The term OLAP or Online Analytic Processing was coined in 1993 by relational database technology pioneer Ted Codd (my claim to fame: we went to the same high school, Poole Grammar).

The term was chosen to contrast with OLTP or online transaction processing, and was prompted by some clever marketing folks at Essbase, who wanted to promote their multidimensional database product. Codd was famous for his twelve rules defining the relational model and duly came up with twelve rules for analytic systems.

The term was quickly taken up by the rest of the industry, and spawned new definitions (Nigel Pendse’s FASMI test) and multiple variations (MOLAP, HOLAP, ROLAP, Huey, Dewie and Louie, etc.).

Over time, these multiple definitions started muddying the meaning of the term (was it a technology? a user interface? an approach to analysis?), and Gartner decreed that it was ‘just’ part of a larger market called business intelligence. The result has been a long slow decline of the use of the term OLAP, as the Google Trends chart below indicates.

Only Nigel Pendse of the OLAP Report tried to side-step this trend, and continued producing OLAP-specific analysis for many years, but “business intelligence” was clearly the mainstream industry term. A few years ago, Nigel sold the OLAP Report to the German BARC group, who initially continued under the same name, and tried vainly to convince everybody that OLAP was still a “hip term”, but finally succumbed to the inevitable and announced last month that they would be changing the name of the report/site to The BI Verdict.

(Sadly, at some point in this process, BARC decided to lock one of Nigel’s best articles — “How not to buy a BI product” – behind their subscription firewall. All I can find on the web is a far-less-entertaining summary of the main points here. [UPDATE: thanks to a tip from Florian Bahr, I can point you to the full article on the WayBackMachine: How not to buy an OLAP product)

Since BARC were the last group using the term with any frequency, it’s now fairly safe to say that OLAP’s days are over, but interestingly, the group seems to have chosen to shift to the wrong term. The chart below shows that the search trend for “business intelligence” has been slowly drifting down over the last five years.

And the decline is even more pronounced for another standard industry term, “performance management”

Since BI and performance management remain fast-growing markets, this trend is a little surprising – until you look at the search figures for the term analytics. Starting in 2005 (perhaps prompted by the introduction of Google Analytics?), the term has skyrocketed in use.

Possible reasons for this may include:

• Popular books and articles aimed as business people tend to use the term, such as Thomas Davenport’s 2007 book “Competing on Analytics”. This is perhaps because there’s more ambiguity for a business audience, who associate the term “business intelligence” with industry data vendors like Reuters and Thomson (now both part of the same company).
• The acquisition of the mainstream BI vendors by larger organizations (Hyperion by Oracle, Cognos by IBM, and BusinessObjects by SAP) has meant that the industry has been increasingly using other, more generic terms, such as “embedded analytics” and “analytic applications” to explain the same functionality. And the largest remaining independent vendor, SAS, has proclaimed themselves the leader in “business analytics”

My conclusion? By the time you read this, this blog might well be called “Analytic Questions” instead of “BI Questions”…

The BI market has been remarkably fragmented for a long time. According to IDC, the market share of the top 5 BI vendors (Business Objects, SAS, Cognos, Microsoft, Hyperion) barely changed over the period 2004-2006, from 46% to 48%, and non-top-15 vendors consistently made up over 30% of the market.

But — following the trend of other technology markets — it seems that the spiral of increasing dominance of a handful of vendors has finally been unleashed.

(1) The leaders are breaking away from the rest of the pack. The M&A activity we’ve seen in 2007 (Business Objects buying Cartesis, Oracle buying Hyperion, SAP buying Pilot and Outlooksoft, etc.) has increased the dominance of the top players, pushing their combined market share past 50% for the first time.

(2) BI and PM convergence is accelerating the process. The business intelligence and performance management markets (including financial applications) are clearly converging. This means a larger market, fewer vendors that can provide a complete offer, and hence increased consolidation.

(3) The importance of independence is increasing. As BI deployments become larger and more organizations implement a strategic approach, being open and independent becomes more important. I believe independent vendors are better able to concentrate on the best possible implementation of BI, rather than having to promote any particular database, middleware, or set of applications. They also tend to be the innovators in the industry (e.g. Cognos’ early move into EPM, Business Objects’ recent moves into unstructured data and BI on demand).

In summary: the market is consolidating, and the independent vendors have the most to gain. The latest growth figures from Business Objects (over 23% year-over-year in 2Q 2007, roughly double the predicted market growth) seem to back this up.

Facebook’s community app platform. As BI vendors try to web-2.0 themselves, they will need to create communities — will they start turning to new platforms, such as Facebook’s? From the look at the applications available so far, no — but over 25s are their fastest-growing segment, and there’s at least some interest in the enterprise space: “interesting… harder to build than consumer… maybe ability to better integrate applications some down the line”. Disclosure: I only signed up two weeks ago…

MySQL going public? How much is open-source worth in the BI space? This will presumably be eagerly watched by open-source BI vendors such as Pentaho. I’m a big fan of iStockPhoto for cheap, royalty-free images for presentations, and it turns out that they use Pentaho and MySQL.

