The time is ripe to discuss the future of independent BI, after the purchase of Hyperion by Oracle and continued speculation on the future of the remaining vendors.
Will there be a “domino effect”?
A commentary in Business Week sums up the “domino effect” opinion (more prevalent among financial analysts than industry analysts) that the deal will lead to the purchase of the remaining large independent players. Here are some of the key quotes:
“The question is which makers of so-called business-intelligence software… will be acquired next.”
“The dam has burst in this sector,” says Murray Beach, president of Boston Corporate Finance, an investment bank that advises technology companies. “Business Objects can’t be far behind”.
Other commentators have taken this a step further, and talked about the end of independent BI as a category. E.g. Tony Baer of OnStrategies Perspectives:
“…BI has little reason to remain a standalone market.” (See the excellent serious about consulting blog for a direct reply to this)
As Dave Kellogg, former Marketing VP of Business Obje ts, has noted in his blog, the business intelligence industry has been remarkably unconsolidated up until now. How long can this last? And if companies like Business Objects and Cognos are purchased by bigger players, does that also imply that there is no longer a future for independent BI?
Is independent BI no longer needed?
There are three main schools of thought that say that it has outlived its usefulness:
- BI should be integrated into business applications (the Oracle/SAP argument). People want to access information as a seamless part of their operational applications. Vendors such as Oracle and SAP offer BI tools and data warehousing environments preconfigured for their applications.
- BI should be integrated with standard user productivity tools (the Microsoft argument). People want to access information directly from Microsoft Office. Excel is arguably the most widely-used BI tool today, and Microsoft aims to provide a robust set of BI tools across their Office suite and applications.
- BI should be integrated with search (the Google argument). Most corporate information is stored in unstructured format, and surveys show that users would like to be able to access their BI reports using the same easy-to-use search interfaces. Google has deals with all the major BI vendors, has purchased www.gapminder.org and is making some moves in the mobile consumer BI market.
Does this combination of pressures spell doom for the independent vendors? Not necessarily.
- First, note that there is clearly some truth to each of these scenarios, but they are mutually exclusive — i.e. if BI is a standard part of Office, then it cannot also be a standard part of your SAP environment. This already implies that there’s room for independent players who can blend the best of each approach.
- Second, healthy BI market growth means that success for one set of vendors doesn’t have to imply failure for the others: everybody can expand as the “BI balloon” grows.
Is there a future for Independent BI?
The real question is “will there continue to be a competitive advantage for independent BI tools in the future?” I believe the answer is yes, for the following reasons:
Variety is the spice of life. Organizations will always need to access and analyze information from many different systems.
- Across the organization. Even in the rare cases where an organization has a single “standard” for their applications, much of the information that executives care about comes from a variety of smaller operational systems. And this situation is not going to go away. The search for competitive advantage through new and innovative systems (e.g. RFID…) means that a single source of data for the entire organization is an unreachable nirvana (if you ever get close to having a true standard, I promise you’ll merge with another organization and have to start again!). In addition, companies are reluctant to have only one strategic supplier and lose all bargaining power, and the vendors do everything they can to remain in accounts. One of the reasons Oracle gave for buying Hyperion was its strategic position in SAP accounts — i.e. to make it harder for SAP customers to completely standardize on their main vendor.
- Across the ecosystem. Today’s organizations are part of complex chain running from raw materials to the final customer. It’s rare to find an organization that doesn’t outsource part of their activities to specialists. You share operational information with your largest customers on a daily basis (although sadly often only via phone or fax). Even if your operational systems are with one particular vendor, you’ll need to be able to access information from across the ecosystem to get a true view of your operational activities.
- Across the industry. Business executives increasingly need external information as part of their BI environments, including industry statistics such as market share, customer satisfaction, and benchmarks against their competitors.
- Data integration isn’t enough. Data integration technology alone cannot solve this problem. There will always be some data sources that require too much time or cost to integrate into the data warehousing environment, and users will always need to integrate and analyze information from multiple sources on the fly.
Vested interests are important. There is no technological reason why Oracle cannot continue to provide excellent support for, say, Hyperion in SAP environments. In practice however, Oracle is in fierce competition with SAP and is unlikely to act with strict neutrality, particularly with regard to embedding BI into the operational workflows of SAP. The vendors protest that they are open and will do what’s best for their customers, but there’s a reason that sports teams and referees are discouraged from betting on the matches they play in.
Focus leads to expertise. Ten years ago, the benefits of buying a BI tool from your database vendor were just as obvious as the benefits of buying one from your application vendor today, but that didn’t stop the success of independent BI vendors. Focus comes down to what one cares about. Independent BI vendors care about their customers’ BI success. Oracle cares about beating SAP and selling more applications and databases. So far, the history of the industry indicates that vendors focused on BI are likely to provide a more innovative, customer-focused solution than those that view BI primarily as a means of selling their platform, databases, applications, or middleware.
BI is highly lev
eraged. BI is the final layer between business people and the millions of dollars you have invested in your information systems. A small difference in BI effectiveness can have a large effect on the overall return on IT investment.
Who’s the best customer for independent BI?
- Have a combination of Oracle, SAP, Microsoft, and other domain-specific applications, and use MS Office.
- Are in fast-moving industries, may need to purchase or merge with another company one day, or otherwise need flexibility in their systems.
- Work closely with their ecosystem of partners, would like to share information with them.
- Use external information for benchmarking and need to share information with market and regulatory authorities.
- Care about using information to help turn strategy into execution at all levels of the organization.
In other words, just about everyone…
Maybe Oracle, SAP, and Microsoft will deliver on their promises this time. Maybe “good enough” is as much as most people need. Maybe Google will upset the whole industry. But I’m hoping that BI is strategic enough for independent BI to live up to its theoretical potential.
Finally, will Business Objects or Cognos get purchased?
Who knows. Both are a public companies and the executive teams hold only a minority of the stock, so ultimately the potential suitor and the shareholders would decide. But any purchaser would lose a large part of the value of the company overnight, since it would no longer be independent, with all the advantages above.