SAP's Acquisition of Sybase Brings Strategic Synergies

SAP America, the U.S. subsidiary of Walldorf, Germany-based SAP has advertised its pending acquisition of Sybase (Dublin, Calif.) as a deal that will benefit both companies through synergies across product lines and markets. The deal is also likely to improve Sybase's historically modest position in the insurance industry and enable SAP to offer attractive new mobile capabilities for insurance users of the vendor's solutions.

In early May SAP America announced that it would make an all cash tender offer for all of the outstanding shares of Sybase common stock at $65.00 per share, representing an enterprise value of approximately $5.8 billion. Sybase will continue to operate on a standalone basis post merger, and both companies will benefit from synergies across product lines and markets, according to SAP's announcement.

SAP predicts that the acquisition will accelerate the reach of its solutions across mobile platforms and drive forward the realization of its in-memory computing vision. That in turn will drive higher user adoption of SAP software and unlock significant business value out of existing customer investments, the vendor asserts. Sybase's mobile platform provides SAP with the capability to connect all applications and data (SAP and non-SAP) and enable them on mobile devices. SAP notes that its customers will be able to tap into Sybase's messaging network -- which provides access to 4 billion mobile subscribers through more than 850 operator relationships worldwide -- and engage its consumers via alerts, transactions and promotions on their mobile devices.

SAP says that its in-memory technology will provide Sybase the opportunity for dramatic performance improvements to its analytic processing capabilities. Sybase will also be able to bring its complex event processing and analytics expertise, which was built in the financial sector, to customers in other industries, markets and product areas in which SAP has a complementary, strong presence, the announcement asserts. SAP predicts that Sybase's core database business will be enhanced by SAP in-memory technology to deliver integrated transactional and analytical capabilities.

"With this transaction, SAP will dramatically expand its addressable market by making available its market-leading solutions to hundreds of millions of mobile users, combining the world's best business software with the world's most powerful mobile infrastructure platform," comments Bill McDermott, co-CEO of SAP and member of the company's executive board. "This is a game-changing transaction for SAP and Sybase customers, who will be better able to connect their employees with key functionality and information from anywhere and make it easier for companies to make faster, more informed business decisions in real time. With SAP's customer-centric approach, we are resolute in our commitment to support Sybase customers to be best-run businesses."

Sybase historically has had little penetration in the insurance industry, especially when contrasted by its position in capital markets, notes Matthew Josefowicz, head of New York-based Novarica's insurance practice. However, the company's relationship with SAP may open up new possibilities in the industry, Josefowicz suggests. "This acquisition gives SAP some interesting tools and capabilities, especially in the mobile area, which helps them potentially expand their offerings to insurers," he comments.

Among several opportunities the acquisition creates for SAP is what Palo Alto, CAlif.-based Celent analyst Donald Light calls a database arrow in the vendor's quiver in head-to-head competition with Oracle (Redwood Shores, Calif.). "Over time, the acquisition also should add some mobility capabilities to the core SAP ERP and BI offerings --someday, perhaps, we will hear: 'ERP? There's an app for that.'"

The mobile capabilities that Sybase brings to SAP will help the latter to leapfrog its competition, assets Shawn Rogers, vice president of research, business intelligence and data warehousing at Enterprise Management Resources (Boulder, Colo.), an IT and data management analyst firm. "This is a very smart and strategic acquisition that will enable SAP to leverage Sybase's mobile capabilities to enable its financial services and insurance customers to communicate in novel ways," Rogers comments. "They'll leverage this into their CRM platform in very interesting ways."

Rogers sees potential uptick in the insurance industry's use of Sybase's IQ column-based analytic server. "It's designed to save time when a company has many users simultaneously making ad hoc queries," he says. "The real-time component is where it adds value to financial services and insurance companies."

Sybase's 365 messaging network will also bring value to SAP and its insurance customers, according to Rogers. "You'll find heavy usage from [customers of SAP's] Business Objects solutions," he predicts. "They have mobility now, but they should be able to leverage this platform in new ways."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio