SAP Acquisition of KXEN Proxy War in the Cloud, Predictive Analytics Space

This week at the SAP Business Objects User Group Conference (SBOUC), Steven Lucas (President of Platform Solutions at SAP) announced the acquisition of predictive analytics and cloud-based solution platform KXEN. This was position in response to SAP customer demand around greater workflow and process integrations with analytics in a cloud-based offering. While the intent to acquire KXEN by SAP is not a done deal, the wheels are firmly on the track and the train is moving ahead to an October, 2013 close based on an analyst call hosted by both companies this morning.

The KXEN acquisition is definitely a good response to SAP customer demands in both the cloud and predictive analytics offerings. At SAPPHIRE 2011, in private meetings with the analytics solution team, the direction of the solution roadmap for SAP in the space of predictive analytics was on the forward horizon view of many solution management team members. As part of the product portfolio, SAP has a long-standing product development gate strategy with rigorous decision points on “make or buy” approaches to new product development. Acquiring KXEN is an acknowledgement that SAP – in at least this space of the predictive analytics field – needed to get in front of the customer based more rapidly than the organic product development cycles would allow.

The acquisition also speaks to a growing proxy war quietly playing out between SAP and Salesforce.com, arguably one of the leaders of the cloud-based sales force automation and marketing who has been cherry-picking talent recently from SAP’s Palo Alto and SuccessFactors Bay Area campuses. Lucas came from Salesforce.com a few years ago to lead the SAP analytics and cloud platform efforts and in his current role targeting good partners (and the talent and products that come with them) to bring formally into the SAP ecosystem. KXEN also has development solutions such as its Cloud Prediction which it launched at DreamForce 2102, and as such to direction of this and other product offerings on the Force.com platform is in question (this was directly asked during the analyst briefing at which point there was a “no change in direction” reply statement while at the same time acknowledging this and other products would enhance the HANA cloud offerings). As the acquisition formalizes it is hard to understand how KXEN’s relationship with SalesForce.com, in short the buy appears to be away to poach and divert the product lines from Force.com to HANA while also getting a good look at the Force.com “wiring” as a part of the process.

As SAP makes more moves to shore-up its cloud and analytics strategy to support the HANA cloud offering, KXEN could be the first of several spot acquisitions in this field as SAP accelerates its product introduction cycles.