Online Extra: A French-U.S. Hybrid's Software Dream
He's the best-known software entrepreneur in France. Bernard Liautaud, 41, co-founded Business Objects in 1990 and has run it ever since, building the maker of business data-analysis tools into a world leader in its category. Part of Liautaud's success, of course, comes from having had the right idea at the right time: The category he helped invent -- known as business intelligence -- now tops $2 billion in annual licenses and should grow 8.5% this year, predicts researcher Gartner Inc.
But Liautaud has also made plenty of shrewd moves. He chose an American-sounding name for the company, he says, because an early client, giant French carmaker Peugeot, was reluctant to buy software from a domestic outfit. Early on, Liautaud established a dual presence in France and the U.S., where it has a headquarters in San Jose, Calif. And when it came time for in initial public offering in 1994, Business Objects (BOBJ ) became the first French software startup ever to list first on the Nasdaq, later adding the Paris bourse in 1999.
Liautaud recently made his biggest-ever bet: The $1.2 billion acquisition of rival Crystal Decisions in Palo Alto, Calif. The two companies, joined since December, 2003, together form largest player in business intelligence, with revenues this year expected near $1 billion. Liautaud spends most of his time these days on the road or at Business Objects' U.S. HQ in San Jose. But Andy Reinhardt, BusinessWeek European technology correspondent, recently caught up with him for a few minutes at the CEO's French office in Levallois-Perret, near Paris.
Q: Give us an overview of where you see Business Objects at this point. A:
Q: Give us an overview of where you see Business Objects at this point.
A:We're very pleased with where we are. As you know, we pioneered this industry 14 years ago, when we founded the company and created the first pure business-intelligence solution. And now, 14 years later, we have really created the clear market leader, particularly through the acquisition [of Crystal Decisions]. We have opened up a significant gap between us and the No. 2 in the market [Ottawa-based Cognos (COGN )].
Q: Software acquisitions have a mixed track record. What are you doing differently to make sure this one works? A:
Q: Software acquisitions have a mixed track record. What are you doing differently to make sure this one works?
A:We are very aware of the statistics against us (laughs). But there are some fundamental differences. One is that both companies are already successful and healthy. Very often [in mergers], one of the companies is in trouble, and that's why it gets acquired. Business Objects is one of the rare companies that has grown for 10 years in a row and been profitable all along. Crystal was the fastest-growing BI [business intelligence] software company, growing at 25% in each of the past three years and reaching high levels of profitability. So, we're taking two successful, profitable, fast-growing companies and putting them together.
Second thing is that the two companies had similar visions and very complimentary products and business models. There's some overlap, but not that much. Some things look similar from a distance, but when you get close, you realize that we address our customers in different ways. Business Objects addressed the needs of the power users and executives, while Crystal aimed more at information consumers. Together, we can address every information user in a company.
Q: That's the vision stuff. But what about actually combining the companies? A:
Q: That's the vision stuff. But what about actually combining the companies?
A:We've taken a very disciplined approach to the integration. We hired a consulting firm [Bain & Co.] to help us out, and we set up four major task forces that reported to a steering committee lead by me. We met every week and did six months of planning. A crucial philosophy was fast integration. Quite often in mergers, the acquirer puts things aside and says, "We'll see after a year how to integrate the companies."
We decided the key to success would be speed of integration. So, we planned everything to be able to operate as one company starting on Jan. 1. And we did. Now we have one global sales force, one product development organization, and so on. On the product side, we released a roadmap to our customer base at the same moment. We're very clear on where we are going. Now it's all about execution.
Q: Have you suffered management attrition from the Crystal side? A:
Q: Have you suffered management attrition from the Crystal side?
A:There was one loss [Andrew Handford], who was the head of the product group over there, and it was his personal decision. He had been with Crystal for quite a while, and decided that it was time for him to leave. But for the people who have been in charge of developing the technology and managing the product for many years, it was an opportunity to move up a level. We have the key people with us. [Crystal CEO Jonathan Judge isn't joining Business Objects but has helped with the transition.]
Q: How will you balance your product development now between the French and American halves of the company? A:
Q: How will you balance your product development now between the French and American halves of the company?
A:We now have two important sites, Paris and Vancouver [where Business Objects has development labs]. They're about the same size -- about 400 people each -- and it's clear which site manages which pieces of the product line, so there's no overlap or complication in development. This creates a different balance in the R&D organization, which I think is good because it reinforces our technology presence in North America. Plus, the development group in Vancouver has been extremely productive, and I think it's a great asset to the organization.
