowhere near enough. Can SAP acquire a dedicated financial performance management application provider, perhaps Cartesis or OutlookSoft? Can it put together a counter-bid for Hyperion or acquire a competitor – say, a company like Cognos that has both finance and BI products and customers? (And by the way, let’s not overlook Infor, itself recently assembled through acquisitions, which has significant depth in performance management and financial applications.)

These are, as they say, interesting times. For SAP to be taken seriously as a strategic player in BI and performance management, it will have to make something happen. Let’s see if the other big enterprise application provider can score one next.

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Regards,

Mark Smith
CEO & EVP Research