SAP announced yesterday that it will acquire Sybase and its versatile mobile applications platform for approximately $5.8 billion. The acquisition greatly strengthens SAP’s hand in mobile applications, while giving Sybase access to SAP’s in-memory database technology. The acquisition may also signal a shift in SAP’s long-standing strategy of growth through internal development rather than acquisition .

Sybase was an early leader in the database market and still maintains a strong position in the financial services industry. But it was eclipsed by other database providers years ago and, after a period of uncertainty, decided to stake its future on mobility instead.

Over the past several years Sybase has built a strong and versatile platform that can deliver enterprise applications to a broad range of devices, from BlackBerry to iPhone. It also became a major player in mobile messaging in 2006 when it acquired Mobile 365, which today handles 1.5 billion messages daily, leveraging more than 850 operator relationships to reach 4 billion mobile subscribers with alerts, transactions, promotions, and other content.

With Sybase’s versatile platform, SAP can help customers derive more value from their existing SAP investments by extending them to a broad range of mobile devices, from BlackBerry and iPhone to Windows Mobile and others.

Does it signal a broader strategic shift?

The acquisition of Sybase is SAP’s second major departure from its long-standing strategy of growth through internal development. The first was even bigger: the acquisition of business intelligence and analytics vendor BusinessObjects in November 2007 in a deal valued at $6.8 billion. Had it not done so, SAP would have been at a major disadvantage in business intelligence, given that Oracle acquired Hyperion and IBM acquired Cognos at around the same time.

SAP could plausibly make the case that buying BusinessObjects was imperative from a competitive point of view, but did not mark a U-turn from its strategy of building rather than buying. This second major acquisition comes just three months after the sudden departure of Leo Apotheker after less than a year as CEO and his replacement by Bill McDermott, then head of SAP’s field organization, and Jim Hagemann Snabe, head of product development, as co-CEOs. So it raises the same question: does it mark a major shift in strategy under the new leadership?

The answer isn’t immediately obvious. Sybase and SAP have been working closely together at least since 2003, when they announced plans to align SAP’s small-business ERP suite, Business One, with Sybase’s data management solutions.
 
In fact, apart from the question of whether $5.8 billion is a reasonable price to pay – a question that merits a separate discussion – we think the acquisition may mark the emergence of a shrewd dual strategy rather than a U-turn: a combination of careful internal development and bold acquisitions

Avinder Batra/ITvoir