Can Independent BI Vendors Survive?

Implications: With the recent acquisitions, traditional BI seems to be moving to the big companies (IBM, Oracle, SAP). Smaller, pure-play BI vendors must innovate and find new market niches to survive. “Operational” BI and better usability could buy a few years of success for them.

Analysis: Business Intelligence (BI) has long been the province of large enterprises. Not only are the license costs formidable, but getting the data collected and available has been a daunting challenge. BI vendors have capitalized on this by selling expensive licenses for complex software designed to run on a data warehouse and provide information to a select few executives and top Finance staff. The overall cost of the data warehouse/BI projects are typically hundreds of thousands or millions of dollars. That kind of expensive, customized environment has allowed complex, expensive BI software to thrive.

Large applications companies looking for growth opportunities (Oracle, IBM, SAP) have recently acquired the biggest of the pure-play BI firms. This provides double opportunities for the acquiring companies: First it adds to their direct revenue stream and secondly it gives them entrée to a customer set they previously could not reach. For example, when Oracle acquired Hyperion they gained direct access to a large number of SAP customers who were running Hyperion. Similarly, SAP’s acquisition of Business Objects gives them access to Oracle customers.

Most CIOs have a strong preference for minimizing the number of vendors they work with, so with strong BI offerings from large companies it’s likely the traditional BI business will be increasingly dominated by these three companies, with Microsoft as a fourth coming from a slightly different angle. Independent BI vendors will have a rough, perhaps impossible task competing in that market.

There are still areas where independent BI vendors can compete. Perhaps only 5% or less of corporate staff are able to take advantage of BI today. Providing BI to another 20-30% of the staff is a huge opportunity. Microsoft is targeting much of their latest BI offering at this market, but so far they are the only one of the big competitors aggressively targeting this audience.

This audience requires a more nimble BI with better usability than is traditionally the case. The audience is no longer executives or trained Finance staff, but the average manager who needs metrics about his/her department. This suggests an entirely different set of metrics with a user interface that is either already familiar to the manager (e.g., Excel) or something else very easy to use.

This market is still relatively untapped, and independent BI companies have an opportunity to seize market share if they can produce and sell products that are easy to install and use, cheap to purchase and provide real value to the average manager. There are many challenges, chief among which is the traditional BI challenge of getting access to the data. Cleverness from BI vendors can help somewhat, but cannot entirely solve this problem. If this were an easy task the bigger BI vendors would have already solved it, but the remaining independent BI vendors have strong incentive and can likely make reasonable progress. It seems unlikely that every manager will have access to relevant metrics any time soon, but adding even another 10-20% of managers would still be significant progress.