What's Next for the BI Market?

The business intelligence (BI) market has been booming lately, with a flurry of recent mergers, acquisitions and product announcements. SAP scooped up Business Objects, Oracle purchased Hyperion Solutions, and IBM gobbled up Cognos. Microsoft is touting the launch of Office PerformancePoint Server 2007, as well as its acquisition of data-visualization technology from Dundas for SQL Server 2008.

All of this activity is being driven by the dramatic growth in the BI market. Research firm IDC estimates that the BI market generated a whopping $6 billion in 2006, and revenues should be dramatically larger in 2007 and 2008. According to Dave Menninger, VP of marketing at BI solution provider InforSense, the companies acquiring BI vendors are seeking to harness the fast-growing BI market to simultaneously boost company value and patch holes in their product mixes.

"These acquisitions suggest that BI is still a thriving market, and larger companies are partly driven by what Wall Street looks for," says Menninger. "The BI market is showing greater growth than these companies are, so one way to boost your overall growth is by acquiring companies in a growing market segment."

Despite all the recent acquisitions, the BI market is still very much a growth industry. Menninger estimates that BI has only been adopted by 15-20 percent of the potential customer base, which points to continuing growth in the segment for years to come, which should create plenty of opportunities for new and existing players.

Growth and Acquisitions
Those relatively low numbers for BI market penetration will likely translate into more mergers and acquisitions in the near term, with larger players now shifting their attention to smaller vendors that could make a positive addition to their product portfolios. Companies that don't have a BI solution to offer their customers are at a competitive disadvantage in this rapidly growing market segment, and those that do are quick to tout the benefits of their integrated solutions.

"The biggest changes that we are seeing is the consolidation of vendors in this space," says Francois Ajenstat, Microsoft's director of product management for SQL Server. "Microsoft has made a commitment to BI. Customers are choosing Microsoft over niche BI vendors because the costs are less for deployment and maintenance. Also, ease-of-use is increased because we're dealing with the tools workers use every day in Office."

IBM echoes Microsoft's viewpoint, arguing that most customers (particularly larger ones) look for a one-stop BI solution that can be integrated easily into an existing infrastructure. “Customers are demanding complete solutions, not piece parts, to enable real-time decision making," says Steve Mills, senior vice president and group executive, IBM Software Group. "IBM has been providing Business Intelligence solutions for decades. Our broad set of capabilities – from data warehousing to information integration and analytics – together with Cognos, position us well for the changing Business Intelligence and Performance Management industry. "

Resumes and Retail Sales
Large acquisitions and mergers underscore the intense competition for BI at the corporate level, and those developments are obviously having an impact at the employee and customer level as well, a reality not lost on BI software solution provider MicroStrategy. Soon after the news of IBM's acquisition of Cognos was made public, MicroStrategy COO Sanju Bansal issued a news release encouraging nervous BI executives to consider his company as a possible career move.

"The recent consolidations in the business intelligence industry provide an excellent opportunity for us to attract top talent to join our team," Bansal says. "We believe there are experienced BI professionals at Business Objects and Cognos who are concerned about their job security and the future of working for a large conglomerate. We plan to aggressively recruit these employees to help us expand our global footprint."

Aside from the ever-present risk of layoffs associated with mergers, BI vendor employees will be pleased to know that BI is on the lips of most corporate CIOs these days. An article by Diann Daniel at CIO magazine underscores how important BI has become for retailers, who have enormous amounts of transactional data to store, parse and analyze for executives to divine meaning from, much like reading modern-day tea leaves.  Being able to make business decisions based on sound data is the desire of every CEO, and BI can be a tool that makes that wish a reality.

"Since BI is now the #1 CIO priority according to Gartner \[research\], I believe that more users will want to benefit from the value of BI," Ajenstat says. "Proprietary and costly solutions are no longer required and won't enable pervasive BI to become a reality. We are ensuring that our tools are open, complete, scalable and cost-effective so organizations can increase their use of BI."

The Future of BI
While recent headlines have highlighted the activities of major players like Oracle, IBM and Microsoft in the BI space, Menninger believes that the future of the BI market will be driven by the dozens of small- to mid-sized vendors that are nimble and flexible enough to innovate and adapt to opportunities in the market.

InforSense is a privately-held BI vendor with offices in London and Cambridge, Massachusetts, and a balance sheet that falls into the sub-$100 million yearly revenue category. The company has seen some success in bringing BI solutions to the pharmaceutical and life science industries, but is now planning to pursue a much broader BI product strategy. InforSense doesn't try to compete with large BI players by offering a top-to-bottom BI solution, but aims to bring BI to a company's existing applications.

"Some BI vendors focus on bringing data to analysts by using a separate application, like a management reporting console or a dashboard. Users are being asked to leave one application—most likely the application most suited to their role and load up a dashboard to get BI information," explains Menninger. "You can't expect a customer service rep to learn an all-new application just to extract usable BI information. Our focus is on embedding analytics into those existing applications and processes to bring analysis to data, not to bring data to analysts."

Menninger concedes that large players may have bought their way into the BI space by purchasing other vendors, but argues that they can't provide the flexibility and innovation smaller companies like his can. "These big players are bringing their large, legacy infrastructures to these BI platforms," says Menninger. "Small players like us can design a system from the ground up without being forced to integrate." He says that he has experienced an acquisition firsthand: years ago, a company he worked for was acquired by Oracle, and it took nearly five years for the integration process to run its course. The experience left him with a perspective on acquisitions that could simultaneously be food for thought for larger players and a PowerPoint bullet for smaller vendors preparing their sales pitches.

"After an acquisition, it can take years for relevant technology to be properly integrated \[within a product portfolio\]," says Menninger. "Nearly all \[product\] innovation happens in smaller companies...Larger companies can spend years \[trying to realize value from an acquisition\], and spend more time on integration than innovation. That leaves a lot of room for \[smaller companies\] to innovate. The mega vendors simply can't move quickly enough to react to the opportunities that exist, and those that will arise."