Q: What are the high-level industry trends you're seeing right now in business intelligence? A:
Q: What are the high-level industry trends you're seeing right now in business intelligence?
A:There are several. First, customers want to have fewer suppliers with whom they can have strategic relationships. In business intelligence, instead of having one tool in one department and another tool in another department, they want to standardize on something that gives them enterprisewide intelligence. They want a solution that cuts across all their other systems, lets them access data from SAP (SAP ), Oracle (ORCL ), and PeopleSoft (PSFT ), from IBM (IBM ) machines and Microsoft (MSFT ) systems, and so on. In the end, BI is a window into a complex set of systems, so you want something that is simple and hides all that complexity.
When customers do standardize, they want to buy from a clear leader, a safe company that offers a global presence and has a portfolio wide enough that they can actually standardize on it.
Q: Was this something you saw coming, say, 18 months ago, and decided to jump on it before somebody else came in and bought smaller BI companies? A:
Q: Was this something you saw coming, say, 18 months ago, and decided to jump on it before somebody else came in and bought smaller BI companies?
A:Yes, we thought this would happen. Customers are going to look for a clear choice. Trying to get there by ourselves would have taken a longer time, but by combining with Crystal, we created that company.
Q: What about other trends? A:
Q: What about other trends?
A:We're entering the era of intelligence. The 1980s were the era of the database. For 10 years, the focus for companies was how to store information better. That was when you saw Oracle and all the database companies do so well. Then, in the '90s, it shifted to how to automate business processes. That's when you saw SAP and PeopleSoft and the other big ERP [enterprise resources planning] companies come in to automate the sales force, financial systems, manufacturing, and so on.
Now, we believe it's all about how to extract the power that exists in all those databases and applications, to get real insight and drive better performance for companies. We're moving up in terms of the value of information technology toward business performance improvement, as opposed to just storing data or automating tasks.
Q: I hear the emphasis is moving away from analyzing data for its own sake to using business intelligence to monitor the company's execution in real time. Is that a trend you're tapping into? A:
Q: I hear the emphasis is moving away from analyzing data for its own sake to using business intelligence to monitor the company's execution in real time. Is that a trend you're tapping into?
A:Yes. The ultimate goal is business performance improvement through the intelligent use of information. That has given birth to a new field called "enterprise performance management," which takes a much more proactive stance on driving specific goals within a company. This is about more than just sharing data better within the company. Managers want to drive revenue growth, decrease costs, optimize the supply chain, and increase customer loyalty.
With business intelligence, they can monitor their progress and do analysis afterward. It's not just looking at the past, but how to drive the future.
Q: Aren't the big software companies nibbling into your business by adding business intelligence to their packages? A:
Q: Aren't the big software companies nibbling into your business by adding business intelligence to their packages?
A:Over the long term, they will probably have elements of it in their own platforms. But for now, we're partnering with them. SAP and PeopleSoft use Business Objects technology, and both of them also embed Crystal Reports technology from Crystal Decisions. The way we see them coming into the market is by using components of our technology. Then, if the customer wants a true enterprisewide solution, that's our domain of expertise because we can offer neutral access to all data sources and business applications.
Q: How does the merger change your channel strategy? A:
Q: How does the merger change your channel strategy?
A:Business Objects sold about 60% direct and 40% indirect. Crystal had a very strong, very efficient strategy [of selling through other companies], which means its products are embedded in thousands and thousands of applications. Virtually any time you use an application with built-in reporting capability, it's based on Crystal Reports. So now we have both. They seed thousands of customers, and then we can upsell them more sophisticated Business Objects solutions.
Q: Does the addition of Crystal also help you move down into small and midsize businesses (SMB)? A:
Q: Does the addition of Crystal also help you move down into small and midsize businesses (SMB)?
A:Yes, that was one attraction in doing the deal. Crystal has a larger presence in SMB and has developed a business model that works well there. Its products are easier to use and implement in a small company. They also have a very efficient sales model that can reach out to lots of customers. We are adopting that model, and using the Crystal product line and business model as a way to further our penetration.
Q: Is there pressure from the market to make the output from your software accessible to other analysis tools? Or do you have to sit at the top of the pyramid? A: Right now, we haven't seen customer demand for that.
Q: What's your long-term ambition? A:
Q: What's your long-term ambition?
A:We have established leadership in business intelligence. Now, we want to be more than just No. 1 in BI. We want to be one of the greatest software companies, period. So we've established a goal for ourselves to be one of the top 15 software companies in the world within the next three years.