Solo BI Vendors Have Something To OfferSolo BI Vendors Have Something To Offer

With IBM now acquiring Cognos and SAP in the midst of buying Business Objects, the world's four largest software vendors--IBM, Microsoft, Oracle, and SAP--will soon control more than half of the business intelligence software market. But it's a mistake to ignore what's happening in the other half of what IDC reckons is a $7 billion-a-year market for query, reporting, analysis, and advanced analytics software.

Consider part of the reason Business Objects and Cognos are no longer going it alone: Each lost market share last year, according to IDC, and their BI tool sales grew slower than the 12% market average. Most of their revenue comes from tools that run queries against data and generate reports, functions that are becoming commodities. Sales of cheaper Microsoft BI tools, recently rebranded PerformancePoint Server and given an Excel interface, grew 28% last year while gaining a point of market share, to almost 8%, IDC says.

Once IBM completes its $5 billion acquisition of Cognos, announced last week, the only really big BI company left will be SAS Institute, whose revenue will exceed $2 billion this year. Chief marketing officer Jim Davis insists the company--still two-thirds owned by CEO and co-founder Jim Goodnight--isn't interested in being acquired. It's among the fastest-growing BI vendors because it dominates the market for advanced analytics, including predictive analysis, and has a loyal customer base. This highly sophisticated (and pricey) form of BI constitutes about 25% of SAS revenue and drives other areas, including data integration software (55% of revenue) and query and reporting tools (10%).

BI Startups To Watch

ACTUATE: Sells packaged business intelligence tools and sponsors an open source project for Java-based BI reporting tools

PANORAMA: Reporting, dashboards, and scorecards designed to run on Microsoft, Oracle, and SAP BI platforms without the metadata layer typically required for data extraction

PENTAHO: Relatively low-cost yearly support fee for open source BI software (indemnification from patent claims included)

QLIKTTECH: Conducts business intelligence in system's memory, using 64-bit servers and eliminating some BI steps such as the creation of OLAP cubes

MicroStrategy is the next biggest BI independent, at $313.8 million in revenue last year. CEO Michael Saylor, in a letter to employees last week, predicted that Business Objects and Cognos will veer off on "proprietary strategic trajectories, which place them in a conflict of interest with large segments of their own customer base." MicroStrategy COO Sanju Bansal predicts the acquired BI vendors will get less cooperation from important allies such as data warehousing vendors. "It's hard to believe the Teradata folks will open up their technology plan to IBM," he says, "because the two are mortal enemies."

But the success of smaller independents such as Information Builders, MicroStrategy, and myriad niche suppliers depends on whether they can provide enough differentiation to be worth the added integration effort. Privately held Information Builders does about $300 million in revenue, but growth sputtered last year as it transitioned from mainframe-oriented BI tools to new markets such as mobile BI access. Revenue is tracking 10% higher this year, says chief strategy officer Michael Corcoran, and its labs are working on user interface technologies that deliver more visual capabilities, including animation, to BI reports. Information Builders also sees opportunity partnering with niche software vendors that compete with the likes of SAP and Oracle--a specialist in ERP for retailers, for example.

Customers will be demanding. Transplace, a provider of supply chain software to the transportation industry, recently bought BI tools from Microsoft, deciding early on that Business Objects and Cognos were too expensive, says Cindy Winkel, director of BI and data warehousing. Microsoft beat out Oracle because it had a package starting with SQL Server 2005 for data warehousing and extending up to OLAP cubes and dashboards, and the ability to view it all in Excel.

Transplace's decision-making shows the challenge ahead: BI vendors outside the big four still have a lot to offer, but they'll have to fight that much harder to get considered.