Business Intelligence Vendors Wrestle with Mergers, the Cloud and Open Source
The business intelligence market has changed dramatically in recent years, with mergers, the cloud, open source alternatives and new startups pressuring top vendors like IBM and Oracle.
The business intelligence (BI) market has been expanding at a rapid clip — 20 percent a year for much of the last decade. But the rate of growth slowed last year and may remain subdued for some time.
According to Gartner, worldwide BI software revenue surpassed $9.3 billion in 2009, a 4.2 percent increase from 2008. Gartner predicts an average increase of 6.3 percent per year until 2013.
"Even though growth was nowhere near the levels of 2008, and by no means immune to the recession, BI showed that it is not as cyclical as many other software areas, recording healthy growth in one of the toughest years recorded in software history," said Gartner analyst Dan Sommer.
"Organizations largely continued their BI projects, hoping that resulting transparency and insight would enable cost cuts and improved productivity and agility," he said. "However, there is no doubt pressure has intensified on deal sizes and price points on new sales throughout the year."
Mergers and Customer Satisfaction
Along with that, BI has fallen off its perch as the top CIO priority in Gartner surveys, where it resided for the last four years, although it remains in the top five. Part of the reason is the internal issues of some of the top five vendors who account for about 75 percent of the market (SAP, Oracle, SAS Institute, IBM and Microsoft). Some have been engaged in acquisitions or post-merger reorganization and integration — Oracle (NASDAQ: ORCL) grabbed Siebel and Hyperion, SAP (NYSE: SAP) snagged Business Objects, and IBM (NYSE: IBM) acquired Cognos, SPSS and Initiate Systems.
"With the purchase of statistical analysis software company SPSS, IBM is now in a position to leverage advanced analytics as part of their BI stack, in order to compete against industry stalwart SAS," said Gareth Doherty, an analyst at Info-Tech Research Group. "Advanced analysis is the natural next step for organizations that have been effectively leveraging BI up until now."
But Doherty said these deals have come at a price. Many existing customers of these acquired companies experience an uncomfortable transition to the new customer support models with the mega-vendors, he said. Gartner surveys back this up with reports of lowered customer satisfaction levels.
Open Source, Pure-play and SaaS Business Intelligence
Coupled with greater economic hurdles to overcome, Garner characterizes the market as a David vs. Goliath kind of struggle. While market leaders such as SAP, Oracle and IBM provide their own integrated stacks with BI being just one element, there has been a rise in demand for pure-play BI specialists.
"While IT is trying to rationalize around one or a few vendors, the market for self-service BI is wide open," said Sommer. "All vendors, small and large, on-premises, open source or in the cloud, are flocking to cater for this space, trying to co-exist with the enterprise standard."
John Callan, director of product marketing for Spotfire, TIBCO Software Inc., sees a similar surge of interest in the self-service side.
"Self-service BI means that individual business professionals take their data analytic needs into their own hands, producing faster and more relevant results than would have been the case where yet another round trip to IT is required to produce a new report from the traditional BI system," he said. "This trend towards self-service BI has been facilitated by technologies such as in-memory and cloud-based publishing, making speed, flexibility and ease-of-use the key tenets of what next-generation BI is all about, without sacrificing the need to access enterprise data sources and comply with strict security requirements laid down by IT."
The result of this shift is not that the little guys are overrunning the giants. Goliath still rules, but David is obtaining plenty of healthy scraps as organizations seek to buy more targeted BI for departmental usage.
"Vendors offering dashboards and data discovery tools with in-memory analytics and ease-of-use visualization, together with the open-source crowd, continue to be the fastest growers in the BI market," said Sommers (for more on open source business intelligence, see Open Source R Language Could Revolutionize Business Intelligence and Open Source Business Intelligence Software Ranked by Analysts).
Doherty concurs. He lays out a key trend in the areas of on-demand BI. He noted that on-demand offerings with utility based licensing have piqued the interest of a growing number of users as a means of cutting costs. Hosted solutions are also appealing to mid-market organizations that don't have the technical capabilities or the necessary infrastructure to host an on-premise solution but are interested in BI. This growing interest in the BI market for lower-cost solutions has led to an increase in software-as-a-service (SaaS) BI offerings from the mega-vendors.
Up the line, he foresees a greater emphasis on what he calls "BI for the masses." Most major vendors are preaching the virtues of wider BI deployments at the department level. This is primarily a marketing move aimed at gaining a greater footprint (and larger licensing volumes) within organizations.
"Vendors have developed more user-friendly interfaces and better office integration to aid in the push for departmental BI," said Doherty. "The promise of self-service BI is to lower dependence on IT and reduce IT-related support and maintenance costs by creating a self-sufficient user base."