SAP Acquires TopTier To Further Broaden Its Horizons

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SAP Acquires TopTier To Further Broaden Its Horizons
M. Reed - April 17, 2001

Event Summary

SAP AG (NYSE: SAP), a major provider of e-business software solutions, and TopTier Software, Inc. (privately held) have announced that the two companies have signed a definitive agreement for SAP to acquire TopTier, subject to the approval of antitrust authorities. TopTier has been an SAP partner since 1999 and parts of its technology are already integrated and available within the SAP enterprise portal offering, the mySAP Workplace.

Under the terms of the agreement, SAP will acquire all of the outstanding shares of TopTier for approximately $400 million in cash. TopTier will become a wholly owned subsidiary of SAP upon closing, which is expected to occur during the second quarter of 2001. TopTier generated approximately $20 million of revenue in 2000 and SAP anticipates recording a charge resulting from acquired in-process research and development that will not exceed $50 million. SAP expects the acquisition to have minimal impact on 2001 earnings per share.

SAP states that this is a further step in its strategy, which includes building market-leading positions in the enterprise portal, customer relationship management, supply chain management and marketplace sectors. This acquisition strengthens SAP's leadership in the enterprise portal market and increases SAP's ability to broaden its user base. The acquisition will also provide SAP with a strong engineering staff experienced in the portal market and a large installed base of enterprise customers, including Daimler Chrysler, Hewlett Packard, GMAC, Universal Studios and Wells Fargo Bank.

According to the vendor, the TopTier technology fits seamlessly with the mySAP Workplace to deliver up-to-date, role-based information, applications and services, and enables further integration of heterogeneous applications beyond those of SAP.

Market Impact

This announcement makes it clear that SAP is intent on extending its role as the major player in the enterprise resource planning (ERP) space, with footholds in business intelligence, customer relationship management (CRM), supply chain management (SCM), e-Business, and any other area where they see a potential synergy in the future. Its efforts to become a "one-stop shop" will give other vendors a strong incentive to acquire or develop similar capabilities, in as many areas as they can afford.

TEC believes that momentum in the area of mergers and acquisitions, particularly between ERP, business intelligence, and enterprise application integration (EAI) vendors will continue with a vengeance. As the big players get bigger, the smaller entries will fall out of the running. The best defense against being "all things to all people" will continue to be strongly focused vertical offerings where the ability to do one thing very well will outweigh the ability to do everything "at least a little".

User Recommendations

Customers evaluating major enterprise software acquisitions will continue to have a basic set of three options:

  • Buy everything from one vendor, a virtual "one stop shop". This should (we emphasize "should") eliminate many of the integration headaches. The quintessential example of this vendor approach is Oracle.

  • Buy "best of breed" applications, and rely on application integration software to tie everything together. This may allow for more latitude in product choices, but requires the greatest degree of customization by both the vendors and the customer.

  • Buy as much as you can from a single vendor, and contract with them to integrate any missing components. This may ease the integration effort by putting the vendor "on the hook" to make everything work together.

What it all comes down to is the fact that data that is not transformed into knowledge is at most dangerous, and at least not very useful. Having your enterprise data (i.e., ERP) in a monolithic application with no way to find out what it really means, or to apply it to other applications (i.e., CRM) will not help solve your business issues. A decision must be made early in the technology selection process as to which general approach to application integration is correct for your talent pool and business requirements, and which one will yield the fastest return on investment.

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