BI Market: Greater Need, Fewer Choices

One by one, the pure-play BI software developers are picking off rivals, as well as companies whose technology complements their own. Business Objects arguably launched the trend in August 2002 when it bought Acta Technology for its integration products. But think back to this summer: In July alone, Business Objects acquired Crystal Decisions, Hyperion Solutions bought Brio Software, and Actuate acquired Nimble Technology.

All that activity-plus regular reports of IBM, Oracle, SAP, and others building BI features into their own products-has stymied some IT buyers and validated some consulting firms' concerns.

"BI is now a serious business and demands serious players," says Don Montgomery, director of Unisys' business-intelligence division in Malvern, Pa.

The vendors left standing after the M&A dust settles will be those that are developing or buying BI software for different classes of corporate users and adding new features without significantly raising prices, Montgomery predicts. Some of the companies likely to thrive in the new world of BI for the masses are database giants such as Oracle and operating-system kingpins such as Microsoft, which are embedding more BI functionality into future versions of their flagship products.

Microsoft has made public its interest in enhancing SQL Server with BI capabilities. Earlier this year, the company said it would add reporting services to the next generation of SQL Server, code-named Yukon, a move aimed at BI specialists such as Cognos and ProClarity Corp. Yet those companies are soldiering on as independents.

Other big players like SAP and Siebel Systems have worked hard in recent months to add more BI features to their enterprise software. Observers say it's only a matter of time before BI is a check-list component of many enterprise-software offerings, not a specialized solution IT managers must acquire separately.

Given the rapidly changing landscape, is it any wonder that executives trying to implement BI plans are stuck between a rock and a hard place? They can either delay implementing a BI strategy and risk losing ground in their market or buy now and risk watching that investment get gobbled up in the next buyout.

Market maturation

"Look at the large vendors with broader portfolios," counsels Dan Vesset, research manager for analytics and data warehousing at International Data Corp., Framingham, Mass. "They're more stable and you get more components."

BI encompasses many different technologies, such as data mining, data warehousing, data integration, and reporting, Vesset says. The market for products with this wide range of capabilities will probably remain fragmented for some time to come. But CIOs who consider their current and future needs should be well-prepared to withstand the buffeting winds of consolidation.

Think about who in your organization needs BI products-and why they need them. "If you're providing tools for business analysts, you may want some ad hoc reporting capabilities," Vesset says. "But if you're trying to give them hard-core statisticians' tools to do their jobs better, consider a more sophisticated data-mining package."

Analysts advise would-be buyers to consider the trend toward fusion among different types of BI functionality. For example, Actuate's purchase of Nimble and Business Objects' buy of Acta landed both companies data-integration technology that takes one more best-of-breed purchase off their clients' plates. Given this trend, it's likely that cherry-picking your way to a BI solution-getting your reporting tool from one vendor and your metadata-management system from another-could come back to bite you later.

And it's important to specifically examine the emerging confluence between BI tools and portal software. Don't develop your portal and BI strategies in separate silos; in the coming quarters, more BI vendors are expected to make their products accessible via portals from IBM, SAP, and others-and not just by way of a BI-specific view on the desktop.

Ultimately, experts say, the wave of consolidation need not drown IT consumers. They just need to properly research the financial wherewithal and technological capabilities of the vendors doing the acquiring.

Amy Rogers Nazarov is a freelance journalist based in Washington, D.C.

This article originally appeared in Optimize magazine, October 2003, Issue 24.