Wall Street is viewing the business Intelligence market with renewed interest and respect, given its performance relative to other sectors in the software industry, which have been hit hard in the downturn. Organizations are investing in business intelligence at a much higher rate than for IT as a whole reports TDWI in the “What Works e-Brief” for Monday, November 18, 2002.

Once the darling of Wall Street, software firms have taken a beating during the past two years. The only bright spot among the dark clouds rolling across the software industry has been the performance of business analytics software.

"Business analytics has been an oasis in the software industry," says Edward Maguire, a financial analyst with Merrill Lynch. "Analytics is finally getting the respect it deserves." Across the software industry, revenues have slipped precipitously in the past 12 months: nine percent in ERP, 22 percent in integration, 33 percent in CRM, and 48 percent in supply chain management. In comparison, the business analytics market only suffered a 3 percent year- over-year decline in revenues, according to Frank Sparacino of First Analysis Securities.

Leading business analytics vendors, including Business Objects and Cognos, have shown year-over-year revenue growth of between 7 percent and 11 percent respectively, a Herculean achievement compared to the rest of the software market. (TDWI defines business analytics as a subset of business intelligence, which also encompasses data warehousing. Business analytics software enables business users to access, analyze, and act on information.)

Closer to home, data warehousing departments report that their 2003 budgets will generally grow at a faster rate than their firms' IT budgets, according to a survey of 172 attendees that TDWI conducted at its November 2002 conference in Orlando, Florida.

More than a third (36 percent) of data warehousing teams say their 2003 budgets will increase by 6 percent or higher, whereas only 21 percent said their IT budgets will grow that fast. On the flip side, 21 percent said their IT budgets will decline, while only 9 percent said their business intelligence budgets will decline.

There are several reasons for the relatively strong performance of the business analytics market. One driver is that business analytics software helps organizations drive additional value from their existing IT investments, according to Merrill Lynch's Maguire. Since most organizations overspent on software during the past several years, they are now trying to leverage those investments with improved analytics and better information architecture. In particular, analytics helps organizations assess and monitor business processes managed by new operational software from firms such as SAP or PeopleSoft. Second, despite the best efforts of BI vendors, most BI software is sold to IT at a departmental level for under $100,000. In other words, the software is still affordable compared the million-dollar investments companies have made in sales, service, CRM, or ERP software. Often, BI deals slip under the radar screens of zealous penny-pinching CFOs.

Third, new proposed SEC guidelines and the Sarbanes-Oxley Act, which makes CEOs and CFOs liable for the accuracy of their organizations’financial statements, are both placing increased interest on accurate and timely reporting of financial information, says Sparacino. Finally, the BI market and tools are maturing. A short list of vendors have risen to the top of the market, providing solid, steady execution that appeals to customers (and investors!). Leading vendors now offer a complete set of integrated tools to address most problems and serve most types of users.

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