June 5, 2013, Posted by Phil Wohl

SAP is trying to make us look bad. Less than week after publishing a blog post where we predicted that hybris would be the next eCommerce platform vendor to brave the IPO waters (Spotlight on eCommerce Platform Vendors), the Walldorf giant said “not so fast,” signing an agreement to acquire hybris in a deal that has the eCommerce world buzzing.  The deal value wasn’t disclosed, but you can be sure the acquisition didn’t come cheap when you factor in:

• hybris’ $100MM+ in revenue and 50{436e1fe4221e847ca3bb704dca1a9cf108fa1768e8242e5671c4240f864b020e} growth rate
• the competitive threat of the IPO path (and very likely, other suitors)
• SAP’s history of paying up for high quality, high growth companies (they paid 12X revenue for SuccessFactors in 2011)
• the overall frothiness of the customer experience M&A market

For those of us who follow this sector closely, it was not surprising to see SAP’s name as the acquiror. By relying solely on internal development on their Web Channel Experience Management product (which will now be wound down), SAP was falling further and further behind archrivals Oracle and IBM, both of whom have effectively leveraged M&A to build out their eCommerce capabilities.

In the May 2013 eCommerce Magic Quadrant, Gartner lumped SAP into the “Challenger” category, along with Demandware, Digital River, EBay and Intershop. Challenger no more. The hybris acquisition moves SAP immediately into the “Leaders” category, alongside Oracle and IBM.

The Big 3 are now firmly entrenched as the leaders in the eCommerce platform space, and it will be difficult for others to enter this exclusive club. Salesforce, Adobe and NetSuite are the most likely aspirants, but they would have to get there through acquisition, and there aren’t many sizeable M&A options out there. Demandware, a public company which did $80MM in 2012 revenue, is really the only potential target that would fit the bill in terms of size and growth.

Post SAP-hybris, the market will likely enter a new phase of consolidation. While phase 1 was about leading software vendors acquiring core platform capability (see Oracle/ATG, eBay/Magento, eBay/GSI, IBM/Sterling Commerce and now SAP-hybris), phase 2 will likely be about adding intelligence to the platform in order to personalize the shopping experience, across all channels, devices and locations.  Stay tuned– now is when the excitement really begins…

Phil Wohl is a Partner at Catapult Advisors, an investment bank providing M&A and capital raising advice to leading software and internet companies. https://www.catapultadvisors.com