FSN: Oracle and Hyperion versus SAP and OutlookSoft

Oracle and Hyperion versus SAP and OutlookSoft

21st May 2007
The ERP market is going through structural change as it reaches out into the performance management market to shore up its position in the finance function. The world's largest ERP vendors, SAP and Oracle have acquired two well known players in financial reporting. On paper the deals look similar but deeper inspection shows that the transactions are far from equivalent. Gary Simon , FSN's managing editor reports.

The recent acquisition of Hyperion and OutlookSoft by Oracle and SAP respectively is effectively an admission by the ERP vendors that they have failed over the years to gain traction in the financial reporting market. Both SAP and Oracle have tried over the years to launch group reporting and consolidation products but they have never been successful in taking massive market share from the best of breed vendors such as Hyperion, Cartesis and Infor.

Talking to FSN, Graham Walter, VP, UK, Middle East and South Africa, Cognos, said, “SAP's plans to acquire OutlookSoft is a clear acknowledgement by SAP that, after nearly a decade of promises, their current performance management vision and solutions do not meet the requirements of the marketplace. It is now playing catch-up, but perhaps not in the most effective way.”

However, David Jones, of Paragon a consultancy that specialises in implementing group reporting and performance management applications told FSN, “The SAP acquisition of OutlookSoft makes a lot of sense as the existing SAP SEM product line which addresses the same functional areas as OutlookSoft has proven very slow to take on the likes of Hyperion, Cartesis, OutlookSoft, Infor and Cognos. For example, in our recent study of Group Reporting in European Multinationals we found that in the Anglo-Saxon markets less than 10% of these large companies were using SAP SEM and even across the whole of our survey (including Germany, Switzerland, Austria) only 29% were using SAP SEM solutions for Consolidation and Planning even though over 65% were using SAP R/3 as their core ERP platform.”

“The problem appears to be that SAP SEM, which uses SAP BW as the basis of consolidation and budgeting is believed by the CFO and his team to be clumsier, less functional, more difficult to implement and more dependent on IT than its best of breed rivals. So, very big German companies have been happy to implement SAP SEM but many others have been less keen,” he added.

Oracle similarly needed to build its capability in performance management but its Hyperion acquisition appears to be a much bolder move. Hyperion with 2,500 employees globally is more than 10 times the size of OutlookSoft. Hyperion, with a turnover of $765 m is a ‘household name' is the dominant group reporting player in Global 2000 companies and is therefore a natural fit with Oracle.

By contrast OutlookSoft is much more associated with the mid-market and makes a curious bedfellow for SAP which has dominated the high end of the ERP market for many years. Graham Walter adds, “OutlookSoft is targeted at the small to mid-sized company, whereas SAP is targeted at the large enterprise.” It's a sentiment underlined by OutlookSoft's concentration on the Microsoft technology platform.

To some observers like David Jones, the deal is supportive of SAP's mid-market strategy. “As SAP moves into the middle market they clearly need something lighter and quicker to implement. SAP now have that lighter and quicker option and the question will be have they ‘missed the bus' given the large number of customers in the middle market and at the higher end of the market who have already selected Hyperion, Cognos, Infor etc. as their solution in the last few years,” he says.

The deal is also likely to bring SAP into swift contention with Microsoft when the latter launches Microsoft PerformancePoint later this year. “Microsoft is also targeting the provision of consolidation, budgeting, planning and performance management to the middle market,” added Jones.

Jones told FSN, “This sets up another interesting fight. It's interesting to note that in the SAP press release they do not mention that OutlookSoft has built its success on its close relationship with MicroSoft, in particular its integration with Excel and use of SQL Server and Analysis Services to provide its multidimensional reporting platform”

Other best of breed vendors do not feel threatened by the latest Oracle and SAP moves. Frank Pizzolato, CEO of Clarity systems told FSN, “In terms of the impact of the SAP acquisition on Clarity, only a small percentage of Clarity's customers are SAP accounts. And, our strategy for SAP competes has been to avoid prospects that own SAP and are moving to BW. We have found that customers that are “married” to the SAP product stack are not good prospects for Clarity. So, this change in the competitive landscape will have little impact on this part of our business.”

“In situations where the client is committed to a Microsoft technology stack (e.g. in the mid-market), the competitive landscape has gotten better for Clarity. We believe that OutlookSoft/SAP will be focused on selling to the SAP customer base. As a result, OutlookSoft/SAP will be less focused and less effective in selling mid-market solutions to customers looking for a solution on MS-SQL Server and Analysis Services,” he added

Pizzolato also believes the Oracle Hyperion deal will help Clarity Systems. He told FSN, “Clarity has recently become a certified Oracle ISV Partner. We understand that over the next quarter or two the Oracle Partner Network will be able to resell Hyperion's products, just like they can do with the rest of Oracle's products. So, Clarity (as an Oracle ISV Partner) will be able to resell Essbase sometime in the near future. This will remove one of Hyperion's competitive strategies against Clarity. That is, Hyperion has often tried to infer that Clarity is less able to ensure continued support for Essbase, since Clarity is not a Hyperion Partner. This argument will disappear once Clarity is able to resell Essbase.”

As for the future, much depends on the way that product road maps shape up once the dust has settled. “From our customers' perspective there is generally enthusiasm for the acquisition of their vendors by the big players as it secures their investment and reassures them about the continued focus and investment in the BPM solutions they have chosen. The concern is generally about future product strategies, particularly where the larger vendors have competing products,” says Paragon's Jones.

Cognos' Graham Walter adds, “. SAP customers will need to carefully consider the impact of the likely chaos the different components are going to cause development teams in the near future.”

So who will win? Well in a competitive global market scale becomes all important and domain expertise is what really gives competitive edge. Both Hyperion and OutlookSoft can do a competent job of financial reporting but in the final analysis, Hyperion dwarfs OutlookSoft in terms of manpower and capability. SAP will have to work very hard if it is to compete in Hyperion's backyard. On the other hand, SAP has a unique opportunity to gain territory in the mid-market.

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