SWOT: Oracle to Acquire Hyperion Solutions
Oracle’s announced intention to acquire Hyperion Solutions leaves many users, analysts, competitors and partners wondering: what’s next?
- By Mike Schiff
- March 7, 2007
Seeking to expand its applications market share in both operations and analytics, Oracle continues its aggressive acquisition strategy. Its offer to acquire Hyperion Solutions will provide Oracle with strong performance management analytic applications and suite of BI tools. Following is a breakdown of strengths and weaknesses:
Strengths:
- Hyperion is a strong performance management solutions vendor with high credibility among corporate financial officers.
- From its inception (as a result of the 1998 merger of Arbor Software and Hyperion Software) Hyperion has offered both strong BI tools and financially oriented analytic solutions. Hyperion Essbase is one of the industry’s leading OLAP engines.
- Hyperion’s financial consolidation software is used by many major organizations to help close their books. Numerous organizations that use SAP’s enterprise application software also use Hyperion.
- On a non-GAAP basis, Oracle expects the acquisition to increase its per share earnings by at least a penny in FY 2008 (period ending May 31, 2008) and at least 4 cents in FY 2009.
- Once again, Oracle has demonstrated its ability to acquire needed technology to augment its own. This demonstrates its commitment to grow its own capabilities through both its own development efforts and through acquisitions.
Weaknesses:
- Oracle is paying $3.3 billion for Hyperion and its cash offer of $52 per share represents a 21% premium over the closing price of Hyperion’s stock just prior to the offer.
- Although no longer actively marketed by Oracle, Oracle Express is competitive with Hyperion Essbase. Express and Essbase are both competitive with the Oracle Database OLAP option.
- Furthermore, in addition to overlap between Hyperion’s and Oracle’s BI tools and analytic applications, both Oracle and Hyperion offer Master Data Management solutions.
- Oracle’s aggressive acquisition strategy (approximately 30 acquisitions since 2004) has required management attention and other resources to integrate acquired technology and staff. Digesting that many acquisitions, while retaining their installed bases, is certainly a challenge for any company.
- Hyperion has partnerships with several direct Oracle competitors including IBM, Microsoft, SAP, and Teradata. These partners may not appreciate Hyperion’s acquisition by Oracle and their relationships may now be at risk. The Hyperion and Informatica data integration OEM relationship may also be at risk.
Opportunities:
- Hyperion’s presence in SAP shops will provide the Oracle sales force with an entry into additional accounts. In the announcement press release, Oracle’s president stated that "Hyperion is the latest move in our strategy to extend Oracle’s offerings to SAP customers" and "Oracle’s Hyperion software will be the lens through which SAP’s most important customers view and analyze their underlying SAP ERP data."
- Oracle will rightfully be able to claim that it is one of the only vendors to offer a complete set of recognized and established software solutions including enterprise applications, databases, BI tools, analytic applications (including financial planning, budgeting, and consolidations), and data integration technology.
- Hyperion’s more than 12 thousand customers will present Oracle with many up-selling or cross-selling opportunities.
Threats:
- BI vendors including Business Objects and Cognos will likely view Oracle’s acquisition of Hyperion as an opportunity to target Hyperion accounts. Migration programs and associated incentives can be expected.
- In 1995 Oracle acquired the Express OLAP technology from Information Resources, Inc. However, with the launch of the Oracle Database OLAP option in 2001, Oracle no longer actively marketed Express. This may lead Hyperion users to question Oracle’s future commitment to Essbase.
- While Oracle certainly seems committed to the acquired Hyperion planning, budgeting, and consolidation analytic applications, it could be less committed to many of Hyperion’s BI tools. Other BI vendors will certainly leverage such doubts to their own advantage.
- BI specialists will attempt to portray future Hyperion releases as optimized for Oracle, while positioning their own offerings as open to all databases and application software.
- In addition to its "native" BI products, Oracle has acquired BI technology from other vendors including Siebel and (soon) Hyperion. This may cause market place confusion as to which products are used where and which ones have Oracle’s long-term commitment.
About the Author
Michael A. Schiff is founder and principal analyst of MAS Strategies, which specializes in formulating effective data warehousing strategies. With more than four decades of industry experience as a developer, user, consultant, vendor, and industry analyst, Mike is an expert in developing, marketing, and implementing solutions that transform operational data into useful decision-enabling information.
His prior experience as an IT director and systems and programming manager provide him with a thorough understanding of the technical, business, and political issues that must be addressed for any successful implementation. With Bachelor and Master of Science degrees from MIT's Sloan School of Management and as a certified financial planner, Mike can address both the technical and financial aspects of data warehousing and business intelligence.