BI Market Consolidation?

I was recently asked for my thoughts on BI market consolidation for a BI supplement to The Times newspaper:

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.