SAP Buys Business Objects for $6.78 Billion

The acquisition is intended partly to help SAP reach an ambitious goal of doubling its customer base to 100,000 by 2010. Schwarz said about 40 percent of Business Objects' customers are using SAP today. Business Objects has roughly 45,000 customers, suggesting SAP will gain about 27,000 new customers through the deal.

SAP has made some progress with its own business intelligence software, including an analytics engine called BI Accelerator. But Business Objects excels in ease of use and user interface technologies, which will become increasingly important to BI in the future, IDC's Lykkegaard said.

"Business intelligence in the future will increasingly become a user interface for applications," he said. "You'll do your analysis from the BI interface and then dive directly into the transactional data you want to examine."

Combining the companies' products lines will be an important part of getting the most from the acquisition, Bradshaw said.

"Both businesses can continue to operate independently, but the real value-add comes from them working together to take the data in business applications and 'operationalize' it much more, so people aren't just presented with core data, they're presented with insight and recommendations," he said.

Both companies have also been moving into software as a service. SAP could build a strong on-demand package by offering SAP Business ByDesign, its forthcoming hosted applications suite for the midmarket, alongside Business Objects' online reporting service, crystalreports.com.

While SAP's motives for the deal are clear, Business Objects' are harder to divine. Along with SAP it is one of Europe's last remaining world-renowned software companies. It has been growing strongly and always seemed staunchly proud of its independence.

Lykkegaard said the company may be hedging its bets against the wave of consolidation that continues to engulf the software industry.

"Business Objects has never had a credibility problem, but it's a consolidating industry and a lot of large companies want to shorten the list of vendors they do business with," he said. "Although Business Objects is a huge company, in a sense they are also a niche player, because IBM, Microsoft and Oracle are also on that short list."

Peter Sayer in Paris and Marc Ferranti in New York contributed to this report.

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