Business Objects Case Study Dave Kellogg Plug and Play Tech Center Collaboration Track (PACT) Event Revision 1.2 10/10/08

Disclaimer Facts / data are from memory and approximate Facts presented are to illustrate the lessons learned The lessons learned represent my opinion Intended audience Group of international entrepreneurs and venture capitalists

Facts / data are from memory and approximate

Facts presented are to illustrate the lessons learned

The lessons learned represent my opinion

Intended audience

Group of international entrepreneurs and venture capitalists

Business Objects Basics VC-backed, French startup Investors included: Discovery Ventures, Atlas Ventures, Innovacom Founded by two 27-year-olds from Oracle France in 1990 3 rd -party inventor submitted concept to Oracle France Idea was shot down on the corporate ladder They decided to found company to commercialize the idea Category: business intelligence software Query and reporting, later added analysis, dashboarding, planning Sold to SAP for $6.8B in October, 2007 Me Ran marketing in various forms from 1995 to 2004 ($30M to $850M) Based in both Paris and San Jose Currently CEO of Mark Logic, leading provider of XML servers Specialized DBMS for managing XML Documents, unstructured, and semi-structured data Filling a void between relational databases and search engines

VC-backed, French startup

Investors included: Discovery Ventures, Atlas Ventures, Innovacom

Founded by two 27-year-olds from Oracle France in 1990

3 rd -party inventor submitted concept to Oracle France

Idea was shot down on the corporate ladder

They decided to found company to commercialize the idea

Category: business intelligence software

Query and reporting, later added analysis, dashboarding, planning

Sold to SAP for $6.8B in October, 2007

Me

Ran marketing in various forms from 1995 to 2004 ($30M to $850M)

Based in both Paris and San Jose

Currently CEO of Mark Logic, leading provider of XML servers

Specialized DBMS for managing XML

Documents, unstructured, and semi-structured data

Filling a void between relational databases and search engines

Co-Founders Bernard Liautaud, CEO Denis Payre, COO Partners Shared office, joint photos and interviews, et cetera Worked successfully, in a stormy way, for 6 years Pro: healthy tension improves ideas Con: too much conflict can paralyze Lessons learned There is usually a greater and a lesser equal Think: Simon and Garfunkel The more this is understood by both, the better CEO job changes much less than COO job as a company grows

Bernard Liautaud, CEO

Denis Payre, COO

Partners

Shared office, joint photos and interviews, et cetera

Worked successfully, in a stormy way, for 6 years

Pro: healthy tension improves ideas

Con: too much conflict can paralyze

Lessons learned

There is usually a greater and a lesser equal

Think: Simon and Garfunkel

The more this is understood by both, the better

CEO job changes much less than COO job as a company grows

Frugality / Profitability About half the company was sold for ~$5M Why so low a valuation? Inexperienced founders (27 year old founders less hip then than today) Paris location (outside the mainstream) IP licensed with royalties (some IP risk; later renegotiated) Overall perceived low odds of success 100:1 returns for original VCs In cases, the best investment they ever made The good news was this drove a culture of frugality from day one Build your own desk Profitability and cash generation a must item In software: profitability is a decision

About half the company was sold for ~$5M

Why so low a valuation?

Inexperienced founders (27 year old founders less hip then than today)

Paris location (outside the mainstream)

IP licensed with royalties (some IP risk; later renegotiated)

Overall perceived low odds of success

100:1 returns for original VCs

In cases, the best investment they ever made

The good news was this drove a culture of frugality from day one

Build your own desk

Profitability and cash generation a must item

In software: profitability is a decision

Targeting the US Market Software is not like baseball Do not attempt to work your way up thru the minor leagues Do not say “let’s take France first and then expand” No one outside France will care that you own France Business Objects understood this from inception Focused on USA from early on Eventually moved headquarters to the USA after repeated troubles Lessons learned To be a real player, you must be a leader in the leading market Consider relocating all / part of your non-US-based company I never appreciated Silicon Valley so much as when I moved to Paris

Software is not like baseball

Do not attempt to work your way up thru the minor leagues

Do not say “let’s take France first and then expand”

No one outside France will care that you own France

Business Objects understood this from inception

Focused on USA from early on

Eventually moved headquarters to the USA after repeated troubles

Lessons learned

To be a real player, you must be a leader in the leading market

Consider relocating all / part of your non-US-based company

I never appreciated Silicon Valley so much as when I moved to Paris

Empowerment / Decentralization The CEO was never afraid to hire those senior to himself in terms of experience Most people say they aren’t, but behave otherwise Deep experience at board, field, and corporate level French headquarters drove decision to use country model No “worldwide VP of sales” Empowered general managers running P&Ls in countries Benefits / lessons learned Empowerment: run your own (distribution) business Experimentation and benchmarking: comparability Frugality / profitability: N people have P&Ls, not 1

The CEO was never afraid to hire those senior to himself in terms of experience

Most people say they aren’t, but behave otherwise

Deep experience at board, field, and corporate level

French headquarters drove decision to use country model

No “worldwide VP of sales”

Empowered general managers running P&Ls in countries

Benefits / lessons learned

Empowerment: run your own (distribution) business

Experimentation and benchmarking: comparability

Frugality / profitability: N people have P&Ls, not 1

Near-Death Experiences Two software development projects nearly killed the company BusinessObjects 4.0 (1996) Tosca / Cadenza (1999 – 2002) One was launched into the market (Business Objects 4.0) “ I thought my motherboard was broken” – anonymous customer Result: grow deceleration, stock price drop 90% One never made it out (Tosca / Cadenza) Result: forced hand to buy Crystal Decisions for $1B Overall the acquisition was a very good thing Benefits beyond product line completion (e.g., market share leadership) Lessons Success leads to arrogance and arrogance to failure: watch the degree of ambition in your development plans Where you develop matters: system vs. application software Use agile methods and avoid waterfall nightmares Choose code names carefully (Tosca is a tragedy) :-)

Two software development projects nearly killed the company

BusinessObjects 4.0 (1996)

Tosca / Cadenza (1999 – 2002)

One was launched into the market (Business Objects 4.0)

“ I thought my motherboard was broken” – anonymous customer

Result: grow deceleration, stock price drop 90%

One never made it out (Tosca / Cadenza)

Result: forced hand to buy Crystal Decisions for $1B

Overall the acquisition was a very good thing

Benefits beyond product line completion (e.g., market share leadership)

Lessons

Success leads to arrogance and arrogance to failure: watch the degree of ambition in your development plans

Where you develop matters: system vs. application software

Use agile methods and avoid waterfall nightmares

Choose code names carefully (Tosca is a tragedy) :-)

Product Excellence It is possible to carve niches off major players with focus BusinessObjects, WebIntelligence, Crystal Reports Best-of-breed in category Oracle had every advantage Discoverer and other BI products Oracle’s products were not best-in-class Nor did they interoperate well outside the Oracle world Lessons Focus enables competitive advantage Customer intimacy / product excellence matters: not everything is a commodity Structural advantage: use not-being-Oracle as an advantage against Oracle

It is possible to carve niches off major players with focus

BusinessObjects, WebIntelligence, Crystal Reports

Best-of-breed in category

Oracle had every advantage

Discoverer and other BI products

Oracle’s products were not best-in-class

Nor did they interoperate well outside the Oracle world

Lessons

Focus enables competitive advantage

Customer intimacy / product excellence matters: not everything is a commodity

Structural advantage: use not-being-Oracle as an advantage against Oracle