Oracle: Dynasty or Diluted?
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After Oracle made its $3.3 billion offer for Hyperion last week, I wondered just how disruptive the news would be to the business intelligence sector. Taking out one of the market leaders in a multi-billion-dollar vertical is nothing to sneeze at.
Or is it?
I spoke to Keith Gile, who Business Objects hired last year to be a strategic adviser to Founder and Chairman Bernard Liautaud. Gile knows about the BI market from spending several years covering the space for Forrester Research.
"The positioning was clearly in the performance management area," Gile said. "They were so determined to avoid the BI conversation and just focus on performance management."
Gile pointed out that Oracle already has two flavors of performance management: its homegrown financial budgeting and planning applications and its PeopleSoft performance management solution.
"Basically, their management came on the phone and pretty much threw 'em under the bus and said these things weren't good enough, and therefore, 'we went out and bought a pure-play, best-of-breed performance management solution in Hyperion,'" Gile said.
"Well good, so now they're going to create one division or department run by the Hyperion folks. What are people going to buy? Which flavor are they going to have to go with?"
Gile's point echoes what several other competitors -- who have watched Oracle shell out some $20 billion on 30 acquisitions over the last few years -- have said.
Gile and others believe, perhaps not unreasonably, that Oracle is diluting its own brand by buying too many companies and either integrating their software whole hog into its product lines or installing it into the stack between other pieces of software.
Gile is not alone. SAP spokesman Jim Dever told me buying Hyperion is a continuation of Oracle's strategy to buy customers and market share, and only adds to "Oracle's already cluttered application landscape."
We heard these arguments four years ago when Oracle pulled the trigger on PeopleSoft. What has changed?
There may have been some perception shifts because Oracle has gotten really good at integrating acquisitions at an almost ridiculous pace. That was my opinion before the Hyperion bid, and it hasn't changed after speaking with Gile.
"They're getting really good at these acquisitions and maybe that will have a huge impact on their market share, but I don't see it happening," Gile said.
Gile questioned why customers who don't use Oracle gear at all would want to get locked into Oracle and buy performance management from the biggest stack on the planet.
He stressed that staying independent could be the key differentiator for BI and performance management in the future, provided that Business Objects demonstrates more innovation.
That's his story and he's sticking to it.
"It's the nicest thing Oracle could have done for us. Remove one of the players, create doubt and confusion in the marketplace, and give us an opportunity," Gile said.
Oracle and BI SaaS
Before the Oracle-Hyperion acquisition bid, I was obsessed with the idea that Oracle was going to buy BI, albeit a different flavor.
On a call with Oracle last month to discuss its latest BI revision, I asked an official if Oracle is considering getting into the BI software-as-a-service space.
This hatchling subsector of the BI market aims to complement traditional BI packages by delivering or hosting BI applications via the Internet.
There was a pregnant pause, after which the executive said: "We're not prepared to comment on that at this time."
Such answers lend validity to words like "jackpot" and phrases like "red flag." But then the Hyperion deal was announced, which would seem to put my theory on the back burner. Then analysts I spoke to blew it out of the water.
Ventana Research CEO Mark Smith told me BI SaaS is something Oracle could very well grow on its own, given the company's focus seems to hinge on snapping up large applications vendors.
"They already have knowledge and products," Smith said. "They have the capacity to drive forward. It would not surprise me if they launch a SaaS but from my perspective do not need to acquire anything to do it."
Forrester Research analyst Boris Evelson called himself a big fan of the BI SaaS idea but said he has not seen a successful implementation yet.
"Whether a BI solution is hosted or in house, 80 to 90 percent of the work is still the same: identifying data sources, extracting, cleansing, aggregating, modeling, etc." Evelson said. "None of the BI SaaS vendors I talked to had a good story around that.
The space is populated by SeaTab, Oco and LucidEra. Most of the vendors are so young they're still soliciting for seed funding. Why would Oracle, which Charles Phillips said is looking to acquire market leaders, buy into such a nascent market?
Evelson said SeaTab, Oco and LucidEra are tiny niche players going after the SMB market. "I do not see them growing and I do not see Oracle getting into that space until someone solves the problem I described above."
There it is, folks: another theory dashed in the wake of the high-tech industry's rapid consolidation pace.