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February 14, 1999


By CBR Staff Writer

Hyperion Solutions may well be experiencing a relatively rough ride since its stock fell to a price that has effectively wiped out the value of its Arbor acquisition. But its Appsource subsidiary, the company Arbor bought for $6.65m in December 1997, is showing the positive glow of good health. The unit now has more than 1,000 customers and saw revenues of $9m, a 300% increase over 1997, if analyst estimates are correct.

The subsidiary’s performance has made the 35-strong Appsource unit bullishly optimistic. Having captured the lion’s share of business selling Wired for OLAP as the front-end query and reporting tool for its parent company’s OLAP (on-line analytical processing) Essbase server, Appsource is now aggressively pursuing new business lines around the new OLAP entrant – Microsoft.

We’re going to attack the [Microsoft] SQL Server 7.0 services market in the same way we attacked the [Arbor/Hyperion Solutions] Essbase market three years ago and we will be the dominant player, says Richard Daley, president of Appsource. Conservative estimates suggest that 50% of all Essbase sales include Wired for OLAP, and Appsource wants to achieve similar, if not better success rates against sales of SQL Server and Microsoft’s OLAP offering.

Hyperion made the Appsource business a wholly owned subsidiary back in August 1998 with the specific aim of re-establishing the Appsource corporate brand name in OLAP circles. While the reorganization involved little more than changing signs on doors and business card according to Daley, it was designed to have a more wide reaching impact on the market as a whole. Hyperion executives believed the AppSource brand name would hold more appeal to non-Hyperion customers, or more specifically Microsoft SQL Server 7.0 accounts.

With this end in mind, the company also established a sales force to sell Wired for OLAP as a point product add-on to Microsoft’s OLAP server. Pitching to this market is a very different sell to the solutions focus within the Hyperion sales team. The average sales price is lower and the market is different, so you need a different sales team, Daley told us. That said, the sales force Appsource established is small which has enabled it to keep overheads down and, according to Daly, makes the unit highly profitable.

Although the unit currently sees revenue streams from Essbase sales, under an OEM agreement with Hyperion Solutions and IBM, Lawson Software, PeopleSoft and ShowCase – Hyperion sub-channels – the revenue mix will change over the next year as Microsoft muscle into the lower-end of the OLAP market. In anticipation of the change in market dynamics, Appsource has made Wired for OLAP more tightly integrated with SQL Server 7.0 services. Last week, it announced a new release of Wired for OLAP that exploits write back and other facilities provided by the Microsoft OLAP server.

Version 4.0 has met with nods of approval from the market. Wired for OLAP is already recognized as being at the forefront of products in this market, particularly with regard to its user interface. In Version 4.0 further improvements have been made to the user interface, including a new web-style interface. Performance and scalability have been improved by the introduction of the Wired Enterprise Repository, which allows utilization of leading relational databases including SQL Server 7.0, IBM DB2 and Oracle 7/8, concludes Mike Norman, a ComputerWire analyst and datawarehousing consultant.

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In a bid to provide the flexibility and price points it believes are required to compete in the Microsoft marketplace the latest version also has a number of levels of sophistication from a web client that costs $100 to a full three-tier package which costs $600.

Appsource is undeterred by the impending threat Microsoft’s own front-end query and analysis tool, Excel 2000, will have on Wired for OLAP 4.0 sales. There are many users out there who are not comfortable using a spreadsheet for OLAP analysis. Power users will be frustrated because Microsoft will only be able to provide low-end OLAP functionality, says Daley. While he admits that Appsource may have to relinquish some users to Excel 2000, he argues that Wired for OLAP will always be more attractive to serious OLAP users that require the query and calculation capability within its product and a level of scalability not present in the Microsoft equivalent.

As a wholly owned subsidiary of Hyperion Solutions, Appsource naturally has a number of constraints on its growth in the MS SQL Server OLAP Services market. The company has to convince its VAR and OEM channel, many of whom will compete with Hyperion, that it is an independent entity in order to make long term headway into Microsoft’s OLAP user base.

Appsource might have an easier time convincing the market place of its independence if it was spun-off as a separate entity. But it hotly denies any suggestion that it is considering this strategy. Hyperion has no plans to spin-off Appsource, says Bill Clarke, senior VP of marketing at Hyperion Solutions. But all the signs point to the sense of such a strategy.

This article is part of ComputerWire’s M&A Impact information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.

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