SAP has announced that it is to acquire Business Objects subject to shareholder approval. Is this good news, bad news or downright ugly?

The answer to this question will surely depend on how SAP manages Business Objects. SAP has stated that Business Objects will continue to operate as a separate entity. This is potentially good news: other acquisitions that SAP has made have tended to end up being engulfed in its maw and never seeing the light of day again. Worse, the technology it acquires tends to end up being specifically targeted at SAP customers even when the company has said that won't happen. For example, when SAP acquired TopTier it was quite explicit that that company's product would continue to be marketed to non-SAP customers. And was it? In theory perhaps, in practice no.

The ugly would therefore be if Business Objects was simply swallowed by SAP, in which case it would become simply a SAP-only solution provider and cease to be of interest to the general market. However, while bearing in mind that SAP could always change its mind about Business Objects remaining a separate entity, the promise that it will start that way is encouraging.

However, there remains the question of the good and the bad. And this depends on how much SAP meddles. And this in turn is a function of two things: first, how much SAP wants Business Objects functionality to embed in its own products and, secondly, how much its executives are naturally of an interfering frame of mind. I'll not comment on the latter but the big danger is that SAP starts to ask Business Objects to develop products specifically for the SAP market to the detriment of its general-purpose capabilities, which could result in its falling behind its competitors in more generic markets.

I can't therefore answer the question of the good or the bad but let's assume the former. What will this mean? Well, it would be nice to think that SAP might listen to Business Objects when the latter advises them on simplifying the labyrinthine and over-complicated data warehousing environment that SAP offers: but I wouldn't hold my breath. It also means a conflict of interest in a couple of areas: for example, between the OutlookSoft performance management suite that SAP bought earlier this year and that which Business Objects brings to the table. My guess is that this will be to the detriment of the former. Another conflict will be in the area of federated query capability, where both companies have made acquisitions in the last couple of years.

On the other hand, there will also be synergies: SAP can leverage Business Objects' ETL (extract, transform and load) and data quality tools, for example; and, of course, there is the possibility of cross-selling.

So, what about the impact on the market? If the SAP acquisition is "good" then this is going to be "bad" or even "ugly" for a lot of other vendors. Provided that Business Objects can stay independent enough, and be perceived that way, then it should not lose much business in the non-SAP space. On the other hand, it has the opportunity to grab large chunks of SAP business that it could not previously reach. This will be especially true when it comes to Business Objects' infrastructure products for data integration and data quality. While a significant player in these markets it is not a major one at present but it could become so if it can leverage the SAP user base. This could mean that this acquisition potentially has a greater impact on other vendors in the infrastructure space than with regard to business intelligence and performance management. So, while a good SAP/Business Objects going forward could be bad for the likes of Cognos and SAS, it could be ugly for Informatica, Trillium and so on.

Whatever happens, this also raises lots of potential questions about further acquisitions either by bigger vendors (Oracle, HP, IBM) going for threatened suppliers in the spaces just discussed or, conversely, the vendors in this space, themselves looking to grow through acquisition to protect their positions. For example, what price an Informatica acquisition of Composite Software or, a bit more of a stretch, a SAS acquisition of Netezza?

To conclude, this looks good for Business Objects but could easily not turn out that way if SAP gets too involved. The prospects for its competitors are the inverse of those for Business Objects though some, of course, will be impacted more than others.