Business Intelligence: Consolidation and Beyond (Strategic Focus)

Overview

Catalyst

Summary

Key Messages

The wave of consolidation may be beneficial to both acquiring and acquired companies

Opportunities from the BI market will still remain solid in real terms

As market dynamics change, technology will become increasingly customer-focused

End-users should be aware of long-term implications and look beyond current turmoil

Intensifying competition and the entry of larger players will integrate the value-chain

Conglomerates will try to bridge portfolio gaps while smaller players exploit niches

Go-to-market strategies will need to be re-evaluated against current market challenges

Table of figures

Table of tables

Market Opportunity

The pure-play vendor-dominated BI market is undergoing a wave of consolidation

Consolidation is a likely win-win for acquiring and acquired companies

Conglomerates will be able to boost growth rates and profitability riding on BI solutions

Acquired vendors will be able to combat revenue and margin growth challenges better

Price competition and cost inflation has started to affect pure-play vendors

Microsoft and other conglomerates are trying to commoditize basic BI further

Consolidation will expand the addressable market for BI, benefiting pure-play vendors

A stabilizing market growth rate still leaves enough room for revenue expansion

Increasing organizational data, shifting user demographics, and convergence will drive BI

Data explosion will continue to fuel demand for monitoring and analysis

A younger user demographic will adopt BI tools faster

Convergence will help to expand the addressable market

Recessionary signals and traditional hindrances to BI may slow down uptake

A recessionary environment may affect vendors with high exposure to financial service firms

Vendor consolidation may foster a ""wait-and-see"" attitude in end-users

Traditional roadblocks to BI will still remain

Long-term growth opportunities exist in spite of the turbulence from consolidation

Technology Evolution

Attractiveness of converged bundles to drive accelerated end-user adoption

Pre-integrated product bundles

Add-on industry bundles

Alternative approaches to data analysis may become mainstream in the medium-term

In-memory analytics could be to BI what just-in-time (JIT) is to manufacturing

In-memory analytics is faster, simpler and more flexible

Natural language processing will help BI to analyze critical but oft-neglected data

Mobile BI could shift from a 'good-to-have' to a 'should-have' feature for reporting

Technology evolution has been relatively tepid but increasingly customer focused

Customer Impact

Acquisition frenzy may foster a ""wait and see"" attitude in end-users

End-users can derive short-term gains as conglomerates chase market share

Best-of-breed products and features will probably be retained over the long-term

The entry of conglomerates will help end-users looking for end-to-end solutions

Short-term end-user impact is minimal, but expect some longer-term rationalization

Competitive Landscape

Conglomerates, mid-layer, and niche vendors form the current BI market

Conglomerates

Mid-Layer

Niche

Timing of acquisitions important as valuations driven up by demand

The reshuffling of vendor categories has disturbed the traditional BI value chain

A highly converged future value chain will still contain niches for smaller players

Pre-integrated product bundles will increase adoption and drive pervasiveness

Add-on industry bundles will deliver industry-oriented solutions, generating higher value

Complete BI bundles will deliver end-to-end solutions and unlock maximum value

In spite of converged offerings, some gaps will likely exist for smaller vendors

The BI sector could also witness the entry of additional vendors

Possible scenarios in the converging market

An integrated value chain requires conglomerates to bundle as others develop niche skills

Go to Market

Look for bundling opportunities when creating new product offerings

Establish footprint into large enterprises and growth SMEs through pre-integrated bundles

Target business and industry issues in large enterprises with add-on industry bundles

Exploit sub-prime concerns and recessionary signals to hard-sell risk management BI

Capitalize on channel partnerships and hosted solutions to reach SMEs

Develop SaaS offerings and innovative pricing models for price sensitive SMEs

Leverage channel partnerships to target SMEs that have limited in-house IT infrastructure

Recommendations

For conglomerates:

Conceptualize, develop, and market bundles at every opportunity

Use size and financial muscle to your advantage

For pure-play vendors:

Innovate with agility

Exploit gaps

Advanced capabilities gap

Vendor independence gap

Relationship gap

Industry alignment gap

Capitalize on partnerships

APPENDIX

Definitions

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Major acquisitions in the business intelligence market, 2006-2008

Table 2: Current BI bundles consist of product and industry bundles

Table 3: Future BI bundles will combine BI with other applications to derive actionable intelligence

Table 4: Respondents' mobility investment plans

Table 5: Probability of various BI features to be offered on mobiles

Table 6: Respondent's preferred approach to buying BI

List of Figures

Figure 1: Some BI vendors are growing at a higher pace than their acquirers

Figure 2: BI vendors exhibited higher margins than their acquirers in 2007

Figure 3: A majority of BI vendors are witnessing a slowdown in revenue growth rates

Figure 4: Several BI vendors are reporting a decline in gross margin

Figure 5: Growth rates are stabilizing to more sustainable levels

Figure 6: Relatively mature segments such as retail banking will witness a gradual slow down

Figure 7: High exposure of BI vendors to financial services customers could put them at risk

Figure 8: The mobile applications market is growing at a healthy pace

Figure 9: Number of respondents that currently use or will use mobility solutions

Figure 10: Acquisition multiples and sizes of four major BI M&A deals (2006-2007)

Figure 11: Traditional value chain: limited overlap between layers resulting in commoditization

Figure 12: Consolidated value chain

Figure 13: Scenario planning diagram

Figure 14: Take hosted BI offerings to the UK, Benelux, Australian, and French markets

Figure 15: Targeting SMEs requires a formidable local and national reseller base