As business intelligence (BI) technology continues to mature, industry vendors have attempted to move up the enterprise software value chain by evolving their flagship products into comprehensive, full-service solutions. These newer tools (reporting, data mining, OLAP, etc.) come bundled with functionality that customers previously had to provide internally, source from complementary third-party vendors or do without. Likewise, the audience of users for these tools has grown beyond application developers, DBAs and tech- savvy business analysts. Today's intuitive, point-and-click BI tools are user- friendly enough for nontechnical employees and executives. The industry segment began as a wide spectrum of focused point solutions targeted at expert users. It has evolved into a marketplace of integrated offerings that combine executive digital dashboards, standard and ad hoc querying and reporting, and advanced analytical features, all wrapped with sophisticated platform management and administration interfaces.
For prospective buyers who are new to the business intelligence market, this is great news. Corporations in many industries delayed significant business intelligence investments because they did not perceive any compelling business value above and beyond their existing processes, or because they lacked the resources to adapt the available products to their specific business environments. Aside from the high expense and the perceived risk of failure, these conservative companies are, more than anything, discouraged by the possibility of buying a product that is "not ready for prime time." The idea of needing to make multiple purchases to assemble the required solution or, even worse, investing in a product that becomes obsolete in a year is difficult for these companies to digest.
In more recent years, these types of buyers are becoming aware that they can buy "the whole solution" off the shelf as a stable and fully supported product. Furthermore, they are seeing more and more of their peer companies benefit from the use of business intelligence technology. They are also recognizing the need for a solid BI technology foundation to support their high-priority customer relationship management (CRM) and supply chain management (SCM) initiatives. The cumulative effect of these revelations is that even the most conservative companies are just about ready to open their BI checkbooks.
The evolution to full-service BI offerings is, in fact, very astute strategy on the part of business intelligence vendors. Understanding the technology adoption curve outlined in Geoffrey Moore's Crossing The Chasm, they realize that the early and late majority segments represent the greatest revenue and profit opportunities, but that these segments cannot be captured with the traditional BI product. The only way to successfully sell into these segments of the mass market is to have a comprehensive solution that addresses all of a customer's related requirements and has out-of-the-box functionality that does not require extensive customer implementation effort.
What About Us?
However, all is not necessarily well in the world of BI. In fact, existing business intelligence customers don't particularly care for these new developments. Early-adopter industries such as financial services, direct marketing, large-scale manufacturing and retailing have been investing heavily in business intelligence software for many years. They already have internal resources and infrastructure wrapped around a network of multiple business intelligence "point solutions" so that they can efficiently access and distribute information throughout the company. To these sophisticated customers, the extra functionality bundled into the mainstream product just gets in the way.
Often, these companies would rather continue to use and augment the latest version of their point solution rather than replace their internal custom software with the vendor's "grand vision." In other instances, these sophisticated customers do find value in all aspects of the full solution, but the components are valued by different areas of the organization. The vendor's full-solution sales approach typically treats these different internal areas as part of the same customer account when, in fact, they have very distinct needs. Either of these situations can make selling the "full business intelligence solution" to these early adopter customers an extremely complex and often unsuccessful process.
At first blush, it appears to be the classic chasm-crossing paradox: to capture a piece of the larger market opportunity, vendors must turn their backs on the customers that funded their success to this point. However, closer analysis reveals that things do not have to be this way.
The Best of Both Worlds
Modern marketing theory tells us that technology is allowing sellers to move beyond mass customization of solution offerings to actually unbundling the components of the solution itself and allowing customers to configure products as they see fit. This approach requires vendors to identify the critical component of their offering that which all customers value and designate this as the core product. Customers can then bundle optional components around this core until they have an offering that addresses all of the needs they have, and none of the needs they don't. This process of co- opting the customer into the product configuration process is particularly applicable to the software industry where modularity is built into the product and pre-sales product configuration can be performed at relatively low incremental cost.
