In a departure from its organic growth strategy, SAP AG yesterday announced plans to acquire business intelligence software provider Business Objects SA for $6.78 billion in cash.

The deal, described as a "friendly takeover" by both SAP and Business Objects, is expected to become final in the first quarter of 2008, pending an official tender offer and approvals by various regulatory agencies, including the U.S. Securities and Exchange Commission.

SAP CEO Henning Kagermann, at a press conference today to announce the deal, said Business Objects would operate as a stand-alone entity within SAP. That structure, he said, will enable Business Objects to sell its BI software to SAP and non-SAP customers.

"We will not force Business Objects to SAP technology," Kagermann said. "They should be agnostic and run on nearly every technology environment, as they are doing today."

The planned acquisition represents a shift from the company's adamantly held position that, unlike its principal competitors, it did not need to engage in major acquisitions in order to meet its growth objectives. SAP, in recent quarters, has contented itself with small, tuck-in acquisitions of strategic technology providers, such as corporate performance management software vendor OutlookSoft, acquired in May.

Rivals Oracle and Infor Global Solutions, meanwhile, have pursued aggressive growth-through-acquisition strategies. Oracle has bought more than 30 companies in less than three years, among them PeopleSoft and, in April, BI vendor Hyperion for $3.3 billion.

Infor, meanwhile, has acquired 31 companies — including SSA Global, over the past four years.

Kagermann, speaking at the press conference, said SAP decided to break from its organic growth strategy in order to meet its overall growth objectives. SAP has said its goal is to double its customer base to 100,000 between 2005 and 2010. To do that, Kagermann said, SAP must exploit the fast-growing market for what he called business user solutions — software such as analytics and other BI tools that are used by a wide variety of business users but have been thought of as separate from transactional systems such as ERP, which is SAP's strength.

According to a recent report from Forrester Research, BI is the number one area for new license growth in the packaged application market over the next year. Forty-one percent of surveyed companies plan to purchase or upgrade BI software, and 13% said they plan to purchase BI for the first time.

While SAP is the market leader in enterprise applications for large and mid-market companies, "with the business user it is different," Kagermann said. "Here we have some innovations, but we have to accept that, in that market, there are other leaders that have started from the beginning to focus on this segment. We felt doing an acquisition of the market leader is an important strategic move."