Business Objects 'not up for sale'

Despite evidence that Business Objects SA was once a takeover target of Oracle Corp., the business intelligence specialist has clung to its independence through a period of consolidation in the software industry. And that's how Business Objects Chief Executive Officer John Schwarz wants things to stay.

"Business Objects is not up for sale," Schwarz said Thursday in an interview.

"There are a lot of rumors, but we are managing the business to remain independent, and believe our customers want that," he said.

That independence shows in the company's operating system platform strategy. While Business Objects offers its applications on Windows, Unix and Linux, and integrates its reporting tools with Microsoft Corp.'s Office suite, Schwarz would like to see the open-source OS grow.

"We think that Linux is a much better platform than Windows, and it's a platform that is a lot less predatory than Windows," he said. "Our hope and expectation was that it would begin to displace Windows in the enterprise but that has not happened yet."

For Business Objects, Linux has around one-third the market share of Unix, and revenue from Linux applications is "still fairly light." That's because the platform attracts cost-conscious customers, Schwarz said.

Software as a service is another aspect of Business Objects' offering that produces little revenue, but that Schwarz wants to see grow.

The company launched CrystalReports.com in North America in April with two services based on its reporting software: a free version, for up to 10 seats, and a paid version for larger installations.

The service has attracted 6,000 users so far, mostly to the free service, Schwarz said. After three months or so, many of them want to expand their usage and move to the paid service, he said.

"We are busily building out a robust software as a service platform that will make it relatively easy for us to plug new applications into it and plug new users into it," he said.

Schwarz expects that platform to be ready in the spring, and if the Crystal Reports service is a success, the company will consider moving its entire range of products online, he said.

CrystalReports.com "has not played a huge part in our revenue growth yet," Schwarz said.

The company is growing all the same. On Thursday it reported third quarter revenue of US$310 million, up 19 percent year-on-year.

License revenue for the company's core business intelligence software accounted for $100 million of that, down 5 percent compared to a year earlier. However $96 million of that came from the new version, Business Objects XI, up 47 percent year-on- year.

Although the new version offers customers a lot of value, the upgrade required them to make a lot of effort, which has distracted them from starting projects.

"Customers are spending their money on the migration effort and spending a lot less money on buying new technology," Schwarz said.

In the Americas, that migration cycle is over, but it will be another quarter or two before customers in Europe are ready to spend on new Business Objects licenses for new projects, he said. Europe, the Middle East and Africa account for just over one-third of the company's revenue.

Business Objects' consulting and training business grew 34 percent, to $50.3 million for the quarter. Schwarz estimates the potential market for such services at four times its software revenue, or around $500 million. He expects the company to hold its share of the service opportunities at around 20 percent of that market, leaving the rest to partners, he said.