This approach may not elicit encouraging cheers from today's business intelligence software vendors. In fact, some of them may feel that it goes against everything they are trying to achieve in the realm of product marketing. They have worked long and hard at developing their full- service offerings, and the last thing they want is to see it broken up and sold for parts. They perceive the bundled, all-inclusive offering as their pathway to higher margins, value-based pricing and the successful avoidance of commoditization. Additionally, getting customers to buy-in to their architecture and offering a suite is a way for vendors to create customer lock- in and build switching costs, which increase the lifetime value of the customer relationship.
What vendors do not fully grasp is that using their leverage to force existing customers into a full-service solution that they do not want or need will unnecessarily ostracize these segments. This creates an opportunity for niche competitors to steal these proven business intelligence buyers. However, there are ways for full-service vendors to profitably meet the needs of these buyers. The customer-driven configuration approach allows vendors to sell their core product to these sophisticated customers, bundling only the options that are relevant to a customer's particular situation. The result is a tailored solution that can be sold on value, meets customer needs and cannot be commoditized.
Advice for Both Sides
Business Intelligence Vendors
Perhaps the biggest challenge for BI tool vendors is to develop the confidence at the strategic decision-maker level that they can unbundle their products to serve both early-adopter and majority markets without commoditizing their offerings or jeopardizing the viability of the business. Once this idea is bought into at the executive level, it can be carried out tactically using the following steps:
Unbundle the software into logical components. Begin by identifying the core product that all customer segments value, and then break out additional modules based on the general areas of functionality they provide. Build integration "hooks" into each component to link BI functionality with other enterprise software solutions (CRM, SCM, sales force automation, etc.). Providing functional application programming interfaces (APIs) that facilitate connections to vended and custom applications in these areas will benefit segments that view BI more as an enabler of other solutions than as an end in itself.
Segment the target market by approximate position on the BI technology adoption curve and anticipated application of the product. The general idea is to target the more sophisticated customers with the core offering and then charge a reasonable markup to bundle only the options that these customers need to create a unique and "total" solution. As needs change and different departments find value in other components of the end-to-end solution, there may be opportunities to sell other modules to these existing customers. The first sale is usually the toughest; but after the foundation is in place, it is easier to extend the solution throughout the enterprise.
The neophyte mass-market customers, on the other hand, should be targeted with an offering that more closely approximates the full- service solution. This comprehensive, easily implemented offering typically provides the most value for these customers without significantly interfering with their current infrastructures.
Differentiate on relationships. The unfortunate thing about unbundling a product offering is that some of the components will, in fact, be near-commodities. The way to add value to these commodities is to orchestrate their combination and delivery in a way that uniquely addresses customer needs. The key is to find nonthreatening ways to discover which components are the ones that prospective customers value. Prospects are much more likely to share their needs and what they are trying to achieve after they understand the value proposition for the core product and how each component adds to the benefits provided.
Business Intelligence Buyers
By realizing that they are entitled to bundling only those options that are relevant to their particular situation, both early-adopter and late-majority buyer segments can get what they want from vendors in the business intelligence market. The following guidelines should ease the negotiation process and promote the development of a strong customer-vendor partnership.
Don't be forced into buying more technology than is needed. The BI marketplace is competitive enough for a prospective customer to find a vendor who will provide a solution that fits into their existing environment without adding redundant or unneeded functionality. Don't allow self-purported "industry leaders" to make customers commit to a bloated product architecture.
When possible, have internal departments agree on a set of enterprise-tested architectural standards. This will ease the process of vendor selection, ensure compatibility across departments and increase internal efficiency. Prospective customers that are new to the business intelligence market or are not sure what they need should purchase from vendors that comply with accepted standards. This will avoid committing to an obsolete architecture should the product need to removed at a later date. For more experienced BI buyers, internal compliance with organizational standards makes it easier for each department to buy components of the vendor's "full solution" at their own pace.
Take a longer-term, partnership-oriented view to BI purchasing and be willing to pay for customization. Hammering away on vendors for the lowest possible price does not incent them to tailor customized solutions to your specific business needs. Realize that by bundling only the components that are relevant to a customer's environment, vendors are performing a service for which they should be compensated.
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