Now that Oracle (ORCL), SAP (SAP), and IBM have collectively
spent $15B to buy Hyperion
Solutions, Business
Objects and Cognos
there are a lot of industry pundits proclaiming, as Andreas Bitterer, VP of
research at Gartner Research, said "This is the end of business
intelligence as we know it." Along with these proclamations are the
pundits' market observations and conventional
wisdom.
Here's what I think.
The BI market is
growing
IDC
estimated the worldwide business intelligence (BI) software sales for last
year was $6.3 billion and that it will be growing at 12% annually. Although not
hyper-growth, this is a healthy, growing market. Market estimates do not
adequately take into account Microsoft Excel, the real BI front-end tool, nor
the Microsoft Access and SQL scripts used to create a significant portion of
the reporting and analysis conducted at companies of all sizes. These "data shadow
systems" are ripe to be replaced.
BI is not pervasive yet and there are significant business
drivers to introduce, improve or expand BI at almost every company. That bodes well for continued expansion.
Corporate IT prefers
more than "one neck to choke"
A lot of pundits are talking that the BI pure-plays had to
sell out to the tech titans because corporate IT wanted to buy all their
software from one company. I don't deny that
there are some companies that indeed want that, but if that was indeed the
predominant feeling why then did the titans buy the BI pure-plays? After all,
according to this reasoning, the titans should have had the top market share. But
they didn't – so that's
why they bought the pure-plays.
According to IDC, the three BI pure-plays that were just
acquired had 29.5% market share versus the 7.8% market share that the titans
had before they gobbled up the BI firms. Money talks and corporate IT was
buying the pure-plays four times as often as the titans. Also, Goldman Sachs
research found that 60% of CIOs preferred to buy their BI software from
independent BI vendors rather than from database or application vendors.
If customers had a good thing going with the former
pure-plays' products, they're
unlikely to migrate their existing BI applications to new BI products now that
the titans own them. Just like you see database applications that stay around
for a decade even when a company has adopted a new database standard, there
often is not any business justification to migrate that software.
But maybe the door is open for another BI product when corporations
start up brand-new BI projects. BI is not pervasive at most companies, with
most business people using Microsoft Excel as their reporting and analysis "BI"
tool. So there are still lots of opportunities for BI products and vendors to
make new inroads.
Smaller BI firms will be "Trampled Under Foot" …. NOT!
Market consolidation is a fact of life in the BI industry
just like it is in many industries. Software acquisitions have been going on
for years, although they accelerated in the last several years. Pundits seem to
feel that now that the titans have acquired some of the top BI pure-plays, the game
is over and the titans will dominate.
Really? Let's look at the
IDC number again. Combine the market share the titans (IBM, ORCL and SAP) and
their BI pure-play acquisitions (Hyperion, BOBJ and COGN) and you get 37.3%.
That is a healthy part of the market but that means that 62.7% is OTHER. The
market, not the pundits, is telling us by their purchases that there is at
least a little room for smaller firms.
The innovations are coming from the smaller firms. The
titans bought the BI pure-plays to get what they have and the BI pure-plays
have been on an acquisition binge of their own for years. All of these BI firms
at one point developed "best-of-breed" BI software, but somewhere
along the way they started acquiring smaller firms to create BI software suites.
They became aggregators rather than simply innovators. Nothing wrong with that,
it served them well to expand and many companies wanted those suites. (Of course,
two third of the market is not buying those suites.)
Conclusions
What's really new? The BI
market has come into its own and is experiencing healthy growth. Corporations
are purchasing BI software from a variety of software vendors, not just the
titans or the BI vendors that they acquired, and the
spreadsheet is the de facto BI tool for most business people. Smaller BI
firms may be acquired, but will be an ongoing source of innovation in the
industry. They may be the farm system (or minor leagues or lower division
depending on your favorite sport), but many are growing, profitable and
offering their customers terrific value.
Next we will talk about the future of the BI market in "Ramble
On."
(OK, who can spot the Led Zeppelin references in this post?
Do you think I'm impressing my teenage sons?)
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