SAP: Would Acquiring Teradata Make Sense?

Implications: o  Although rumors are flying about the possible acquisition of Teradata by SAP, the fit is far from perfect. o  SAP executives have stated the need for advanced analytics and there are other vendors that SAP could acquire to fulfill this need. o  SAP might consider acquiring a data mining vendor in order to augment its advanced analytic capabilities; SPSS would seem to be a likely candidate.

Analysis: SAP, the leader in enterprise operational applications, acquired business intelligence leader Business Objects in January 2008. While SAP had its own business intelligence offerings (e.g., NetWeaver BI), they were installed almost exclusively within the SAP customer base. Business Objects, which SAP has pledged to allow to operate as an autonomous business unit, is database and application agnostic, and has a strong presence in both SAP and non-SAP environments.

Teradata, a leader in the data warehouse market, is noted for its high performance in very large database environments. It was spun off from NCR in September 2007, and has been the subject of continuing speculation that it would be acquired by several major vendors including Hewlett-Packard, Oracle, and SAP.  While SAP may want to augment its analytic capabilities, Teradata is far from the ideal candidate for it to acquire.

Teradata gains its power from a combination of proprietary hardware and database software. It is considered by many as the product to beat in top-end data warehouse implementations especially for enterprise (multi-subject, multi-user, mixed workload) data warehouse implementations. As such, it would represent overkill for SAP who already offers data warehouse software as part of NetWeaver BI. I doubt if SAP is truly interested in becoming a hardware vendor, which is precisely what would result if it were to acquire Teradata.

A more likely candidate for SAP to acquire in order to augment its advanced analytics capabilities would be a data mining vendor. While I have heard speculation concerning SAS as a possible candidate, SAS is $2 billion+ privately-held corporation that has no desire or incentive to lose its independence or have its culture changed as a result of an acquisition.

I believe that SPSS, a leader in data mining and predictive analytics would be a more likely candidate and a better fit. SAP's Business Objects unit OEMs SPSS Clementine data mining technology as the BusinessObjects Predictive Workbench, an optional component of the BusinessObjects XI 3.0 platform. With a market capitalization of under $600 million, acquiring its OEM partner would seem to make make more sense for SAP and be a better fit than Teradata or SAS.

While I'm speculating about possible acquisitions, Acxiom, with a market capitalization of around $1 billion,  is also worthy of consideration as it would augment the information available through Business Objects Information OnDemand store of marketing and financial data.  However, this is a discussion for another day.