Microsoft Gets Serious About Business Intelligence

Implications: Microsoft’s acquisition of DATAllegro should put to rest any skepticism on whether Microsoft is serious about the data warehouse and Business Intelligence (BI) market.  They have been progressively moving more into BI and data warehouses for several years, but have focused on the low-end BI user.  Now they’re going after the high-end market as well via an appliance. 

Analysis: A number of factors are converging to move BI into the mainstream.  Not least is the fact the ERP market has consolidated and matured, so Oracle and SAP are looking hungrily for new worlds to conquer.  This is shown by their recent acquisition of Hyperion and Business Objects.  With IBM’s acquisition of Cognos, the BI market is clearly consolidating.  At the same time the amount of data enterprises need to manage has exploded and computational power has grown to the point where extracting useful information from that data is feasible.  BI tools provide a presentation layer which is only as good as the data warehouse under it.  No BI system can provide “intelligence” without a data warehouse capable of managing huge amounts of data.

Microsoft is looking for new markets for growth as they are increasingly confronted by the law of large numbers.  BI is a market they have targeted as key to their future growth.  The last release of their database, SQL Server 2005, was a serious contender in the data warehouse arena, albeit still generally for smaller enterprises.  The current release, SQL Server 2008, further enhances scalability and capability for data warehouses. However, it still does not offer the performance required for a really high-end data warehouse, which could have upwards of 100 TB of data.  Only a hardware appliance can handle that amount of data.

The high-end data warehouse market is not particularly large in terms of numbers, but the revenue is quite significant.  The market leader today, Teradata, has annual revenue approaching $2B.  HP is also focusing on the high-end data warehouse market.  DATAllegro has specifically targeted Teradata with their offerings in the recent past.  Their technology is generally considered comparable or better than Teradata’s, although their revenues are much smaller. 

Microsoft’s acquisition of DATAllegro clearly spells trouble for Teradata, Oracle, HP and any other would-be players in this market.  More importantly, it represents a key building block in Microsoft’s BI product portfolio.  They already have low- to mid-range data warehouse capability with SQL Server.  Now they can address the highest-end data warehouse requirements.  They already have low- to mid-range BI capability.  All they need is a high-end BI offering and they will be the only vendor to address the entire BI product suite from low- to high-end with both data warehouse and BI products.