Business Objects Adopts The "Best-of-Breed" Approach

| About: Business Objects (BOBJ)
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Dennis Byron submits: Given Business Objects’ (BOBJ) French headquarters, I say “Plus ca change, plus c’est les meme chose” (apologies to my French teacher on Avenue Gambetta if I got those little apostrophes in the wrong place or the les should be la). Business Objects has announced the “First and Only Complete Close and Forecast and Cost Control Solutions for the Office of Finance.”

I enjoy parsing such marketing claims, especially when I recall writing about the same words in 1970 for Honeywell’s (NYSE:HON) announcement of its Model 58 (based on Bull small business systems that Honeywell had inherited from the GE (NYSE:GE) computer division acquisition the year before). I admit to just a little hyperbole almost 40 years ago. In the unlikely case the CFO could have actually figured out how to use the Model 58, he would have been the only one sitting in front of it because it was a single-user machine. And he surely would have been a he at the time.

However, as an impartial analyst in most of the years since Gambetta, I think I could have accurately used Business Objects’ words of this week to describe the SAP (NYSE:SAP) R/2 “Controller” module 20 years ago. So what’s really new in the Business Objects announcement? The announcement is all about how Business Objects combined its SRC (2005)/Armstrong Laing (2006)/Cartesis (2007) acquisitions with ‘heritage’ products (including earlier acquired products such as Crystal Reports-2004). Parsing of the claim involves accepting the factoid that the new suite’s profitability component and built-in governance are the first in a suite. I have not researched that factoid but Business Objects is a credible organization.

More relevant to the claim is the fact that the suite is what the company calls “best of breed.” That is, it is not built into an ERP suite such as SAP’s or Oracle’s (NYSE:ORCL) (see the “aside” below), but is dedicated totally to the CFO. I don’t buy any advantage in such a pure-play positioning from any application software supplier. There are no particular pluses in not being more tightly linked to the chart of accounts, ledger, payables, receivables, and so forth as in the SAP and Oracle suites. In fact, in my research I have consistently found that users are willing to accept less functionality in individual software components in order to get the total-suite advantages of “one vendor to blame.”

Oracle and SAP (chosen only as examples) bring the added advantage of providing other industry-specific components as well for everything from telecommunications to mining (a dozen or so for Oracle, over two dozen for SAP). This is especially relevant when Business Objects highlights its two vertical extensions (supply chain for distributors, funds transfer pricing for financial services).

My research has consistently found that functionality rules, not a suite value proposition or a best of breed value proposition. So if Business Objects can deliver 50% or more of SAP’s and Oracle’s comparable feature line-up, users will fairly consider it. The Business Objects products’ role-specific features are an example of how it might achieve that threshold. Another way that Business Objects can differentiate this offering is via the Open Appliance initiative it announced in the Spring. But it implied that it needs to get its initiative partners up to speed before putting together such a package.

In fact, currently Business Objects will “sell” the grouping, which it calls EPM XI, as a suite, but it is not yet priced as a suite. A representative said at the press/analyst meeting that users typically choose to deploy a single “application plus some of the reporting tools” first, although a decision is often based on an entire suite’s benefits. Business Objects probably cannot price it all together yet because the “forecasting and cost control” and “close” modules do not become generally available until the end of the calendar year.

On the same call, a “private investor” zeroed in on this issue coming at it from a different direction. The question was, “Is the RFP process changing vis a vis Business Objects’ best of breed approach” versus SAP’s and Oracle’s more broad-based value proposition? My guess is that the investor is gaging the outlook that Business Objects might be an Oracle acquisition target.

Assuming Business Objects retains its independence, there is a lot of opportunity in its eventually packaging EPM XI in an appliance with, for example, Open Appliance alliance partner Netezza (NZ). This would really bring things full circle back to the fibs I told about the Honeywell Model 58 hardware/software bundle in 1970.

As an aside, Marge Breya—Business Objects’ VP of marketing—got a kick out of the fact that an Oracle employee, representing one of the ERP players that competes with Business Objects’ “best-of-breed” approach, called in to the analyst/press conference. It was great French diplomacy that Business Objects answered Oracle’s question fully. Could you see the reverse happening? Maybe Henning could call into Larry’s financial analyst call on September 20.

BOBJ vs. ORCL vs. SAP 1-yr chart: