It was the SAP World Tour in Sopot, Poland last week, and I had the honor of presenting a keynote session on business analytics.

The three-day event kicked off with a evening on a tall ship in nearby Gdynia, with traditional nautical music and evening entertainment including hitting a large nail into a stump of wood(?!).

The opening “run better” presentation was done as a panel discussion with Grzegorz Rogali?ski, the SAP country manager, and Tomasz Niebylski, head of presales, and hosted by a local TV journalist.

As always, here are my slides in both Adobe PDF and Microsoft PowerPoint format:

And here are some other photos from the event:

Governance, Risk and Compliance

IT and Finance: “We both work for the same company… so why is there so much tension”?

Product information about SAP GRC

BusinessObjects Explorer for Finance:

“I got the voice message when I was still at the restaurant. At first all I could hear was static, cars honking… and then the voice of James, my company’s CEO. He was stuck Mumbai traffic on the way to the airport…”

Product information about BusinessObjects Explorer

Explorer for Sales & Marketing

SMS from the CFO: “e.u.forecasts xtracold winter.pls correlate top hot snax/yr/ctry 4am board meeting”.

Product information about BusinessObjects Explorer

Explorer for IT

“Wow – look at all the snacks we sold.”

Product information about BusinessObjects Explorer

Enterprise Performance Management: Consolidation & Management Reporting

“My daughter Anna drew this… this big puff of smoke? That’s supposed to be me, doing what my wife calls my seven-day-a-month disappearing act…hours stuck in spreadsheet hell”

SAP Enterprise Performance Management product information

Enterprise Performance Management: Planning, Budgeting, and Simulating

“Budgets and planning time… a recurring corporate crisis, but we have to do it… monthly, quarterly, or yearly, we decision-makers gather with all our reports and projections and then it begins! [‘oh please, this is so ridiculous…’]”

SAP Enterprise Performance Management product information

IDC recently released several reports on business analytics market shares, including business intelligence and performance management:

• Worldwide Business Analytics Software 2009 – 2013 Forecast and 2008 Vendor Shares, IDC #219383, August 2009
• Worldwide Financial Performance and Strategy Management 2008 Vendor Shares: Market Consolidation Drives Domination, IDC #218656, June 2009
• Worldwide Business Intelligence Tools 2008 Vendor Shares, IDC #218598, June 2009

You’ll have to subscribe to IDC’s excellent service to get the full details, but if you look carefully through industry articles and vendor samples of the reports you can get many of the key figures and information about how IDC divides up the analytics market.

Here’s my interpretation of the big picture trends:

1. It’s a race between Oracle and SAP. IDC divides the analytics market into three main areas, all roughly the same size (there is also a fourth area, Spatial Information Analytics, but this makes up only around 3% of the overall market)

• Performance management and analytic applications (SAP #1)
• Business intelligence tools (SAP #1)
• Data warehousing platform software (Oracle #1).

Both Oracle and SAP are growing faster than the market average, implying consolidation around the market leaders (although some of the top growth figures came from some of the smaller vendors in the space).

2. Oracle’s lead is narrowing, with SAP is coming on strong… Oracle leads the overall analytics market by IDC’s definition, but Oracle’s growth has slowed since last year, while SAP’s has increased. Oracle is losing market share in its traditional area of strength (data warehousing platforms) where the #2 and #3 (IBM and Microsoft) both grew faster. SAP is growing faster than Oracle overall and in each of the three main areas.

3. …Particularly in FPSM. Thanks to the acquisition of Hyperion, Oracle has been the leader of what IDC calls the Financial Performance and Strategy Management Applications market (part of the analytic applications area) since 2006. But some key acquisitions by #2 SAP (including Pilot and Business Objects) have narrowed the gap considerably, and SAP experienced almost 3x Oracle’s growth over the last year.

Are the Numbers Accurate?

It’s human nature to assume that any set of numbers is more trustworthy than simple rankings. But just how accurate are the numbers, really?

IDC puts a lot of effort into gathering and interpreting the market share figures, and takes a lot of care to allocate the total vendor revenues among the various markets in which they participate. Despite this, there are at least three reasons that the numbers they provide are necessarily inexact.

