Business Objects' Lofty Objective


There's good news and bad news for Bernard Liautaud. The good news? With the $1.2 billion acquisition of rival Crystal Decisions in December, 2003, his company, Business Objects (BOBJ), is steadily clawing its way past the $1 billion revenue mark and to the top of the business intelligence market -- one of the few big growth areas in business software.

The bad news? The sector has been catching the eye of large application providers like Siebel Systems (SEBL), SAP (SAP), and Oracle (ORCL).

Outfits like Paris-based Business Objects make software that helps spot trends in corporate data and allows CEOs to make better decisions. Liautaud and his competitors are trying to replace the executive's "gut feeling" with real data.

As the software world continues to consolidate, you can bet SAP or Oracle will make a run at someone. Liautaud insists it won't be Business Objects, but his company -- along with competitors Cognos (COGN) and Hyperion (HYSL) -- is frequently mentioned in takeover talks (see BW Online, 8/30/05, "The Case for Cognos").

BusinessWeek Online reporter Sarah Lacy caught up with Liautaud on one of his frequent trips to Silicon Valley to discuss why he thinks his company will continue to lead the business intelligence pack and why he's not scared of the software giants. Following are edited excerpts of their conversation:

Why did you decide to start Business Objects?

My first real job was at Oracle in 1986. I joined when the French subsidiary was just getting formed. Oracle was about a $100 million company at the time. For me, it was an unbelievable first experience. At the same time, I realized Oracle wasn't providing a good way for business people to access information.

[Oracle's software] was great to manage and store data, but normal human beings who weren't info-tech specialists weren't able to utilize it. So, with a friend, I met an engineer who had developed a new paradigm to enable these people to access Oracle's databases in a much easier way.

So we started in Paris in 1990 as a very small entity and grew the business rapidly. We grew the company to $60 million in about five years, basically on this idea that businesspeople need more information to make their jobs more efficient. We went public in 1994 on the Nasdaq. It was a big deal because there weren't a lot of successful technology companies in Europe.

In the second quarter, you were one of the few software providers -- aside from Oracle and SAP -- that had better success at closing big deals than a year earlier. Why is that?

The market for business intelligence is one of the strongest in enterprise software, and it's going to be for many years to come. Being at the right time at the right place is a big element. A lot of companies are looking at their needs in BI [business intelligence], and there's a need to consolidate to one vendor. That usually results in larger transactions.

Would you consider this a maturing or emerging market? There's still a lot of growth potential, but that kind of need for consolidation signals an industry that's maturing.

The industry is 15 years old, but it has all of its potential ahead of it. People are making decisions without the hard facts. Companies have massive amounts of information they don't use. What we do is bring the intelligence to all of these operations, and it's the right time to do it.

Why?

In the 1980s, companies invested significantly to create their databases. That's why Oracle and Informix (IBM) and all these guys grew very rapidly at the time. Then in the 1990s, it was all about automating the processes. SAP automated your manufacturing or finances. Siebel automated your salesforce. PeopleSoft automated your human resources. Now it's all about: How can I get value in all of these transactions and data stored in these systems?

Isn't that part of what a good application is supposed to do, like a good customer-relationship-management product?

No, because CRM really automates your salesforce. Business intelligence is at a different level. For instance, you want to know what your most profitable products are. Where are the data to help with that analysis?

Well some of it is in the CRM, some is in the manufacturing system, and some is in the finance system. So you need to have a solution that cuts across all the different types of systems.

Why couldn't SAP or Oracle do that, now that they're offering much broader suites of software that touch all of these areas?

Because on average companies have between five and seven different types of databases and between 100 and 300 different types of applications. By definition, the infrastructure of companies is extremely heterogeneous.

Even a company that says "I am an SAP shop" has hundreds of applications that are not covered by SAP, and when they do the analysis of their business, they need to have them in the fold.

There has been a lot of speculation that a large application company like Siebel or Oracle might buy your outfit or one of your rivals. What would that do to the sector?

I think it doesn't really change the equation. The fundamental issue is an application company or a database company doesn't provide the independence that is required for this business. Like us, our competitors like to promote they are a neutral party.

As soon as they become part of, let's say, an SAP, then they aren't a neutral party anymore. The business underneath is so competitive. Oracle is trying to beat SAP, and customers really understand that.

What's the future of business intelligence?

Today, companies are able to analyze their data better. Tomorrow, it's all about driving performance. It's all about translating corporate objectives into actual metrics and targets, driving that through an organization, and monitoring them through "dashboards" and "scorecards" and taking actions.

In the past, BI was more, "O.K., let's analyze our sales in the past quarter." Now it's going to be much more, "How am I going to drive additional revenue in the coming quarters?"

Let's say you're a CEO and you declare, "Next year, I want to increase operating margins by 3%." That's a good goal, but how are you going to drive that through an organization? BI makes the difference between a good strategy and good result.


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