January 5, 2009

#7. Acquisition of Major Hyperion Consulting Firms

While consulting firms getting acquired is nothing new (AnswerThink buying Beacon, Hitachi buying Navigator, etc.), the rash of consolidations affecting the Hyperion consulting world in 2008 was unprecedented. Let's review 5+ major EPM consulting company transactions that occurred in roughly the last 12 months alone.

Yes, I know this technically happened at the every end of 2007, but this event is really what signaled the onslaught of coming consolidation. Edgewater first got into the Hyperion consulting game with the acquisition a few years ago of Ranzal. They later swallowed Lynx and now they're continuing their march towards global assimilation with the purchase of Vertical Pitch out of Denver, Colorado. They were bought for $20MM and their run rate (trailing twelve months revenue) was about $10MM. The $20MM was $14MM in cash and $6MM in Edgewater stock (which is now is more valuable as kindling than stock, to be honest).

On one hand, this purchase was predictable. Edgewater had a great deal of cash on hand and they were itching to buy up another Hyperion partner; a predominantly West Coast firm just made good geographic sense. On the other hand, most people were surprised because Dan Gudal (founder of Vertical Pitch) never seemed like the type to sell out. I guess everyone has his price? It's also possible that Dan read the tea leaves of the soon to be plummeting USA economy and realized that this was probably the peak time to get out.

I know: Sinmax Global sounds like a multinational porn conglomerate, but they were actually a major EPM player in India and Southeast Asia. While their founder was a former Hyperion groupie, Sinmax had since expanded beyond Hyperion to include competing products like Cognos and Business Objects.

While this didn't make many headlines over in the USA, it was the first of a two-pronged attack from Titan Technology Partners into the EPM space.

This one is mildly confusing. Rolta is an Indian conglomerate with 5,000 employees. In January of 2008, Rolta bought TUSC, a Chicago-based Oracle (and other IT services) consulting firm with around 160 consultants. Rolta (or TUSC, if you prefer) bought the consulting division of WhittmanHart. Based out of Chicago, WHC (WhittmanHart Consulting) primarily focused on Hyperion although their 80 consultants also implemented some other products.

The purchase of WHC made perfect sense for Rolta. TUSC (their USA-based IT arm) was already based in Chicago so it was easy enough to acquire another Chicago-based firm and while ERP and Data Warehousing certainly slowed down in 2008, BI/EPM did not. Simply, companies are adding BI/EPM initiatives while cutting others, so to keep growing, Rolta needed to get into the EPM space.

August 18, 2008. Titan acquires Pinnacle.
While I wasn't surprised that Titan bought a domestic Hyperion consulting firm (based on their initial salvo into EPM back in May when they bought Sinmax), I will admit that the purchase of Pinnacle threw me. The founders of Pinnacle, Andrew Jorgensen and Michael Fuori, always seemed very content working for themselves. Andy, in particular, has been known as a bit of a rebel, "go his own way" sort of person in the industry for years.

While there has been some gossip as to why this deal was executed, I won't go into it here. The important thing is that it did happen and within one month, two of the ten largest Hyperion partners disappeared (the other, of course, being WHC mentioned just above).
Most of you probably haven't heard of Narratus, but those old-timers in the crowd may have heard of Data Into Action. DIA (Data Into Action) was a major California Hyperion partner back in the 1990s until it was bought (sort of) by Hyperion to fill a gap in their own consulting services organization. When they left the Hyperion corporate fold (after 5 years, if I recall correctly), they relaunched as a division of Narratus... and that division is now part of Global Analytics.

Global Analytics is a fairly small Hyperion partner (~$4.5MM in revenue, at last check) but this acquisition signals their intention to grow. Of course, buying a little division of Narratus (DIA was fairly tiny once they went back out on their own) isn't the fastest way to do it. Frankly, it's a lot more likely that Global Analytics will be acquired themselves than that they will be able to grow through any sizable acquisitions. This purchase does get Global Analytics out of the area they've been pigeonholed in by their competitors: a company that only does Hyperion infrastructure. They can now claim to have a project implementation arm as well.

