SAP announced today that it will acquire Sybase for $65.00 per share, representing an enterprise value of approximately $5.8 billion. The announcement says that “customers will be able to better harness today’s explosion of data and deliver information and insight in real time to business consumers wherever they work so they can make faster, more informed decisions.” But the vision goes beyond that: the combined companies will be able to deliver the ability to act on those decisions, anywhere. The combination of SAP’s substantial share of its customers’ transactional systems with Sybase’s mobile expertise in messaging and application development tools for mobile devices affords extraordinary opportunities that are not lost on management. Following the public press event, I chatted with Vishal Sikka, SAP’s CTO, and Dr. Raj Nathan, EVP and CMO of Sybase. We covered some of the opportunities on the table and SAP’s plans for its new assets.
If acted on effectively, this deal could:
- Change the landscape of enterprise applications, enabling mobile endpoints to be platforms for informed, geo-aware, distributed decision-making. Sybase’s hidden jewel, Sybase 365, reaches 4 billion mobile subscribers through 850+ operator relationships worldwide. Sybase today can engage consumers via alerts, transactions and promotions on their mobile devices; tomorrow, entirely new opportunities can be realized. If consumers can make decisions, why not SAP’s enterprise decision makers? Sikka told me
We can expose data, actions, processes, applications – and make them mobile. Using Sybase’s GRX – geographic messaging services –we can enable people in the context of their physical alignment with business processes. This is a great market opportunity – the mobile internet is 10x the desktop internet.”
- Leverage Sybase’s tools and SAP’s ecosystem to drive innovative uses. In our conversation, Raj Nathan said that
With SAP as the back end, the development environment will benefit from a common set of frameworks and tools. We would expect to bring these developers into one common family.”
Sybase has an extensive array of partners, (generating some 45% of its revenue), and over 1200 OEMs just in the Anywhere product family. It has design tools, data replication and mobile management products that can all benefit the SAP base and new customers alike. SAP’s developer network and formidable ecosystem of application partners will find many uses for these opportunities.
- Expand Sybase’s event processing foothold beyond Wall Street to other markets. where SAP has customers and a formidable execution engine of sales and support. The press release mentioned this briefly, and the analyst call went by it rather quickly. SAP sees moving the risk analytics platform (RAP) to utilities and other sectors where it has strength, to event-enable customer applications. The industry is poised to embrace the event paradigm; IBM, Tibco and others have made moves of late and SAP can now join the party.
- Leverage in-memory expertise to enable a new class of decision applications. Much was made of SAP’s in-memory database technology and its possible relationship to Sybase ASE and IQ; Sybase CEO John Chen was quoted in the release saying that “SAP’s in-memory technology in combination with Sybase’s database technology will revolutionize how transactional and analytic applications are built.” In our conversation, Sikka was more specific:
Last week I was at one of our largest consumer goods customers. They have 3000 data sources worldwide, and coordinating across all of them is a formidable challenge. Imagine our in-memory database sitting next to them, in hundreds of departments. To make decisions you need the data in synch in real time. We can use Sybase’s Replication Server, and event technology, to transform what companies can aspire to do.”
- Create a new class of device-aware user experiences, without reinventing for each platform. As Sikka put it,
We have a leading collection of transactional and analytic apps. Sybase thinks in a similar way with PowerBuilder and its mobile tools. Devices have a native experience and you want to use it – the iPhone applications we have already delivered with Sybase are a great example. We’ve done the work with Microsoft with Duet, and Sybase is the leader in enabling device-independent user experiences. The apps won’t have to be recoded for every platform.
- Bring to market a formidable end-to-end information supply chain within SAP’s customer base (and beyond), connecting SAP’s business apps via Sybase’s market-leading replication technology to the widely deployed, mature IQ analytic database engine, for use by the Business Objects business intelligence portfolio, itself a market leader.
On paper, then, this is a compelling, rich portfolio. Of course, nothing is done till it’s done, and challenges remain. Gartner’s Ted Friedman pointed out on Twitter that it was “Nice that SAP [is] getting valuable tech, but what should SYBS customers expect? Hope it’s a better experience than BOBJ customers have had.” The fact that SAP says Sybase will retain its management team and operate independently has its upside there (assuming it gets to sustain the investment that has given it one of the better customer loyalty and retention profiles in the industry.) The same model might create challenges in rationalizing the agenda for the visionaries who hope to combine the technology stacks; Friedman’s point highlights the fact that all did not seem to go smoothly with the integration of the last major acquisition. Forrester’s John Rymer noted that there are significant middleware challenges ahead for SAP, whose NetWeaver has not been the leading force it was once pointed toward becoming. Although Sybase does bring some data integration, replication and even acquired EII to the table, the overall middleware picture remains somewhat challenging.
Other points of view were quickly posted. Ray Wang at Altimeter Group quickly pointed out that SAP’s stated posture on acquisitions had gone by the wayside. Forrester’s Boris Evelson noted that the combined company has significant overlaps to rationalize and that it will need to get out of its own way [edited 5/14 to remove incorrect reference to BW running only on te same platform as other apps]. The opportunity to upsell a Sybase IQ into SAP shops should motivate them to change that rather quickly. Michael Krigsman noted that “the acquisition represents SAP’s willingness to invest in new areas and markets,” no small thing for a new management team hoping to get itself off to a good start. [added: Curt Monash believes other ADBMS acquisitions will follow. I agree.]
It’s worth noting that Sybase brings 23 quarters of revenue growth (10 record quarters in a row during a downturn) and strong margin to the table. Its revenue generation in no way depends on the SAP deal and if it is indeed left somewhat alone it should continue to drive more cash into the coffers as SAP makes its transition. That’s no small thing. And it suggests some breathing room while the picture unfolds. As is so often the case, this will be about execution. Integrating some overlapping technologies, choosing some over others, creating a coherent roadmap, telling a good story and training a sales force will matter. Keeping the channel, the developers and the partners happy will matter. Services partnerships will be as critical as ever, as new, complex opportunities will strain the capabilities of customers to absorb and use effectively. But in the end, the picture is promising. The assets are there, and the bet seems a prudent one.
Disclosures: SAP and Sybase are clients of IT Market Strategy.