Business Objects acquisition has rivals mulling future

Competitors in the business intelligence market believe they may be able to benefit from Business Objects/Crystal Decisions integration issues post-merger — at least in the short term.

French company Business Objects said Friday it will acquire

Palo Alto, Calif.-based Crystal Decisions for US$820 million in stock and shares. The merger will result in the largest business intelligence software company on the market.

“”This is not the merger of two troubled companies; this is not the acquisition of a broken entity by another player trying to get entry into a part of the market,”” said Business Objects CEO Bernard Liautaud during a conference call late last week. “”This is the combination of two highly respected and recognized leaders for the greater good of the customers and the market.””

Liautaud described the business intelligence market as an “”immature and fragmented market . . . there is no clear leader.”” By combining the two — specifically Business Objects’ strength in data integration, enterprise performance management and analytic applications with Crystal Decisions’ enterprise reporting — Liautaud aims to capitalize on this perceived gap.

“”We believe that the software industry is facing a period of consolidation, forming new entities that will be advantaged by size, scope, geographic coverage and financial strength,”” added John Judge, Crystal Decisions’ CEO.

Ottawa-based Cognos, the largest company in the business intelligence space before the merger, recently launched a new product designed to cover all enterprise points of entry. The merger could be an opportunity for Cognos to promote this product in the “”two to three years”” it will take to integrate Business Objects and Crystal Decisions, said Rob Rose, vice-president of corporate strategy at Cognos.

“”No matter what they do from an integration point of view, Business Objects has a very large customer base and Crystal has a very large customer base. One of those audiences is going to be alienated because they’re going to have to make compromises,”” Rose added.

Cognos faced integration issues itself last year when it bought Minneapolis-based Adaytum for US$160 million. The merger was exacerbated by the fact that Adaytum tools were already integrated with that of Business Objects. Cognos proposed a 30-day “”deintegration”” plan to prepare the company before it could become part of Cognos.

“”An acquisition always has major integration issues,”” said Rose, but added that Adaytum was a relatively small purchase and was ultimately absorbed quite quickly.

Michael Corcoran, vice-president and chief communications officer of another Business Objects rival, New York-based Information Builders Inc., also identified a potential windfall.

“”There’s going to be some confusion in Crystal’s customer base, so it will create some short-term opportunities for us,”” he said. “”Maybe (there are) some people we’ve recently met who were devout Crystal shops who may not be now, who might be on the fence a little bit. That will drive some short-term goals for us.””

To avoid some of this confusion and maintain customer loyalty, Liautaud said that Business Objects is committed to keeping the Crystal brand for now.

IDC Canada Ltd. analyst Warren Shiau said that Business Objects may have done enough work up front to prevent too many defections. “”I think Business Objects has been at pains to say they intend on keeping Crystal Decisions’ management in place. I don’t know that (customer migration) would be that huge of an issue for them,”” he said.

Shiau added that Business Objects may be on the path to future customer wins through Crystal Decisions’ installed base. “”Business Objects may have seen that this is a way to keep a very strong presence in business intelligence tools and possibly be a way to grab customer base that could eventually migrate into more sophisticated business intelligence analytics tools,”” he said.

The merger is expected to close in the fourth quarter of this year.

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