Business Objects S.A. History

Address:

Tour Chantecoq
5, rue Chantecoq
92800 Puteaux
France

Telephone: (33) 1.41.25.21.21
Fax: (33) 1.41.25.31.00

Public Company
Incorporated: 1991
Employees: 757
Sales: US $114.25 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: BOBJY
SICs: 7372 Prepackaged Software

Company History:

France's Business Objects S.A. is a leading provider of software-based enterprise decision support tools to mid-sized and large-scale corporations. Business Objects' client/server software focuses on providing an intuitive "semantic layer" between the end user and the often arcane protocols needed to access corporate databases, data warehouses, and other data repositories. Using their own natural language criteria, Business Objects' clients can perform sophisticated interrogative analysis procedures, producing rapid and specific reports to aid in the decision-making process. By placing the tools to access information in the hands of the end user, Business Objects enables corporations to achieve greater speed and accuracy in decision making and greater competitiveness in the global marketplace.

The company targets four primary market segments. In addition to its principal market of providing front-end support to data warehouses and data marts, the company adds third party decision support services to packaged software applications, such as Microsoft Excel; Internet-based database and data warehouse reporting functionality using the World Wide Web; and decision support services to corporate and third party custom-built relational database management system (RDBMS) applications. Business Objects' client/server software can be adapted for use in corporations ranging from 100 to 10,000 or more licensed stations.

The heart of the company's product line is its BusinessObjects client/server platform, which entered its version 4.1 in late 1997. BusinessObjects's chief function is to provide a company-patented "semantic layer" meant to shield the end user from the need to formulate data query requests using the highly technical Standard Query Language (SQL) demanded by most data repositories. Instead, a corporation's Information Services department creates a series of graphical "objects" representing SQL search commands, providing the end user with a point-and-click interface tailored to the user's commercial language needs. Objects can be combined to provide highly specific data requests; the results can be presented in graphical charts and diagrams and exported to other decision support software.

Available for use with most major operating systems, including Unix and Windows, BusinessObjects is comprised of separate, combinable component modules. Reporter forms the software's core, providing the graphical query engine with which the end user constructs an object-based data request; resulting data is submitted to a report generator, which produces editable, template-based reports, and a graph generator to create a variety of two-dimensional and three-dimensional charts, graphs, and other graphical report tools. An add-on to Reporter is the analysis-oriented Explorer, with which the end user submits the Reporter-generator base report to multidimensional analytic criteria. Reader and Driller function as separate components. Reader enables read-only viewing of previously generated reports; Driller allows users to read and conduct "data mining" analysis on previously generated reports. A fifth component, which began shipping in December 1997, is the company's thin-client, Java applet, WebIntelligence, enabling World Wide Web-based, real-time querying, reporting, and analysis not only within the corporation but also for the corporation clients, suppliers, and partners.

In addition to these core components, Business Objects provides a series of add-on products, including BusinessQuery for Excel, which provides BusinessObjects querying abilities and reporting directly integrated into that Microsoft application. BusinessMiner is a Reporter add-on that provides additional "decision tree" graphical formulation for identifying data trends. The company licenses BusinessMiner from a third party developer. Information Services support is provided by the company's suite of BusinessObjects environment tools, including Designer; the security and access management module Supervisor; the query request router Document Agent Server; Data Access Drivers for use with major relational database systems; and pre-prepared Rapid Deployment Templates for use with major database applications from SAP, Oracle, Baan, PeopleSoft, and others.

Although based in France, Business Objects has from the start taken a distinctly international approach. With subsidiary operations in 14 countries and sales to more than 60 countries, foreign sales represent some 70 percent of Business Objects' revenues. The United States, which alone accounts for more than 30 percent of the company's annual sales, plays a key role in Business Objects' development and future strategy. Whereas research and development are maintained at the company's Paris area headquarters, the company's sales and marketing are governed by its San Jose, California headquarters. Business Objects has also adopted a business model similar to its Silicon Valley counterparts, including an aggressive, internationally oriented recruitment policy, salaries boosted by stock options, and an early opening to investment capital. Since 1994 the company has been listed on the NASDAQ stock exchange.

