PM (performance management) vendors appear to be universal in their delight at the news that Oracle will buy Hyperion for $3.3 billion.

Their pleasure comes mainly from believing that enterprise-level companies do not want to buy a PM solution from an application or database vendor, preferring instead to purchase mission-critical applications like PM from an independent company with domain expertise and a unique understanding of the space.

"A Goldman Sachs survey said that over 65 percent of CIOs prefer to purchase their BI and PM applications from an independent vendor," said Michelle Mollot, vice president of market strategy at Cognos.

First and foremost, Oracle will have to convince customers that the Hyperion application will not be optimized for the Oracle database environment and rather that it will be optimized for applications that are important to their company, especially because most large companies have a heterogeneous database and application environment that requires a high level of open and ERP-independent software.

The last thing a customer wants is performance management to be an accessory to a database or an application, adds Piet Loubser, senior vice president and director of market intelligence at Business Objects.

There appears to be universal agreement from Hyperion competitors that performance management must live transversely across all systems in a heterogeneous environment.

"You cant afford to have any bias to other applications that might exist in an infrastructure," Loubser said.

Trevor Walker, vice president of marketing at Cartesis, a financial consolidation vendor, said that in the foreseeable future, there will be a lack of clarity on applications from Oracle and where they sit on the application roadmap. "It opens up a lot of opportunities," he said.

Craig Schiff, president of BPM partners, a vendor-neutral consulting firm that helps companies launch BPM initiatives, says the acquisition will be a significant challenge for Oracle.

"No transactional vendor has been able to sell PM applications. Nobody buys SAPs PM apps," Schiff said.

 The only value Oracle may offer to its customers is integration with its underlying data structure. But Schiff says Hyperion itself is still struggling with integration issues between its own applications, such as financial management, planning, and BI tools.

Schiff may know a thing or two about Hyperion as he was the second hire at the company back in the 1980s.

While Oracle is spending R&D dollars on integration with ERP, most large companies see the major benefit from single-solution providers in the fact that all of their research and development dollars are focused on PM.

"Because PM is a strategic front-office solution with high visibility, it is not an area you compromise on," Schiff said.

Not all analysts agree, however. Despite the delight expressed by vendors spoken to for this report, Josh Greenbaum, principal at Enterprise Applications Consulting has a different point of view: "Competitors should be worried."

According to Greenbaum, Hyperion lets Oracle have a conversation with the financial management of a company, the C-level executives. Hyperion plus a big ERP suite can be potentially a lucrative and competitive combination if it can make sense in the context of what Oracle already has.

"The trick is integration and assimilation," Greenbaum said.

Schiff also sees another side to the acquisition, saying it could be a preemptive move before Microsoft unveils Performance Point Server, its PM solution. Schiff says that Microsoft is going to be a big player in the performance space and that IBM may enter the fray as well, picking up Cognos next

It is the conclusion of all analysts and vendors in this space that performance management as a separate niche has become extremely mission-critical ever since Sarbanes-Oxley. Up until Sarbanes, the systems for financial management were not effective, and the budget process was too loose, many say. 

PM is the discipline companies need to apply to reign in risk, notes Cognos' Mollot. It has by default become the new battleground for the hearts and minds of enterprise customers, and that may explain why Oracle made its move.

"Application vendors have been able to automate the transaction system phase and now PM becomes the next competitive advantage," Mollot said.