Software // Information Management
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4/10/2008
07:31 AM
Cindi Howson
Cindi Howson
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Is BI a Commodity?

Are forces at work to give buyers the wrong impression? A commodity is anything for which there is supply but without much differentiation... Perhaps some vendors want you to think BI is a commodity so you'll buy from whoever already has a foothold in your company.

I was recently at a SAS event in which Jim Davis, their Chief Marketing Officer, talked about the commoditization of BI. He described their sales efforts for these applications as low and the price sensitivity as high.

I gasped (silently of course), thinking of the many customers I speak to and work with who spend months evaluating software, sending vendors painfully detailed RFIs, and diligently conducting proof of concepts. Some of these customers already own BI tools or will evaluate tools despite what's being offered to them for free.So at first I thought Davis' comments were in isolation and only relative to SAS' efforts to sell analytic applications (which do command a higher price and take more sales effort.) But then I saw another reference to commoditization of BI in a CIO magazine article. And someone referred to this commoditization as a fact at a seminar I recently taught.

Is my head in the sand here? Or are forces at work to give buyers the wrong impression?

A commodity is anything for which there is supply but without much differentiation. Without a differentiation, vendors are forced to compete mainly on price, putting pressure on margins.

So is that where we are today?

In terms of differentiation, the strategies that several vendors are pursuing are quite similar. Several are pursuing end-to-end BI from ERP to ETL to BI tools, analytic applications, and performance management. Note though, that IBM/Cognos doesn't compete in the ERP space. SAP/Business Objects doesn't compete in the RDBMS space. Some vendors such as SAS, MicroStrategy, Information Builders, and Qliktech take a more narrow focus of BI. So there are strategic differences.

In terms of product capabilities for BI tools, on the surface all of the vendors now offer a broad spectrum of solutions that include reporting, business query, OLAP, Office integration, and dashboards. Several years ago, vendors competed in only a single segment of the BI spectrum, so indeed, on the surface, the spectrum of offerings seems similar. But this is where the difference ends. None of the vendors are great at all these modules. Instead, they continue to have their strengths and weaknesses in specific modules. Add emerging capabilities such as BI search, mobile BI, rich reportlets, as well as integration with advanced visualization and predictive analytics and the products differ still more.

Price is a slightly different story. Operating margins have declined somewhat in recent years, but not drastically. Microsoft's increased presence in the BI market helps drive prices downward. Software heavy weights Oracle, SAP, and IBM may further affect BI pricing as these vendors can more readily bundle BI with higher-ticket items, whether the operational apps or the database, but that's not yet happening. BI needs to become more affordable for it to become more pervasive. Vendors, however, are not yet competing on price alone as they would with something that has been commoditized. Customers continue to be willing to pay a premium for better or unique product capabilities.

So where is this commoditization perception coming from? Perhaps it's a prediction for the future. Or perhaps some vendors want you to think BI is a commodity so you'll buy from whoever already has a foothold in your company.

I'd welcome your comments on how important price has been in your BI buying... and how well you think the vendors are articulating their differentiators.

Regards, CindiAre forces at work to give buyers the wrong impression? A commodity is anything for which there is supply but without much differentiation... Perhaps some vendors want you to think BI is a commodity so you'll buy from whoever already has a foothold in your company.

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