Analysis: Inside Business Objects' Midmarket Strategy and Products

Seeing a huge market opportunity to sell business intelligence software to companies with 100 to 1,000 employees and $100 million to $1 billion in revenue, Business Objects today announced a major new-product family and larger initiative aimed at catering to midsized companies. The midmarket now buys $2.1 billion worth of BI software each year, according to IDC, and Business Objects says that figure is growing 12.5 percent per year -- 50 percent faster than BI sales growth among large enterprises.

To cater to the tighter budgets and leaner IT staffs of midsized companies, Business Objects is introducing Crystal Decisions, a "holistic" product that will be offered in Standard, Professional and Premium editions. The Standard edition, which includes reporting, query and analysis, is being released today starting at $20,000. The Pro and Premium editions, which will add data integration and performance management capabilities, will debut in the second and fourth quarter, respectively. All three editions will be able to deliver data, reports and analyses within Microsoft Office and SharePoint.

Business Object's larger initiative will see a separate division set up to serve the midmarket, and it will have its own research, development and customer support teams. It will also have a separate Web presence and a partner-driven solutions marketplace patterned after Salesforce.com's AppExchange.

Among the top BI vendors, Business Objects is uniquely positioned to take on the midmarket thanks to its 2003 acquisition of Crystal Decisions. That company catered to small and midsized companies and had a strong sales channel. As a result, Business Objects says it already has 30,000 midmarket customers and 2,300 integrator and reseller partners.

Business Objects currently offers Crystal Reports Server and the CrystalReports.com on-demand service. The Crystal Decisions family goes beyond reporting and is said to share its code base with the Business Objects XI platform. That overlap leads at least one competitor to question whether Crystal Decisions is truly designed for midmarket needs. "High-end BI products are complex, but midmarket customers are concerned about implementation time, skill sets and training requirements," says Rick Pitts, CEO of the North American unit of QlikTech, a midmarket-focused BI vendor. "If you go to Business Object's Web site, you'll see 18 pages of courses. We have three courses, the longest of which lasts four days."

The Crystal Decisions product "does not strip out or dumb-down the functionality of Business Objects XI, but it does differentiate in terms of configuration options," says Todd Rowe, head of Business Object's new Midmarket Business. The product is simplified in that there are just three products with five configuration options -- Windows/Linux and Oracle/DB2/SQL -- in contrast to the 20 configuration options of Business Objects XI. User interfaces are said to be simplified, borrowing from the look and feel of Crystal Reports rather than the power-user interfaces of XI.

Implementation options are also simplified -- some would say limited -- to single-server deployments with five, ten or 20 concurrent users. "With the typical ratio of five live users to every concurrent user, it scales well for the typical midmarket company," says Rowe. For broader delivery of reports and analysis, companies can exploit a "live data" feature that lets you embed Crystal Decisions reports, queries and analysis in Microsoft Office documents. "Any time the data is refreshed, the analysis and reports in the Office documents will refresh as well," says Rowe.

Business Objects expects to consolidate marketshare in what it describes as a fragmented midmarket divided among 20 vendors worldwide, but the number-one competitor will clearly be Microsoft, which is wrapping more and more BI functionality around SQL Server.

"Microsoft approaches this in a completely different way, requiring you to buy a license to the database to get everything else," says John Hagerty of AMR Research. "That's not bad, but what a lot of people value about BI tools is that they can glom on to whatever data happens to be there in whatever format without having to implement anything other than the BI tool to get at it."

Microsoft includes integration technologies with SQL Server, something only available in the Pro and Premium editions of Crystal Decisions, but Rowe says Crystal Decisions will deliver more extensive data quality, data cleansing and ETL capabilities. Microsoft's PerformancePoint Server, based in part on ProClarity products Microsoft acquired last year, is set to debut in mid 2007. Crystal Decisions Premium, which will include goal, metric, scorecard, trend and collaboration features, won't debut until the fourth quarter.

Can niche BI vendors -- even big ones like Business Objects -- stand up to Microsoft's bundling strategy? "We'll have to educate the market on the costs," says Pitts of QlikTech. "When you look at SQL Server plus SharePoint plus PerformancePoint plus Office 2007 plus Windows Vista, you really have to reexamine the cost equation."

As for Crystal Decision's competitiveness, Hagerty says "if a company doesn't have SQL Server right now, this is a technology that could be disruptive."