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The Way Business Is Moving

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Issue Date: March 2004

More intelligence demands a shrinking market

March 2004
Andrew Seldon

The business intelligence market, a once thriving corner of the IT landscape, is in decline. It is not that there is no need for BI tools, it is just that the market is undergoing a consolidation phase that will see most of the smaller companies vanishing as a few giants dominate the market.

The 21st century was ushered in in style. The great Y2K debacle with claims of national states of emergency and global economic collapse proved to be more of a PR gag than a real threat, and the world markets were looking positively sickly with the dotbomb and subsequent recession putting a damper on the market. And then there were the criminal activities of Enron and its friends.
Corporations operating in this environment were faced with many tough decisions, some of them relating to their IT systems. Their first IT related decision was to cut as much spending as possible until they managed to figure out what they were getting for their money. The business intelligence (BI) market was one of the areas they spent time examining and the result was a new approach to BI solutions.
No longer are companies willing to buy bits and pieces of a BI solution from different tool vendors, but the tendency to look for a full solution from one supplier has emerged - as it has in so many other segments of the IT market. BI vendors are now on a mission to pad their offerings to fill in the missing gaps and provide that full solution.
The concept of corporate performance management (or enterprise performance management, or even business performance management, depending on who you are talking to) is the most obvious example of this trend. CPM requires an intelligence solution that spans the organisation, from boardroom down to individual staff members, and grafting in disparate tools is not the optimal, or even a possible solution.
Piet Loubser, Business Objects South Africa's business manager, notes that consolidation is, above all other factors, customer driven. "Corporations out there want BI partners able to provide the full BI stack, from data identification, extraction, transformation and loading (ETL), through to user dashboards and scorecards."
These events have all contributed to a new era of consolidation in the BI industry, an era in which we can expect to see many known brands fading away into oblivion as market forces take their toll and customers opt for the larger players able to offer stability and a broad range of solutions. Furthermore, the entrance of Microsoft into the BI arena - an event not popular with previous partners - is also causing nervousness and a further push to consolidate, either on the beast's back or as a stronger competitor.
In addition, just to cheer BI vendors up a little more, ERP vendors are also getting in on the BI act. Their moves make sense. ERP databases contain the critical data that makes corporations run, and that is a good starting point for analytical or mining applications. To date, however, apart from SAP and Oracle, no ERP provider looks very threatening.
Ampie Swanepoel, responsible for the BI and CPM solution domains within Dimension Data Application Solutions, says: "It is likely that more consolidation will take place in the BI technology space. It is anticipated that the large ERP vendors (Oracle, SAP) will continue to enhance their business intelligence capabilities and might start to dominate the BI space within their customer base."
He adds that ERP vendors see a huge potential for growth for themselves in the BI and CPM domains. "The market potential for ERP vendors selling integrated BI and CPM modules to their existing base is huge and this will help them gain significant market share. Furthermore, the ERP vendors have the domain knowledge, which span areas such as finance, HR, sales and marketing to deliver a comprehensive CPM suite. They also have the R&D; facilities to develop a comprehensive CPM application in a short time frame.
"The best of breed BI vendors (such as Business Objects, Cognos, SAS, Hyperion) will still have a place, as it is not anticipated that the ERP vendors will not be able to cater for the needs of all organisations due to the fact that BI is their core business, and they will continue to create more innovation to maintain their advantage."
Objectively BI
At a recent BI round table, Meta Group's BI analyst, Johan Jacobs said that few BI vendors satisfy all the intelligence requirements businesses need from a full BI solution. This shortcoming is one of the reasons for the consolidation trend.
Jacobs adds that the merger of Business Objects and Crystal Decisions is, at present the leader in the consolidation process as other BO vendors will struggle to match the combined strengths of the two companies - assuming they get it right and manage to combine their product sets, taking advantage of the strengths of both companies.
e.com Institute's MD, Cassim Parak, is confident that the merger of the product lines will be a success. Already he says the two companies are offering a wall-to-wall BI solution, but not yet under the same banner.
Loubser adds that Crystal is the fifth acquisition Business Objects has undertaken. It therefore has the experience to integrate and get both parties cooperating in the best interest of the business quickly.
Although the BI mood in South Africa has been depressed, contrary to improving BI economies in Europe, Parak has noticed an increase in interest in BI from corporate SA over the past few months. The first change, however, has to come in the data integration and quality segment, since this is an area of neglect in many local companies.
With 19 real players in the market right now, Meta expects to see only five or six large players remaining in 2006. While speculation about which companies will remain standing is rife, most expect the following companies, perhaps with a few additions in the form of acquisitions to be there: Cognos, Business Objects, SAS and SAP. Of course there are many other BI firms, such as Hyperion that need to be included in the calculation.
Keith Jones, MD, Harvey Jones Systems, adds that the consolidation in the market presents clients with a difficult dilemma: who to choose? "The main players such as Microsoft, IBM, Oracle and SAP will no doubt survive the shakeout, but the future is less certain for other vendors. Vendors will have two choices: try to dominate a sector of the BI market globally, or align themselves with one of the main players and dominate a niche in that market.
