How SAP’s Hybris Acquisition Can Help Its E-Commerce Business

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SAP (NYSE:SAP) has completed the acquisition of e-commerce software provider Hybris in a bid to strengthen its grip on the e-commerce software market. [1] Hybris provides a new generation of enterprise e-commerce software that handles both business-to-business (B2B) as well as business-to-consumer (B2C) transactions. The acquisition will help improve SAP’s e-commerce offerings and put it on par with competitors like Oracle and IBM. While the company didn’t disclose the price paid for the latest all-cash acquisition, it is rumored to be in the range of $1-1.5 billion. This will lift SAP’s total amount spent on acquisitions in the last one-and-a-half years to nearly $10 billion. Below we take a look at how SAP can benefit from the Hybris acquisition going forward.

We currently have a $74 Trefis price estimate for SAP, which is in line with the current market price.

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Hybris Will Help Plug The Gap

Customer experience is becoming a priority for company executives as consumers are becoming more dependent on reviews for their decision-making. According to company management, more than half of all customers change their minds about buying products after reading negative reviews. [2] This necessitates building an e-commerce platform that is capable of handling multiple customer touch points and delivering consistent information. SAP’s e-commerce offerings have not been not as good as those of its competitors like Oracle and IBM, [3] putting it at a disadvantage in a $30 billion market. [4] In addition, SAP’s offerings often require running its own costly ERP or CRM platforms. It is this acquisition that will help SAP fill the gap in its software line. The Hybris e-commerce platform is known for its capabilities and agility. Gartner has placed the company as a leader, along with Oracle and IBM, in its e-commerce magic quadrant report. [5]

SAP will provide Hybris as an option to its huge installed base, which includes nearly 40,000 core ERP (enterprise resource planning) customers. [2] Further, Hybris has a number of prominent names on its client list including Procter & Gamble, Nikon and Grainger among others. Despite the fact that Hybris’s focus has been on the retail vertical, it has been growing very rapidly (according to Gartner, Hybris’ revenue grew by ~90% in both 2011 and 2012). After the acquisition, growth could be much higher as SAP has plans to use its expertise and industry relations to push the platform to other verticals such as manufacturing, banking and financial services and into other geographies like China. In addition, according to the management, only 30% of Hybris’ existing customers run SAP ERP and CRM systems. Therefore, SAP has an opportunity to market its legacy systems to the remaining customers.

HANA Integration Could Give A Boost

Hybris software will also be integrated with the company’s much touted in-memory analytics platform, HANA. HANA is a platform on which analytics applications can be built to process large amounts of data way faster than the current systems. HANA’s popularity can be seen from the fact that it has become the key growth driver for SAP and has been one of the the fastest-growing software products in the world following its launch. [6] In a short time, over 2,500 customers including small companies have started using the platform. With a growing need for real time analytics and Big Data boom, the integration can give it an edge over competitors.

According to the company, the Hybris acquisition will also complement Ariba, which SAP acquired in a $4.5 billion bid last year (Read SAP’s Ariba Acquisition Will Fuel Cloud Business). Ariba provides a web-based e-commerce software that connects thousands of suppliers and buyers online. The company is planning to couple Hybris with Ariba’s offerings going forward.

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Notes:
  1. SAP Completes Acquisition of hybris to Help Businesses Deliver Seamless Commerce Experience to Customers, SAP, August 01 2013 []
  2. SAP Buys Hybris, Gains Customer Experience Power, Information Week [] []
  3. SAP Acquisition of Hybris Brings E-Commerce and MDM Decisions, Gartner, June 12 2013 []
  4. E-commerce Market, Gartner, March 13 2013 []
  5. Gartner Magic Quadrant for E-Commerce Keeps IBM, Oracle + Hybris as Leaders, CMSWiRe, May 21 2013 []
  6. Seven More Questions for SAP’s Co-CEO Bill McDermott, AllThingsD, January 2013 []
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