Oracle Bolsters BI With $3.3B Hyperion Buy

Oracle has agreed to buy business intelligence (BI) heavyweight Hyperion Solutions for US$3.3 billion in cash. The move follows SAP’s acquisition of BI vendor Pilot Software last month, illustrating the trend among enterprise resource planning (ERP) providers to enhance their operational backbone products with performance management, a subsector in the business intelligence space.

“Vendors like SAP and Oracle have realized that they can develop systems that gather the best and most detailed information possible,” Sheryl Kingstone, a Yankee Group analyst, told CRM Buyer. “However, if the users can’t selectively retrieve and analyze this information, the ERP systems ultimately offer only a limited value.”

Aligning Strategic Planning

In other words, the Pilot Software and Hyperion acquisitions are intended to align strategic planning with operational functions.

Consider Hyperion’s latest release, rolled out earlier this week. It is a suite of financial management applications integrated with a BI platform that gives users the ability to collect, organize, analyze and distribute data. One of the application’s features allows users to align planning scenarios, operational plans and financial processes.

Both SAP and Oracle have developed their own BI tools over the last few years. These acquisitions should further build out capabilities, specifically in performance management, Kingstone added.

“Oracle has been investing in BI for the last three years,” she said. “But when you are talking about real enterprise performance management, that is where the best of breed companies have really differentiated themselves.”

“Hyperion’s EPM (enterprise performance management) software coupled with Oracle’s Business Intelligence tools and analytic applications form an end-to-end performance management system that includes planning, budgeting, consolidation, operational analytics and compliance reporting,” Oracle CEO Larry Ellison said describing the benefits of layering Hyperion’s functionality with its own in-house development.

BI Consolidation

The purchase of Hyperion, which is considered to be among the lead vendors in performance management BI along with Business Objects and Cognos, will jump start in this category a longstanding trend that has been underway in the software industry for years: namely, consolidation.

Already enterprise performance management and business intelligence are becoming a single market, according to Cliff Longman, CTO of information management company Kalido. This high-profile acquisition by Oracle will rapidly drive further market consolidation, he told CRM Buyer.

In one way, that would be good for buyers. “It has been an interesting environment for buyers for some time. People are trying to standardize on a single vendor and to date it has not been possible to that in the BI and EPM markets, where three or four big players still dominate,” he said, including Microsoft, SAP, IBM and Oracle in that group.

At the same time, however, buyers would then be confronted with the same suite versus best of breed trade off that exists in all software categories. “The industry has not reached a level of interoperability necessary to integrate various application,” Longman noted. “By going with a single vendor, the company then has to accept whatever features and functions the vendor has chosen to offer.”

Shopping Spree

The Hyperion deal is the latest in a string of acquisitions by Oracle, a group that includes PeopleSoft HR, Siebel CRM, G-Log, Demantra and i-flex. The company’s Fusion approach — a middleware system under development that will tie these various applications and their platforms together — will likely be extended at some point to include Hyperion as well.

This transaction is expected to be accretive to Oracle’s earnings on a non-GAAP basis by at least 1 cent per share in fiscal year 2008 and by at least 4 cents per share in fiscal 2009, according to Oracle President and CFO Safra Catz. The deal, which is subject to customary conditions, should close in April 2007.

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