SAP plans to acquire Business Objects in a cash deal valued at slightly more than $6.8bn (£3.3bn), SAP announced on Sunday.
The acquisition, which is expected to close in the first quarter of 2008, will be SAP's largest acquisition. SAP has tended to favour developing its own technology, rather than acquiring it.
The acquisition of Business Objects, a leading supplier of business intelligence software, is designed to dovetail into SAP's previously announced strategic plans to double its addressable market by 2010, Henning Kagermann, SAP's chief executive said.
Kagermann said that SAP had noted the growth in the business intelligence market nearly a year ago.
SAP's customers have been calling on the enterprise applications giant to add an end-to-end solution for structured and unstructured business analytics and embed those tools into SAP's business suite, Kagermann added.
"This acquisition accelerates our growth potential," Kagermann said.
Business Objects, based in California and Paris, will operate as a standalone business and be part of the SAP Group.
Roughly 40 percent of Business Objects' customers use SAP, said John Schwarz, Business Objects' chief executive.
The companies said there is very little overlap and neither company expects significant restructuring as a result.
The acquisition may help SAP compete against its rival Oracle.
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Last March, Oracle acquired business intelligence tool developer Hyperion Solutions in a $3.3bn (£1.6bn) deal.
At the time of the Hyperion acquisition, Oracle said "thousands of SAP customers" relied on Hyperion for financial analysis and reporting systems.
Oracle said then that SAP's customers would need to tie into Hyperion software to view and analyse their underlying SAP enterprise resource planning (ERP) data.
