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SAP Sets Sights on Big Data Startup

Bernd Leukert, executive board member for technology at SAP SE, looks on as the software maker announces their fourth quarter results in Walldorf, Germany, on Friday, Jan. 22, 2016. SAP showed progress in remaking itself as a supplier of online software, predicting sales and operating profit next year topping its previous forecast as it moves more customers to a new version of its core software suite and adds cloud-computing sales. Photographer: Martin Leissl/Bloomberg via Getty Images
Bernd Leukert announced SAP's purchase of a big data specialist.
  • Why it matters

    Why it matters

    SAP’s purchase, while small, will strengthen it strategically in terms of big data analysis and cloud computing, areas where it was in danger of falling behind.

  • Facts

    Facts

    • Altiscale, based in Palo Alto, California, enables customers to save and to process in the cloud vast amounts of data of different kinds, namely from machines.
    • SNS Research estimates that investments in big-data technologies amount to $46 billion this year alone.
    • SAP is Europe’s largest software company.
  • Audio

    Audio

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The world’s largest producer of business software has put an end to weeks of speculation that it was acquiring the 4-year old U.S. company Altiscale, a move that should help the company expand into the growing realm of big data.

An SAP executive announced the deal on Tuesday at a corporate event in Germany. Bernd Leukert, a member of the SAP executive board in charge of innovation and technology, said the company was expanding its big-data analysis and cloud software portfolio by acquiring Altiscale, confirming earlier reports by U.S. media.

He declined to name a price, but the deal could be worth at least $125 million, U.S. website VentureBeat reported last month, citing a person familiar with the matter.

Altiscale, which has raised at least $42 million, is currently owned by private equity and venture capital firms including General Catalyst, Northgate and Sequoia Capital, and individual shareholders. The rumored purchase price means that investors are poised to receive at least three to four times as much funds as they have put in.

SAP, Europe’s largest software company, had been falling behind in big data and cloud computing.

Big data is a growing business. According to the Stockholm-based market research company SNS Research, investments in these technologies amounted to $46 billion this year alone, and the market is set to experience a 12-percent growth rate annually in the next four years.

For SAP, the goal is to offer single vendor solutions to SAP’s clients, Mr. Leukert told Handelsblatt. Many companies these days are busy developing data-driven business models, for instance when planning the maintenance schedule for their machines.

“When customers upgrade their business models, they want investment security,” Mr. Leukert said, adding that SAP could now deliver this “end to end” with Altiscale.

The start-up, founded in 2012 and based in Palo Alto, California, enables its customers to save and to process vast amounts of data in the cloud, namely from machines. Altiscale’s customers therefore do not need to operate their own research centers or own large servers, and can instead use Altiscale’s infrastructure, which relies on a cloud-based version of the Hadoop software.

The Hadoop technology, an open source Java-based technology, has grown to become nearly the standard for the processing and storage of extremely large, unstructured data sets.

SAP, Europe’s largest software company, had been falling behind in that area, which makes the new acquisition all the more important. The German corporation realized the usefulness of Hadoop quite late, according to Constellation Research analyst Holger Mueller.

This technology is important “to support customers in developing and running next generation applications,” he told Handelsblatt, pointing out that SAP was also acquiring additional infrastructure and expertise. Acuiring Altiscale means “customers will have fewer need to work with other suppliers,” Mr. Mueller added.

Whatever the final transaction cost is, it will amount to just a small fraction of SAP’s previous notable investment in a cloud-based company. In September 2014, the software giant paid $8.3 billion, or €6.5 billion, to acquire Concur Technologies, a U.S. cloud-based travel-and-expense management company. That transaction raised eyebrows as the most expensive acquisition in SAP’s 44-year history.

Altiscale wasn’t the only new partnership announced Wednesday. SAP and the automotive supplier Bosch revealed their intention to cooperate more closely in improving digital connection and smart machines.

“In order to tap the full potential of the connected industry, multinational companies need to cooperate more intensively than they have so far, and with open standards,” said Volkmar Denner, Bosch’s chief executive. SAP and Bosch will share central databases in cloud and software solutions industries.

The software company is currently hosting an Industrial Internet Consortium (IIC) summit, which is held for the first time on German soil, at its Walldorf headquarters.

 

024 SAP WTB 2015 March 16 2016

 

Christof Kerkmann writes about IT for Handelsblatt. Jean-Michel Hauteville of Handelsblatt Global Edition contributed to this article. To contact the author: kerkmann@handelsblatt.com

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