"There are only three or four BI vendors with enough muscle to attempt the first option, and even their future is not guaranteed as they propose to take on all comers, in all market sectors, a daunting enough task in the old economy, and a very difficult option in the new market."
All-in-one solutions
One of the companies that expects to be standing after the dust has settled is Oracle. The database company's BI guru, Alistair Jacobs, says the company is trying to simplify IT for its clients by incorporating BI and related offerings into its database. "This allows customers to process data where it is stored instead of having to design a new database and go through the problems associated with data transfer and quality maintenance."
Not only will this make things simpler, according to Jacobs, but it will also reduce the cost substantially. He adds that the cost of ownership decreases even more when open source is thrown into the equation - something Oracle should know about as its products run on Linux as well as other proprietary operating systems.
IBM is focusing on the same angle. IBM SA's Business Intelligence consultant, Mike Middleton, says the company's DB2 Universal Database "has unique strengths in supporting business intelligence applications with built-in functionality for data warehousing, online analytical processing (OLAP), scoring and spatial analysis, as well as support for the full range of BI applications.
"More companies are asking for realtime data to improve their decision-making. Such data can enable a retailer, for instance, to detect fraudulent credit card use while the transaction is in progress. These companies are turning to operational data stores (ODS), which enable them to analyse data that may have arrived only moments ago. DB2 Universal Database, with its parallel query processing, high availability and mixed workload support ensures this operation takes place successfully.
"By incorporating BI capabilities within the database itself, IBM promotes high value and exceptional ROI for customers."
Enter the beast
The entrance of Microsoft into the BI market has made existing vendors sit up and take notice. The company is not known for its policies of peaceful coexistence, forcing most BI vendors to at least double check their offerings to make sure they deliver value to clients.
Jones says: "BI vendors are feeling pressure from all sides - Microsoft is entering the market from both the desktop (Office) and platform side (SQL 2000 analysis services), and since entering the market just over three years ago it has become a dominant player."
One local BI specialist, focusing on the MS platform is 3fifteen. While using Microsoft as a platform, Rian Durandt, area specialist, BI for 3fifteen says the aim of BI is the intelligent use of data, using the context and tacit knowledge within a company to deliver competitive advantage and improved profits - tools are only there to assist in finding and analysing the information more easily.
3fifteen takes customers through a process of discovery to ascertain what data they have and what can be gleaned from it before resorting to technology to make the concepts a visible reality. Figures 1 to 3 show an example of a company as small as a pharmacy breaking down its data with ProClarity to ascertain which time periods are best for selling certain products and announcing special offers.
Using ProClarity, 3fifteen can identify what products a pharmacy should be selling, when it should sell it and which group of customers should be targeted
Using ProClarity, 3fifteen can identify what products a pharmacy should be selling, when it should sell it and which group of customers should be targeted
While Microsoft's entrance is going to have an impact, it is still a relative newcomer and needs to fill out its offering. There is supposedly a financial acquisition in the offing to make it compete on a more even footing with the SAPs and Hyperions of the world - but nothing concrete as yet.
Oracle's Jacobs says Microsoft has the same idea as Oracle of incorporating BI functionality right in the database. However, he notes that Microsoft's solutions run on Microsoft with only Microsoft tools or Microsoft-based tools such as ProClarity, whereas Oracle runs on whatever platform customers choose.
The world is getting smaller and so is the BI industry. Companies shopping for BI solutions need to take the changes into account and make sure their choices work for the long term. In these days of limited IT spend, choosing a solution that does not exist in a couple of years is not likely to gain you any bonuses. Careful selection is required.
Selecting the right solution and vendor is not an easy process, especially when making long-term choices. Jones notes: "Clients may be gambling the future of their business if they make the wrong choice. Making the right choice early on should lead to a significant advantage over competitors. The only thing we can be sure of is that sitting on the fence is the only option that will guarantee no benefits!"
Choose a BI vendor that is here to stay
Bill Hoggarth, managing director of SAS Institute lists five areas to investigate when choosing a BI partner:
1. The vendor must offer a comprehensive BI platform to lay the foundation for the enterprise's entire BI initiative.
2. The vendor must also offer advanced analytics. "While a statistical rear view mirror approach is important, real value lies in the ability to leverage that analysis into accurate forecasting, or prediction," says Hoggarth.
3. It is vital to ensure that the BI partner chosen is strong and stable.
4. In South Africa it is also important to ensure the vendor's products will continue to be supported locally.
5. Finally, vendor corporate strength must be matched with global reach, and customer commitment.
When it comes to choosing BI software, Hoggarth says there are four key issues to consider: usability, manageability, scalability and interoperability.
1. The usability of the software should reflect a total focus on the user.
2. Interoperability is also key as businesses need the ability to extend the information, and operate co-operatively.
3. The ability to manage the BI solution is also critical. The initial purchase cost often turns out to be a tiny proportion of the cost of maintaining a solution if its management is not simple and effective.
4. Finally, scalability is vital to ensure that as data and or users increase, the software keeps pace.


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