Oracle’s big gulp: How will the Hyperion acquisition shake out?

Oracle’s acquisition of Hyperion Solutions is wonderful for stockbrokers and people who play the markets for a living, but mergers always generate uncertainty… and uncertainty is a vicious overhead element for IT.

What does the merger mean for those responsible for choosing, deploying and supporting solutions? We won’t know solid details for a while, but the underlying technologies, products, target markets, and missions of both corporate acquirer and corporate acquiree shape the probable outcomes.

Hyperion is itself a company put together through significant acquisitions and the integration of some pretty remarkable third-party tools, and their focus shifted over time from business intelligence (BI) to business performance management (BPM). They have been steadfastly platform-agnostic, supporting Microsoft’s various applications and database infrastructure. Oracle has been a somewhat closer partner on the database side, and with Oracle’s acquisition of ERP players (the creation engine for the data that Hyperion’s technology analyzes), a lot of Oracle customer sites have already had a lot of exposure to Hyperion offerings.

There’s a good deal of BI and BPM duplication (triplication?) in Oracle’s product portfolio already. Hyperion has been digesting acquisitions and resolving overlap for a while now, and had seemed on the cusp of advancing with some remarkable looking original technology, including Smart Search (previewed here) and most especially Smart Space, a thrilling collaborative environment for BPM that due in August/September 2007. And since Hyperion is focused on BPM, most of Hyperion’s products zoom in on the specific customers, interfaces and requirements of BPM and BI users. Oracle, on the other hand, is more focused on broadly-horizontal enterprise deployments and database back ends.

Because of the companies’ different approaches, it remains to be seen how Oracle will proceed with deciding which of the overlapping technologies stay, which go into support-but-no-upgrade land, and which get chucked. It’s the first problem one confronts when two big multiproduct tech companies merge: Best-of-Breed versus perceived convenience of single-source.

For example, Hyperion’s Dashboard Builder is a single-purpose tool, designed to focus on one thing, while building dashboards is one of many things that Oracle BI Enterprise Edition supports. It probably costs Oracle less to maintain its own product and let Hyperion’s go to seed, but customer IT may have already made the investment in training end-users to build their own Hyperion dashboards with the Hyperion tool. Which one wins out?

Given Hyperion’s significant installed base of customers, it’s unlikely in the near term that Oracle will liquidate the goodwill they paid for. The buyer has bought other significant companies recently, PeopleSoft and Siebel Systems, and they continue to support — for the next few years contractually — the products the purchased companies old and with only subtly-changed (if at all) names.

Longer-term Hyperion technologies that are still under development might be good candidates for re-naming and release under Oracle’s name. If so, that’s not a loss to innovation. But as Gary W. Patterson, principal at FiscalDoctor, a Wellesley, Mass. strategy consulting firm notes, “As someone who helps early stage software companies grow and provide new options for customers, I always hate to lose a major company like Hyperion as a potential exit strategy to motivate technology entrepreneurs to build the next great product.” In other words, one less potential buyer reduces demand and competition for the fruits of creative designers’ inventions.

Overall, it will come down to the age-old question about mergers in general, and tech mergers more precisely: Who will pay? The stockholders, the executives, the employees or the customers (through direct prices or losing superior technology)? In the near-term, unfortunately, it’s almost never the executives and it’s usually the customers.