SAP Wins Race to Buy Highdeal

NICE, France -- Management World 2009 -- Having backed away from a potential acquisition of Telcordia Technologies Inc. a few years back, SAP AG (NYSE/Frankfurt: SAP) has, at last, opened its purse and acquired some telecom back-office software expertise, in a deal to buy rating and charging specialist Highdeal Inc. (See SAP Snaps Up Highdeal and SAP's Rising in OSS.)

And according to industry sources, SAP wasn't the only large company courting Highdeal, with IBM Corp. (NYSE: IBM), Oracle Corp. (Nasdaq: ORCL), and an unidentified large bank cited as interested buyers. One seasoned industry executive even identified Huawei Technologies Co. Ltd. as a company that has been keen to buy into the real-time charging sector, saying it may have been in the mix at some point.

IBM, Oracle, and Huawei declined to comment on the matter, as did Highdeal CEO Eric Pillevesse, who has one of the broadest smiles on show at this year's event.

SAP, though, won out. Financial terms were not disclosed, but a straw poll of analysts and executives with a knowledge of Highdeal's business put the probable purchase price at between €20 million and €30 million ($26.6 million and $39.8 million), and certainly no more than €50 million ($66.4 million).

So what's the deal with Highdeal (so to speak)?

Well, it's been focused on developing systems that enable companies, and not exclusively telecom operators, to manage pricing and charging mechanisms for real-time purchases -- that is, the purchase of goods or services that are not part of a subscription. An example would be a chargeable download to a mobile device.

Highdeal's platform has more than 170 customers in industry sectors including utilities, media, and financial, as well as telecom. The company's annual revenues are estimated to be between €10 million and €12 million ($13.3 million and $15.9 million). (See Cogeco Uses Highdeal Software and Highdeal Wins Hub.)

Highdeal has about 90 staff, and it has raised €25 million ($33.2 million) from investors during its lifetime.

The acquisition is expected to close in June, after which Highdeal will become part of SAP's service industries business line.

Mark Johnson, global marketing director for communications industry solutions at SAP (and a strong candidate to win this year's unofficial "longest job title" award at Management World), says Highdeal's technology hits a sweet spot in multiple business sectors that SAP calls "consume-to-cash". That means the space between consumption of a product or service and the point at which the resulting money is collected. "That's the [part of the purchase process] that's changing the most, and operators need more flexibility and the chance to reduce the cost of that process," which is rising.

Johnson says SAP can pitch Highdeal's technology to its 550 telco customers that currently generate about $500 million in annual revenues for the German software giant. Most of that money comes from enterprise resource planning (ERP) systems.

"Our carrier customers are telling us that their billing systems just aren't flexible enough and too costly to run for next-generation services," claims Johnson.

He says SAP decided it needed real-time rating and charging capabilities to add to its existing software portfolio, and that it "looked at others" -- though he wouldn't identify whose those others might be -- before deciding that Highdeal was the right strategic, technological, and cultural fit. "We both believe in packaged software delivered via systems integrators," says Johnson.

Even in such a tightly knit sector such as telecom software, industry contacts struggled to suggest which other companies SAP might have considered, though Openet Telecom Ltd. , Orga Systems , and Volubill were identified as potential alternatives.

SAP also plans to pitch Highdeal's technology to the multiple industry verticals in which it's active.

Johnson declined to discuss whether this was the first of a number of acquisitions, or whether SAP had other gaps in its software portfolio that it needed to fill.

Highdeal CEO Pillevesse, meanwhile, is believed to be planning to fill a swimming pool with champagne and take a dip once the deal closes in June.

— Ray Le Maistre, International News Editor, Light Reading