• First, the numbers can never be more than IDC’s “educated guesses.” Companies that cover multiple market segments almost never publicly break out revenue according to IDC’s groupings, and so are not allowed to provide them selectively to IDC. IDC works with the vendors to try to ensure that there are no obvious mistakes, but there’s an incentive for vendors to try and influence the numbers in their favor (e.g. they may try to persuade IDC that some of the revenue from an area where they are a clear leader should instead be allocated to an area where they are the #2, making them the #1 in both markets).
• Second, even the vendors may only have a hazy idea of the exact revenue that comes from each area. Companies typically purchase related products from vendors in a single deal, and then haggle over the discount amounts. And a single vendor “product” may bundle elements from several different IDC categories. The allocation of the final deal amount between the different components (for example, a database, a data warehouse, some BI tools and some financial planning and budgeting tools) can vary over time, and may be different for different companies. Public companies have to respect some limits set by the SEC concerning revenue recognition, but private companies have a lot of discretion when it comes to stating their revenues (and this does not just concern the smaller vendors — SAS, the #4 vendor overall, is privately held).
• Third, different vendors sell through different channels. If a company sells directly to the final customer, the market share is the same as the revenue, but if it sells through resellers (who make a margin), the real market value of a product may be under-represented by the revenue reported by the vendor. This isn’t technically an inaccuracy, since IDC is explicitly measuring vendor revenues, but it makes it harder to interpret what the numbers actually mean.

Overall, these are marginal concerns, and the overall rankings are probably correct, but I would love to see IDC provide estimates of margins of error directly within the reports, making it easier to know whether small differences are in fact important.

Does Top Market Share Mean that the Vendor has the Best Products?

What do the market share numbers actually mean? What do they imply? What action could or should be taken based on them?

Obviously the vendors and their shareholders care about who’s selling the most (although even then share price typically depends more on profitability than overall revenue). But should anybody else?

Typically, a claim of having the top market share is used to imply that the products are the best ones available in the market (and that is why they are selling so well). But is it true?

Well, yes, they probably are – but in the same way that the #1 in the music charts represents the “best music”.

Just as the top-selling music has the broadest appeal, the leaders have the most broadly useful products. However, just as your own musical tastes might involve something more niche, it may be that a niche BI product or analytic application may be the best for any particular project (which is why there will always be small, focused vendors in the space).

However, the analytics choice most organizations have to make is akin to having to choose the music that will most appeal to all of the different employees in your organization, rather than the music you personally like best. This means most organizations probably shouldn’t choose niche products, because of the value of being able to combine information across different project silos, and because people need multiple different types of access to information.

For example, a sales manager may need a dashboard to track key sales metrics, an OLAP tool for budgeting, an analysis tool for investigating the sales pipeline, and some regular HR reports about team vacation planning. And she would like the data in these reports to be consistent from one usage to another, even when the data in the reports comes from multiple different systems and platforms.

Different products from different vendors may be the “best” niche solutions for each of these needs, but forcing the sales manager to use four unrelated systems, and cope with the inevitable data differences between them, is unlikely to be the best real-life solution. And of course, it’s typically more expensive to deploy multiple solutions than different front ends from the same vendor.

It’s also worth noting that the major vendors may also provide the best niche solutions in many cases, since they typically became major vendors by having the best products in the first place, or grew through the acquisition of other best-of-breed vendors.

So one reason that vendors emphasize market share is because it’s at least somewhat correlated with product quality. Most organizations do a thorough evaluation of the tools available in the market before choosing, and the majority of transactions are extensions to existing deployments, so market share is in some ways the most extensive “customer satisfaction survey” you will ever see. And rather than just ticking boxes, companies and individuals actually have to back up these judgments with money and their reputation.

Other Advantages of Market Share

In addition, choosing a product from a larger vendor provides some tangible benefits above and beyond the quality of the products themselves:

• More support for a wider set of architectures and interfaces. There are economies of scale for supporting different platforms, and larger vendors are likely to have more resources for keeping up with the latest versions of the systems that make up your core information environment, and tighter technical relationships (such as getting earlier access to the next generation of new products). Smaller vendors are typically forced to concentrate on a particular platform or environment. This is of course fine if your environment is supported, but not if you have a complex environment, or may need to change in the future.
• Worldwide services and support. Larger vendors are more likely to be able to support your local language and support requirements. Again, this would not apply to a small vendor in your country who is working in your language, but may be a problem if you need to span geographic locations now or in the future.
• Vendor ecosystem. The success of BI projects are about more than just technology. Larger vendors typically have a more extensive network of consulting and training partners, more other companies you can talk to about using the tools, and higher availability of employees with skills in the vendor’s technology.
• Less risk. The market is undergoing consolidation, and smaller vendors are more likely to go out of business, or be acquired.

There are certainly factors that could also argue in favor of smaller vendors. For example, they may be more responsive, since you represent a larger part of their business, or more innovative, since they have a smaller installed base to maintain, and a stronger incentive to innovate in order to be able to win deals against the bigger players. And they may be more open, with less incentive to tie you to additional products in the vendor’s portfolio (but by the same token, they make be less integrated with the other tools that do you have).