December 30, 2008. TUSC (Rolta) acquires Piocon.
Most of the Hyperion people reading have no idea who Piocon is, but they're well known in the OBIEE space. As past readers of this column know, interRel won Oracle's partner of the year award at OpenWorld 2008 for our EPM solutions. What you may not know is that there was also an award given (out of 17 awards in all) to the "BI Solution" of the year, and the winner was... wait for it... Piocon. This was for a very successful Oracle Business Intelligence project they did, and from what I've heard they deserve it.

Chicago-based Piocon (notice that apparently Rolta only knows how to buy firms based in Chicago) predominantly focuses on the Oil & Gas sector, so TUSC (or Rolta, I can't tell anymore) will most likely need to buy another more well-rounded firm if they're serious about the OBIEE arena. Either way, this gives Rolta (TUSC? Ack!) another building block in their EPM stack.

Why all the consolidation?
I have two theories. It's possible that the economy is tanking and the Hyperion/EPM consulting firms are getting scared. That would explain why the consolidations have been accelerating in the latter half of the year as the economy continues its downward spiral.

The other possibility (and the one that I find more likely) is that IT consulting firms (like Titan and Rolta) realize that their companies aren't expanding in traditional IT areas. Larger firms can use EPM to get in the door and then expand into their other IT areas. Even if the EPM deals aren't huge, once your in a company, the deals can be expanded to technology projects across the enterprise. After all, isn't this why Oracle bought Hyperion in the first place?

Who's Next?
That's probably a subject for a blog posting in and of itself. The rumor at OpenWorld was that interRel was being bought (which couldn't be further from the truth, by the way). It was most likely due to all the awards we were winning at the conference and when you're on people's lips, rumors like this tend to fly. People kept coming up to me congratulating us on getting acquired, and I amused myself by asking who exactly was purchasing us. The answers I got most often were Rolta, Deloitte, and Edgewater.

So we're perfectly clear, let me just say that no one from any of those companies has called me, but I would look to those three companies (Deloitte, Edgewater, or Rolta) to be one of the next companies to buy a Hyperion partner. As for who they will buy, there aren't a ton of pure-EPM partners left. One could speculate that it might be interRel, PII, Kerdock, Global Analytics, US-Analytics, Analytic Vision, HCG, TopDown, or even the Hyperion arm of Palladium, but it could just as likely be some other tiny Hyperion vendor that's not on anyone's radar screen right now. Heck, it might even expand beyond the consulting world to one of the Hyperion software partners like Applied OLAP or Star Analytics.

No matter who it is, look for the EPM/Hyperion consolidation wave to continue.

1 comment:

Pranava said...

Edward,

First let me start by saying I am a fan of your book/books.

Talking about the acquisition concept, I found your thoughts very insightful, couldnt agree more.

On my recent blog,

http://hyperion-talk-n-menu.blogspot.com/2009/10/as-i-sit-here-staring-at-my-newly.html, I wrote something along similar lines. However, after reading your post, adding one and one, I figured this, why acquisitions now?

Hyperion seemed like a niche market at somepoint of time until it started to be used more widely, however it made an even more difference after Oracle purchased Hyperion. And after Oracle gave confidence in actually making Hyperion core of their EPM stack, things changed even more. Now lot more people know about Hyperion.

I think what is happening is with the growing popularity of Hyperion, existing IT giants, Deloitte, Infosys, IBM, etc; are able to drill deeper into the market share by acquiring an stable EPM practice. What this has done in turn is leave the true Hyperion SIs gasping. With a very real cost advantage that IT giants provide to clients, it is difficult for some (if not all) pure Hyperion SIs to compete, thereby the acquisitions. Adding the current economy to the above equation brings forth the point even more pronounced.

In a nutshell Hyperion has become yet another channel for IT giants, 'due to their already large client base and apparent cost benefits for clients', expand their market by including Hyperion in their portfolio. However, pure Hyperion SIs arent efforted the same advantages, thereby the acquisitions.

Though I doubt it, it would be interesting to see if these giants could wrestle with EPM (excluding BI) in an off-shore model.

Please feel free to comment,

-Pranava
http://hyperion-talk-n-menu.blogspot.com/