The business intelligence software arena is maturing, Nemeroff says, and a couple industry trends might be pushing one of the big stand-alone BI software makers into the clutches of a larger software player such as IBM, Microsoft or Oracle.
One is the need for growth. Business Objects, Cognos, Hyperion and MicroStrategy are all publicly traded firms, which means bringing greater equity to shareholders is Mission No. 1. As it stands now, almost all of the Fortune 1000 firms already have one or more BI package installed. Growth for the BI firms, then, can come through essentially two routes: One route entails pushing big customers to standardize on a single BI system. That's the option BI pure-plays have taken so far. The other route entails getting bought out.
The standardization fight -- which continues to rage at full scale -- can only go so far, Nemeroff says. "At some point in time, one of these [BI pure-play] guys is going to stumble a bit," he says, "and then one of these bigger application firms is going to come in and pick one of them up."
Another factor is that the enterprise software makers -- which are basically the same companies that make the most popular databases -- continue to compete at building out their own BI capabilities. Instead of picking up some small, boutique-y analytics firm, why not go for the whole kit and caboodle? That is, why not buy big-time, full business intelligence functionality, along with an established customer base?
Countering Nemeroff's argument is the fact that the stand-alone business intelligence vendors continue to turn in solid sales and earnings. Why would we sell, a pure-play CEO might argue, when we're still performing fine on our own? Nobody's sold out yet, even though some analysts have expected to see the purchase of a BI firm for some time.
"I really thought Oracle was going to buy one of the BI guys, but they bought Siebel," Nemeroff says. But he notes there are indications that enterprise software makers might be setting the table for a purchase. For example, in scaling back its OEM relationship with Hyperion a couple quarters back, IBM has now made it possible to purchase any one of the pure-play BI firms without having to go in and rip out Hyperion technology (assuming that IBM doesn't acquire Hyperion itself).
If one of the BI players gets acquired, Nemeroff adds, then shareholders of all three will win. In any software category, the purchase of one firm drives up the shares of competitors -- at least temporarily. The same would be true for BI.
Of course, figuring out whether the customers already using software from an acquired BI vendor win or lose is another story altogether.