Business Objects' client list reads as a Who's Who among the world's leading corporations. The company boasts more than 6,200 clients with more than 780,000 licensed products, with clients including Texas Instruments, 3M, France Telecom, Sollac, ATT, and Shell. The company also has strategic partnership and distribution agreements with major industry forces such as Microsoft, Oracle, Sun, Silicon Graphics, IBM, Sybase, and Hewlett-Packard, among others.

While posting steady revenue gains throughout the 1990s, including a 34 percent increase in 1997 to top US $114 million in sales, Business Objects has struggled to maintain profitability--posting a net income of less than US $3 million for 1997, a drop of nearly 50 percent from the previous year. This is in part because of the intensive nature of the company's software sales process, which often involves three to six months of prototype setup and testing before the conclusion of a sale. Nonetheless, the company holds a key position in the booming client/server technology market, which has been growing steadily since the mid-1990s. Business Objects continues to be led by co-founder, Chairman, President, and CEO Bernard Liautaud.

Liautaud, who had traveled to California to obtain a Master's in Management from Stanford University before working for the French subsidiary of database leader Oracle in the 1980s, joined with Oracle colleague Denis Payre, who had been responsible for Oracle France's strategic accounts department, to form Business Objects in 1990. With start-up capital of merely FFr 100,000 (approximately US $18,000), the two partners set up shop in a small office in the Parisian suburb of Puteaux. Already steeped in the Silicon Valley culture, Liautaud and Payre had come across a software program written by an independent developer, Jean-Michel Cambot, that provided a simpler means of working with Oracle database systems. Liautaud and Payre, then aged 29 and 28, respectively, immediately recognized the program's potential. As Payre told Les Echos: "No one had seen this market."

Purchasing the program from Cambot, Liautaud and Payre were able to start business with a product already in hand. Their experience with Oracle's database systems, as well as their understanding of the outstandingly successful Silicon Valley business model, would mark Business Objects' development from the beginning. The partners hired an international team, many of whom also had worked for Oracle, giving the company not only a strong technical and commercial base, but a working knowledge of its target customers' needs. Business Objects also would benefit from Oracle's disinterest in pursuing this new market with its own resources, giving its tacit support to the development of a product that, by making Oracle's systems more accessible, would also make them more attractive. The company's international focus was apparent immediately, as development of the software, soon dubbed BusinessObjects, and its introduction in 1991, was done simultaneously in English and French.

Liautaud and Payre adopted another particularity of the Silicon Valley business model--a distinctly non-French opening up of the company's capital. Almost immediately after opening Business Objects' offices, Liautaud and Payre began making the rounds of investment firms in New York, Paris, and San Francisco. Aided by Liautaud's father-in-law, former American Electronic Association President Arnold Silverman, the pair succeeded in attracting investment interest not only in France, but among the crucial Silicon Valley community. Within seven months after starting out, Business Objects had succeeded in raising some US $1 million in investments, principally among France's Paribas Technologies (subsidiary of major banking group Paribas) and Innovacom (a France Telecom subsidiary), Dutch-American investors Atlas Ventures, and the United States's Donald Lucas and Silverman, both leading figures in the California investment community. The internationalization of the company's capital would prove critical for enabling Business Objects to penetrate the crucial U.S. market.

That market readily embraced Business Objects and its ground-breaking product. By 1993 the company was in the black, having already wooed more than 1,000 clients worldwide. With revenues of FFr 51 million (approximately US $10 million) and profits of FFr 5.6 million, Business Objects had achieved a growth of more than 400 percent since 1991. At the same time, with the growth of new client/server technology in the early 1990s, analysts had begun estimating that the niche market Business Objects had created, then worth some US $90 million worldwide, could near US $800 million by the late 1990s.

