SAP Will Acquire Khimetrics

SAP AG moved to solidify its position in the retail vertical today by announcing its intent to acquire Khimetrics, a privately owned BI software vendor specializing in demand metrics and profitability forecasts. The deal is expected to conclude in January 2006, and is subject to the approval of U.S. and German regulatory authorities; terms were not disclosed. Khimetrics will join other recent acquisition Triversity, a provider of point-of-sale retail solutions, in the SAP for Retail fold. This latest deal marries two companies with little overlap in service offerings, but a similar approach to product development, according to Jim McMurray, SAP's senior vice president of retail. "Our organization has a history of committing R&D resources to strengthen our core products. Khimetrics brings the same kind of science to analytical pricing and revenue forecasting," he says. "This is further proof of our unwavering commitment and focus on delivering what our customers want." Khimetrics President and CEO Brent Lippman concurred. "As a company with a strong history in advanced product development, we will be an excellent fit with SAP's culture and outstanding commitment to future-looking research and development," Lippman said in a written statement. Analysts were quick to assess the combined advantage SAP has gained by this move. "With Khimetrics, SAP is adding to its solution portfolio features ranging from sales prediction, basket demand patterns, price optimization, vendor incentive management, promotion planning, scorecard, and reporting," says Ivano Ortis, retail industry program manager for IDC European vertical markets. "Khimetrics' features are providing essential intelligence capabilities to enable merchandise efficiencies and replenishment enhancements." In addition, Ortis assessed the deal's market positioning benefit in light of Oracle's acquisitions of Retek and ProfitLogic earlier this year. "Clearly Oracle's aggressive M&A campaign in retail, as well in the logistics space, is putting increasing pressure on SAP. Still, the two companies are showing a different approach, but both are responding in a timely and competitive manner to current and short-term market challenges." Ortis notes, however, that Khimetrics has focused mostly on retail for much of its history. "Khimetrics is mostly showing retail customers, although it has recently started to target the financial and CPG industries." SAP and Oracle appear to be gearing up for a heated battle in the retail sector. Rick Chavie, SAP senior vice president of industry solution management for trading, retail, and wholesale, gave his thoughts on the absorption of key technology providers in the area. "Retek competes directly with SAP for Retail, and we made a tender offer for Retek in February 2005," Chavie says. "The price became inflated far beyond our assessment of Retek's value, so we withdrew in Q2 of that year." Ortis believes there remains room for best-of-breed vendors, despite continued consolidation by big players. "There are still smaller retail-specific vendors, such as Aldata and IntelliQ, showing strong positions and continuing successful relations with their customer base," Ortis says. "The increasing trend rewarding outsourcing is enabling IT service providers to leverage best-of-breed applications, integrating those into turnkey implementations based on Oracle, IBM, SAP, and Microsoft platforms, among others." According to Ortis, this is mostly because open-standards architecture put in place by large enterprise software vendors is enabling easier development and customization of new solutions. As with any new development, the fallout from this acquisition is yet to be seen. However, Ortiz suggests it will be a catalyst for growth in retail software. "The common factor among retail subsectors is the absolute need of enhancing the consumer experience, for example by speeding up customers' checkouts while reducing out-of-stock situations, aiming to improve the customer service. End-to-end visibility and intelligence of entire value chain operations (from CPG suppliers, distribution, and logistics to warehousing, corporate headquarters, stores, and all of the available sales channels) is a key factor to achieve responsive retailing," Ortis says. "Therefore, IDC continues to expect that achieving responsive retailing operations, in essence the capability to interconnect in real time the supply with the demand side, will be crucial in the short term for retail and wholesale organizations." Related articles: Forrester's Top ERP Vendors Oracle Acquires ProfitLogic SAP Snatches Up Competitive Talent