SAP made a major departure from its "tuck-in" strategy with the October 7 announcement of its agreement to acquire Business Object for 4.8 billion (Euro). On the surface, the deal makes sense from the standpoint of marrying business intelligence (BI) technology with ERP applications. The deal is surprising in the sense that SAP has long insisted that its growth strategy is organic and that it would not make major acquisitions to gain market share. The Business Objects deal is by far the largest SAP acquisition to date, comparable in scope to Oracle’s acquisitions of PeopleSoft, Siebel and Hyperion.

The pending acquisition of Business Objects is an enormously complicated undertaking for SAP – not only culturally, but also in terms of products and partnerships. Product overlaps abound, especially in the business performance solutions (BPS) area. Earlier this year, SAP acquired both Pilot Software (strategy management) and Outlooksoft (planning/budgeting and financial consolidations), as well as forging an agreement to resell Acorn Systems profitability management solutions. Within the past year, Business Objects acquired ALG (profitability management) and Cartesis (planning/budgeting and financial consolidations). This leaves SAP with daunting challenge to rationalize 3 planning/budgeting solutions, 3 for financial consolidations, 2 for profitability management and several products for strategy management and performance scorecarding. As my colleague Boris Evelson notes in his blog, the integration issues related to BI technology and key BI partnering relationships are equally complicated.

SAP’s press release indicates that Business Objects will operate as a stand-alone business as part of the SAP Group. This, presumably, will enable the unit to maintain existing reselling relationships with other application software vendors related to the widely-used reporting tools.  What about SAP’s longstanding relationships with other BI vendors, including Cognos and SAS? And Business Objects’ relationship with Oracle? These questions may remain unanswered for a long period of time, as SAP sorts through the details.

With such an acquisition, the question of what it means for customers is always at the forefront. Since the acquired customer base provides a reliable stream of maintenance revenues for existing products, it is very unlikely that any product will be sunset for at least 5 years. SAP must decide, however, which of the overlapping BPS products will receive new investment and which will be relegated to legacy status. The former Outlooksoft and Cartesis products should move to the forefront of the product portfolio. The actual product roadmaps will emerge once the deal is finalized, which could be 3 to 6 months from now, assuming it is completed as planned.