Indeed, Business Objects' product had come at the right time. The collapse of the international economy during the 1990s and the lingering effects of the recession, which would last into the middle of the decade, coupled with the increasing globalization of business competition, had driven corporations to search for new means not only to increase efficiency but also to achieve more accurate business forecasting models. By placing the tools to conduct database queries and generate reports in the hands of the corporate end user, Business Objects had created an important--and eagerly embraced&mdashøol for these corporations.

The company quickly expanded, opening offices in the United States, England, the Netherlands, and Germany, as well as in Tokyo (where it began translating its software into Japanese). In 1994 Business Objects took the next step toward corporate respectability. In that year Business Objects went public, listing on the NASDAQ stock exchange, becoming the first independent French company ever to do so. The choice to go public, and to list on an American exchange, would give the company the appearance of stability necessary to attract the world's largest corporations to its product line. At the same time, the company's initial public offering (IPO) garnered favorable publicity for its products. The public offering for US $8.5 per share was one of the year's big successes: the company, with revenues of US $30 million and a net income of US $2.3 million in 1994, was valued at some US $200 million.

One year later Business Objects continued to build on its promise. By 1995 more than 70 percent of its sales were made internationally and 35 percent of its revenues came from the United States alone. Sales had doubled over the previous year, topping US $60 million, for a net income of more than US $8 million. The company, though maintaining its headquarters and, in particular, its development activities in France, was nonetheless shifting more and more of its efforts to the all-important American market. By the end of 1995 the company's stock had continued to climb, reaching US $53.5 per share and placing the company's value at nearly US $1 billion.

By the end of 1996, however, Business Objects stock had crashed, plunging to just US $11 per share. The company had overestimated its first quarter's sales totals--the fault of one of its subsidiaries, which had included a prospective sale in its revenue statement--forcing the company to adjust its revenues for its second quarter. The second half of the year proved equally difficult: the launch of the new version 4.0 of the BusinessObjects suite was delayed, crippling the development of sales. Porting the software to a 32-bit platform, necessary to run the software under the WindowsNT operating system, led to a further drag on sales. Although the new version was compatible with Windows95, it now was incompatible with the previous version of Windows (which is a 16-bit platform), still widely in use in the corporate world. A 16-bit version of BusinessObjects (4.5) was not readied until November 1996. In addition, problems with BusinessObjects 4.0 caused the company to prepare an updated version (4.1) within months of its release.

The company, which had been doubling sales each year, saw its revenue growth slip dramatically, closing the year at just US $80 million. More troubling was the slip in profits, which fell back to just US $5 million in 1996. The company's difficulties would continue into 1997, which saw its profits slip again, to US $2 million, despite an increase in revenues to US $114 million. Business Objects' competitors--notably Cognos and Brio Technology--also had made inroads into the business-decision market, taking market share from Business Objects. Nevertheless, the company--and market analysts--found cause to remain optimistic. In 1997 the company began preparing the launch of several new products, including Miner, developed in partnership with France's ISoft, and WebIntelligence, which allowed use of BusinessObjects's functions through the World Wide Web and through corporate intranets.

Business Objects was preparing another transition. In November 1996, Denis Payre, then 34 years old, "retired" from active leadership of the company. Years of commuting between France and the United States had taken its toll, and Payre announced his decision as a means to spend more time with his family. Although Payre kept a position on Business Objects' administrative board, his new interest turned to investing his fortune and his experience into new European computer industry start-up companies. Meanwhile, Business Objects itself seemed to be looking to end its commuter relationship with the United States. The company replaced Payre with the American David Ellett, former division chief with Oracle, whose offices were to be not in France, but in San Jose; another American took a position in the company's top executive ranks, when Tom Weatherford was named CFO in early 1998. Accompanying these appointments was the shift of the company's marketing department to its San Jose headquarters.

The company's increasing emphasis on its U.S. operations was seen as a necessity for the company's future growth. As Bernard Liautaud explained to Le Monde: "The time has come to shift more to the United States. More and more, our largest clients are Americans. That's where the influential financial analysts are." Yet, despite its American ingredients, Business Objects remained a distinctly French success story.

Business Objects S.A. History

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