Business Intelligence Market Consolidation – The Next Stage of “Co-opetition”

The Business Intelligence (BI) industry has been experiencing a significant consolidation of vendors over the last few years and particularly over the last month with the announcement of the mega-acquisitions of Business Objects by SAP and Cognos by IBM.  This will have a significant impact on the industry and the ways in which the leading vendors compete against each other and moreover, how they will continue to cooperate and partner. 

Don Welker, Manager of Clarkston Consulting’s Business Intelligence & Analytics practice, discusses his perceptions on the future of the industry and the impact on current customers and tomorrow’s buyers.

“Co-opetition” is a model where the winner-take-all mentality is substituted with the notion that a network of stakeholders cooperate and compete in order to create maximum value.  It is not uncommon today to have an SAP ERP implementation that is hosted on IBM hardware with an Oracle database, an SAP BW Enterprise Data Warehouse (EDW) with Cognos for analysis and reporting and Hyperion for financial consolidation.

From the Clarkston Consulting point of view, it is under this co-opetition model that the future of the BI industry lies.

Some implications for today’s customers and tomorrow’s buyers and key aspects to follow over the coming months include:

Business Intelligence and Analytics drives:

• Product Portfolio Integration - How will these vendors integrate the newly acquired products into their existing product portfolio? 
  • IBM now has a significant overlap in On-Line Analytical Processing (OLAP) solutions between its own Alphablox and Cognos’ PowerPlay and TM1, which was inherited from the recent acquisition of Applix.  We strongly advise that existing customers of each of these product lines pay particular attention to the pending product roadmap strategies as it’s likely that one or more will be sunset in the longer term.
  • Similarly SAP currently has some overlap in its Corporate Performance Management (CPM) solutions between the acquisitions of Outlooksoft and Pilot Software and Business Objects’ acquisition of Cartesis.  Analogous to the concerns of the OLAP customers, we advise that existing customers of these products, specifically Cartesis and Pilot Software, pay close attention to what may be shorter life spans of their existing solutions.  Alternatively, new SAP CPM customers should benefit from the unification of these products in the longer term.
  • Business Objects BI products are generally viewed as more robust than the SAP BW Business Explorer (BEx) offering from a user interface and usability perspective, so the BO acquisition could potentially provide existing SAP BW customers with a different avenue to obtain more competitive pricing if they’re currently in the market.  On the other hand, SAP has been promoting its relatively new NetWeaver BI 7.0 (aka 2004s) as a BI platform that is strong enough to compete directly with Business Objects and Cognos, so existing customers may need to make some tough timing decisions as to when to upgrade from BW 3.x to BI 7.0 and if/when it makes sense to pursue deals with either BO or Cognos from a strategic perspective.  It will also be interesting to see how SAP positions BO into the overall NetWeaver product strategy. 
  • Cognos is an SAP software partner with some very tight integration into the SAP BI suite.  Here again we see the future of the BI industry based heavily on the co-opetition model.  There would certainly be ramifications for Cognos if SAP decided to limit or delay communications on its interfaces and APIs, but that remains highly unlikely given SAP’s history of demonstrating unwavering commitment to its partners.

• Industry Trends - The following current industry trends will also contribute to the success/failure of the merged organizations:
  • The meshing of BI with Customer Relationship Management (CRM) and Corporate Performance Management (CPM) will undoubtedly be a differentiator in the BI market.  The convergence of these technologies will ultimately provide the ability to get a true 360º view of the business.
  • Enterprise Information Architecture (EIA) initiatives such as Master Data Management (MDM), Customer Data Integration (CDI), Business Process Management (BPM) and Service Oriented Architectures (SOA) will also play a significant role in the success of the BI vendors.  As these technologies progress, it will become increasingly important for BI solutions to seamlessly integrate.
  • Operational BI (BI-for-everyone) provides workers with an up-to-date view of operational metrics so that they're able to respond quickly.  It differs from Enterprise BI in that instead of processing data in a nightly batch cycle, the information is updated in real-time or near real-time from operational systems so that front-line business managers are able to proactively react to exception events.  Real-time BI has been slow in coming to fruition, but the vendors that are able to deliver timely metrics and key performance indicators to the everyday worker will have a decided competitive advantage.
  • Software as a Service (SaaS), also known as On-Demand Software, is a software application delivery model where a software vendor develops, hosts, and operates a web-native software application for use by its customers over the Internet.  It has become popularized by the pioneer in on-demand CRM, SalesForce.com, and according to analyst reports is expected to grow over 20% annually outpacing on-premise software 7:1.
  • Microsoft Office integration is another topic that is a high priority for BI vendors.  Excel, Word, and PowerPoint are used extensively in the business world and BI solutions that provide tight integration can markedly differentiate vendors.
  • Enterprise Search technologies are also uniting with BI to bring the analysis of both structured and unstructured data together.  Enterprise Search vendors are investing heavily to deliver BI functionality within their product offerings and BI vendors will also need to invest to remain competitive. 

• Corporate Culture - How the cultures of the merged organizations will come together will play a significant role.  According to the Human Capital Institute, 50-70% of mergers and acquisitions fail to achieve expected synergies and financial results, and often failure is attributable to talent management issues.  IBM is planning on integrating Cognos and its approximately 4,000 employees into its Information Management Software division creating a new BI and performance management group which will be led by Cognos' current president and CEO, Rob Ashe.  It will be imperative that these companies are able to manage culture clashes and retain key talent while still fostering creativity.  SAP and Business Objects will have similar challenges, although due to their current stage in the acquisition cycle with regulatory approvals pending, we’ll need to wait before formal announcements are communicated about their organizational plans.
• Who's Next? With a recent announcement of the Teradata/SAS strategic partnership, some industry analysts believe that they are the next logical ones to merge.  There’s also Microstrategy and Information Builders in the mix and don’t forget about Microsoft or open source vendors such as Actuate.  It’s likely to see some of these names come up again in the acquisition frenzy.

How can Clarkston Consulting Help?

• If your company is a current customer of any of these vendors’ products or is actively seeking to invest in BI or CPM solutions, Clarkston Consulting can assist by:
• Helping you gain a better understanding of the industry direction by providing an unbiased viewpoint
• Helping you establish the strategy for the ongoing alignment of BI with your overall business strategy as it relates to business requirements, technology, organization, process, and people
• Assessing your current environment in terms of business functionality, technology, and project methodology to identify and understand potential risks, issues and gaps
• Building the business case for your BI investment by identifying your key business drivers and benefits and performing both a quantitative and qualitative cost/benefit analysis and an organizational impact analysis
• Designing and delivering the solution that best fits your needs, on time and within budget so that the identified benefits can be realized
• Transferring knowledge to your internal staff so you are equipped to manage and grow the solution