On average, software markets typically consolidate around a small number of larger organizations, showing that in the long run the benefits of size outweigh the potential downsides. And the fact that purchasers don’t want to take “risks” with smaller vendors and that this “winner takes all” trend is firmly embedded in the consciousness of corporate buyers everywhere makes it even more of a self-fulfilling prophecy.

Which Vendor is the Leader?

What does “market leadership” refer to? Is the “leading” product the one with the biggest market share? Or the highest quality? Or the the highest growth? Or some combination of the above?

Clearly, the term is open to interpretation, and vendors often spend considerable effort to find a marketable leadership claim – even to the extent of trying to tailor or invent market segments in which they are the leader (for example, Arbor software essentially invented the “OLAP market” as part of their marketing plans).

Despite much cynical eye-rolling from customers, it seems clear that these claims will always be part of the marketing landscape, since most of us do indeed want to be able to say we chose the “best” or “leading” software for our organizations.

For example, Oracle places ads such as the one on the right in magazines and airports around the world, claiming leadership in Enterprise Performance Management.

But SAP insists it is the #1 in the space, based on its leading share of the analytic applications market, which includes financial planning and strategy management (IDC does not use the term EPM).

According to IDC’s figure, Oracle is not #1 in business intelligence, and probably not in operational analytics (since SAP is leader in both applications and analytic applications). So what is the basis for the claim in the ad?

Oracle provides a link to a web page that attempts to back up the assertion, and which doesn’t mention market share at all. Instead, it links to reports from analyst companies like Forrester and Gartner that use more qualitative measures of “leadership” (interestingly, SAP could probably use the same list of reports to argue it was the overall leader).

Conclusion

Overall, market share is an important criteria that should not be ignored in purchase decisions. You can absolutely have great analytics projects with tools from smaller vendors. And successful analytics is much more about people and process than it is about technology, so in theory you can succeed with any tool.

But the whole point of analytics is that it must evolve over time, and adapt quickly to any changes in your business, and integrate with other systems inside and outside your organization, and I believe this gives the advantage to the larger vendors.

Among the larger vendors, does it matter which is #1 and #2? To SAP and Oracle, yes. For everybody else, it’s just one factor to consider, along with functionality, fit with your architecture, and – of course – cost.

A comprehensive EPM system captures and reports real metrics about application usage. Who is using which transactions? How long are they active? How long are they idle? EPM gives you the ability to pinpoint and analyze user adoption issues that are hindering the achievement of business results.

As the article says, “ROI isn’t real until it’s realized” — monitoring user adoption and acting on the results is an essential part of any software deployment plan.

But isn’t this just an example of a BI application?

1. Tame information chaos: Collect, manage, and integrate information, and fix any data quality problems (data quality, data integration, metadata management, etc)
2. Turn information into insight: Analyze the information, gain understanding of what is happening, and communicate it to others (query, analysis, reporting, etc.)
3. Use insight to drive change: Support processes for turning understanding into action (scorecards, budgeting and planning, profitability analysis, financial consolidation, analytics, etc.)

Category chaos

There’s general agreement that all these things are needed, but the exact definition and name of each category is hotly debated.

Is the whole thing called Performance Management or Business Intelligence? Which includes which? Or are they separate, but overlapping terms? And of course neither is possible without a solid information platform – is data integration part of BI? Is metadata management part of PM?

Convergence

Whatever the differences, the category edges are blurring, and there are fewer vendors that have products only in one area.

• Between PM and BI. Performance management and business intelligence are essentially two sides of the same coin: there’s no point of defining key performance indicators unless you can track them, and there’s no point in measuring anything unless you have an idea of what it should be.
• Between BI and IM. The prettiest chart in the world is useless unless the data in it can be trusted, and BI and search are starting to overlap.
• Between IM and PM. Compliance rules mean organizations want to be able to drill back to find where each financial figure came from and when it was last updated.

Time for a new name?

If we believe that there is increasing overlap between these categories, and all are needed for effective information use, what is the “whole thing” called?

For obvious reasons, vendors are trying to extend the terms that they are most closely associated with (e.g. Business Objects prefers BI, Hyperion prefers PM) to include the other categories. But these terms are starting to sound dated, and are firmly associated with only part of the overall need and particular users (e.g. BI = IT/query and reporting, PM = finance function/planning and budgeting). And Gartner views information management as a broad umbrella term that includes all kinds of storage and workflow technology.

So, isn’t it time for a name? Something that we can all agree on, and use to promote the value of what we all do, rather than bickering about terms?

Any nominations?