SAP’s Performance Management Blog. Nenshad Bardoliwalla was at Hyperion before joining SAP. His blog gives insight into how the acquisition of Outlooksoft fits into SAP’s strategy (with link to SAP’s CPM presentation in May), and talks about Pilot’s web 2.0 approach to strategy (see previous posting.)  And some inevitable Oracle/Hyperion bashing.

Microsoft PerformancePoint a tough sell? Stephen Sawyer writes that Office, Excel and confusion shaping up as PerformancePoint Server’s biggest competition.

As Cindi Howson points out in her blog, this trend is probably more vendor-driven than customer-driven, but that doesn’t mean it’s won’t ultimately benefit customers. The views of CFOs and CIOs are (slowly) converging on what’s required for a consolidated view of performance across the organization.

So what’s the latest on what some of the leading analyst groups are calling the new single market?

Gartner: Based on a new research note published last week, it sounds like Gartner has decided that their new term is — wait for it — “business intelligence and performance management”:

Business intelligence (BI) and performance management (PM) is an umbrella term that
encompasses and defines a continuum of applications, technologies and methodologies to
support a user’s access and analysis of information and improve insight, decision making and
performance management.

IDC: For IDC, BI and PM are both part of a larger category called “Performance Management Tools and Applications”, which also includes CRM, SCM, Workforce Analytics, and Spatial Analytics. And PMTA is in turn part of the “Business Analytics” market, which also includes data warehousing.

Forrester: Forrester has started using the term “business performance solutions” (BPS) instead of performance management, defined as “applications for planning, measuring, and reporting business performance” . But it doesn’t appear to include “BI”…

Why do I care? Unclear categories and naming makes it (even) harder to understand what these products do, and how they relate to business concerns and the IT infrastructure. There’s still a clear opportunity for a new business-focused category which reflects the reality of the market today and, ideally, doesn’t add confusion by trying to extend or repurpose an existing term.

Less change than you might expect

It doesn’t change the BI market share picture much, based on the latest IDC numbers, from 2005 (2006 figures presumably due out soon, not expecting any huge changes in the relative positions). Hyperion is currently #5, and Oracle is #6, and combined they would become #4, ahead of Microsoft but behind Business Objects, SAS, and Cognos.

EPM: Back to the future

A decade ago, Oracle Express / Oracle Financial Analyzer was the only real competitor to Hyperion Essbase for financial planning and budgeting. It was powerful but aging technology even before Oracle purchased it from IRI in 1995, and they stopped updating it in 2002. Oracle proposed Enterprise Planning and Budgeting (EPB) in 2004, but with completely different underlying technology. Customers howled, and many of them presumably turned to solutions like Essbase.

So In the financial planning and budgeting area, purchasing Hyperion just puts Oracle back to it might have been if it had provided a credible upgrade at the time — except, of course, there’s now clear product overlap with Express/EPB.

Ironically though, Essbase is now an aging solution itself, and will be inevitably perceived as less independent after the acquisition. And the market is moving to support the “CFO 2.0″, with fast innovation and opportunities for other vendors (e.g. Business Objects) to explain the value they can bring to the performance management/planning space.

Core BI: Ouch

Things don’t look good for Oracle/Hyperion core BI customers. Oracle already had lots of overlapping solutions, and this makes it much, much worse. It seems clear that the Oracle BI tools are to be retained, rather than Hyperion’s. Larry essentially justified the Siebel purchase by saying that Siebel Analytics was the “crown jewel of the acquisition“, and in 2Q of this year, Larry went on to say:

“In our business intelligence area, that area is really on fire for us. If you recall, we bought the Siebel analytics product, and that has become our base platform”

So what happens to the ex-Brio products that are now inconveniently integrated with the rest of Hyperions solutions? I’m sure Oracle will do a credible job trying to keep customers, but there’s only so much they can do:

• Existing customer deployments will be stalled trying to figure out which technology to invest in
• Innovation will be stalled while the various R&D teams reorganize
• Lots of Hyperion employees will decide that they don’t want to work for Oracle, and move to the remaining independents or smaller startups. The headhunters are surely speed-dialing as I write this…

Stuck with their “natural share”

Oracle has been claiming to be “serious about BI” for at least 15 years, and for 15 years they haven’t been able to break out of their “natural market share”, consisting of Oracle customers that aren’t that serious about BI, and who don’t evaluate the more powerful independent tools. I don’t believe that this acquisition will fundamentally change the equation.

Independent BI is here to stay — and thrive

There’s a clear value proposition for vendors who are focused only on BI and independent of databases, applications, middlewares, etc. Oracle made it clear that this is about them and SAP, not the customer needs — maybe it will help a few more companies choose independent companies that have their BI interests at heart.

There’s now one fewer vendor that qualifies, and the remaining independents can presumably look forward to getting some of the business from a potentially (probably?) dead-ended Brio customer base.

Good luck, Howard and Frank!

After jumping ship from Gartner to Hyperion, Howard Dresner and Frank Buytendijk will now be Oracle employees. I’m looking forward to reading their reactions…