Business Intelligence Vendor Trends for 2005

BI Briefs

Information Management Online, February 24, 2005

Rick Sherman

Last month we discussed general business intelligence trends that affect customers. This month we're talking about vendors.

1. Vendors are trying to eat one another's lunch!

Historically, business intelligence (BI) and data warehouse vendors have partnered with one another when customers needed tools from different vendors to weave a complete solution.

Now, several factors in IT purchasing are pressuring software companies to compete against their partners in certain situations, despite the fact that they remain partners in other situations. Vendors find themselves having to change hats depending on whether they can capture more of the account by competing for a bigger slice of the budget pie.

There are two main budget influencers:

• First, customers continue to pressure vendors to lower product licensing and maintenance fees. This has put negative pressure on software companies' profit margins and revenue growth. In order to keep revenue growing they need to sell more products, however, existing product growth may have slowed. This has encouraged vendors to expand their product lines (see below).
• Second, IT spending remains constrained in 2005. In the Internet-induced boom times, overall IT spending increased so much that all vendors benefited and could be partners sharing a piece of the IT budgets. Nowadays software companies often view the IT budget as a zero sum game - if a company purchases another software vendor's products there may be no money left to purchase your product. In order to grow, software vendors are expanding the depth and breadth of their product offerings.

2. Titans clash - ERP, enterprise application and BI vendors are increasingly battling each other for a greater share of their customer's budget. In the "old days" companies built reports two ways: simply accessing data from ERP systems or extracting data from the ERP system into a data warehouse and then building reports from that data. In either scenario, they used BI tools to write the reports.

ERP, enterprise application and BI vendors were partners. Their mutual customers created custom-built solutions with their joint product offerings. But now, each group of vendors has extended their offerings to better solve their customers reporting and analytic needs - and they're competing with each other.

These vendors are selling prebuilt packages of reports, real-time data access to operational data, corporate performance management (CPM) solutions and industry-specific solutions. These solutions often include data models, a data warehouse (or data mart), prebuilt ETL to populate the data warehouse and prebuilt reports or dashboards to query it.

Each vendor's solution involves a data and technology stack that is different from the stacks offered by other vendors. These stacks are where the vendors hope to expand their share of their customer's budgets and continue their own growth. The stacks are also where the vendors hope lock in their customers and lock out their competition.

Because these stacks may offer different ETL and BI tools as well as different and incompatible data models, companies will end up with potential silos. They can prevent them by performing systems integration between each prebuilt data warehouse. These new silos are in addition to existing data warehouses, data marts and operation data stores along with any CPM solutions from other vendors. So much for a single version of the truth!

3. Microsoft is coming! Never underestimate Microsoft in any market it wants to penetrate. Microsoft is often a late follower in the marketplace, but it always becomes a force.

Microsoft is moving into databases, BI and even ETL in a big way. Put these functions on a PC, integrate them with Microsoft Office and stand back and watch them rule the world.

When Microsoft SQL Server 2005 is released it should change customers' perception of Microsoft in the marketplace. Naturally, its competitors will still try to marginalize their products. In databases, Microsoft SQL Server already has an estimated 21 percent of the installed base for data warehousing according to Forrester Research.¹ The release this year may spur even more growth.

Microsoft has completely rebuilt its ETL offering in SQL Server 2005 to give it greater functionality. They are clearly targeting more sophisticated integration than they could before. Appropriately, their ETL tool DTS (Data Transformation Services) has been rebranded SQL Server Integration Services.

Microsoft has expanded the BI functionality in its Reporting and Analysis Services. The new Reporting Services Report Builder, for example, enables end users to build reports themselves. SQL Server Analysis Services will provide proactive caching, which improves OLAP performance, and various data mining algorithms.

But most important: Microsoft leverages its installed base of customers by integrating with the Microsoft Office System. Let no one doubt that Microsoft Excel is the leading BI tool used today. SQL Server 2005 will leverage that opportunity for its expansion in the data warehousing and business intelligence market.

4. SAP keeps expanding its offerings. SAP is the leading enterprise resource planning (ERP) software vendor. AMR Research reports that they have 36 percent of the ERP market and 18 percent of the total business application software market.

SAP continues to grow its license revenue, expand and extend its customer base, and successfully leverage its scale. SAP has offered reporting and data warehousing capabilities for years with its SAP BW solution. It has continually expanded that functionality, and it now includes SAP BI, Analytic Applications by SAP and mySAP Business Suite. SAP says this expansion of its DW, BI and analytical capabilities offers significant value to its customers. But its competitors claim it's locking in customers. Without placing any value judgment on it, it is a reality that SAP customers are loyal and increasingly incorporating this functionality into their business solutions.

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