Robert Kugel's Analyst Perspectives

SAP is in the process of acquiring certain financial disclosure management software assets from cundus, a German provider of BI and performance management software. SAP will be buying cundus’ Financial Statement Factory and informationCollector, which together manage the collaborative creation and editing of financial and management reports using both structured and unstructured information. SAP expects to complete the deal by the end of 2010.

The transaction follows a similar move by IBM Cognos in its acquisition of Clarity Systems for the same reason: As the United States Securities and Exchange Commission (SEC) progresses in implementation of its “interactive data” mandate, public companies are finding they need to automate the process of assembling their quarterly and annual external financial filings and tagging data with eXtensible Business Reporting Language (XBRL) tags. As well as being required, this not only saves time but can significantly reduce errors. Although many companies are motivated by the SEC mandate, I believe most that adopt these types of solutions will shorten the process and make it more efficient. Moreover, similar (albeit less complex) reporting requirements already exist in many other countries, and I expect these requirements to expand in future years as investors and others demand easier access to corporate data. Also, this sort of application can be used more broadly to automate any complex regulatory filing that requires the collaborative assembly of text and numbers from multiple sources in a company. For instance, it is also used to prepare compliance reports to regulatory authorities such as (in the case of the finance department) Sarbanes-Oxley Act sections 302 and 404 documents.

SAP is deferring comment on many details until it completes the acquisition. I’m assuming that it will integrate UBmatrix’s XBRL tagging tool – which it already offers to customers under the SAP Business Objects XBRL Publishing moniker – to handle this part of the process (cundus also uses UBmatrix in its XBRL Factory application). Earlier this year UBmatrix was acquired by Edgar Online, which also offers an SEC filing service (and thus both supports and competes with SAP). The offering will be priced separately from SAP’s other financial performance management (FPM) components.

I think this addition to SAP’s product line was long overdue: It plugs an important gap in its offerings to finance departments. In the evaluation of the leading FPM software suites in our 2010 Value Index, while SAP achieved the highest score in our assessment, it achieved that despite the absence of this capability. In addition to IBM Cognos, this software competes with offerings from other FPM suite vendors such as Host Analytics, Longview Solutions and Oracle/Hyperion.

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Regards,

Robert D. Kugel CFA - SVP Research