The BI tool marketplace has long been an oligarchy of medium-sized vendors in the $200M-$600M annual revenue range. This reflects the reality that most large enterprises must invest in products from at least four or five BI vendors to fully cover their needs. Driven by the current focus on vendor management costs, IT organizations are trying to reduce the number of vendor relationships. The BI tool vendors, almost without exception, are responding by broadening their product suites. By 2006/07, we expect the BI market to consolidate around two to four large vendors with comprehensive product suites, leaving a series of smaller specialists that have niche offerings. This transition from the current best-of-breed market to an integrated suite market will be traumatic for many vendors, and we expect much consolidation and partnering during the next five years.

Two recently announced mega- mergers, plus one related deal, mark the beginning of this market consolidation Business Objects acquiring Crystal Decisions, Hyperion acquiring Brio, and in distant third place, Actuate acquiring Nimble Technologies. All of the top 10 BI vendors agree that an industry shakeout is coming (and is indeed underway), and they all believe that they will be among the final winners the vendors with the most successful and complete suites. Obviously, not all of them will be in that final group of approximately four vendors. The others will be bought out to fill in the suites of the eventual leaders, will have to find defendable niches in which to survive, or will face extinction.

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