It's The End Of The Business Intelligence World As We Know It

The once staid business intelligence market is about to explode into something very different. Oracle's deal to acquire Hyperion Solutions for $3.3 billion, disclosed March 1, is the latest in a series of developments since the beginning of the year that make such a market blowout inevitable. In January, NCR announced plans to spin off Teradata, its data warehousing division, as a standalone company. About the same time, Hewlett-Packard revealed that it has been quietly developing a data warehousing platform of its own.

In fact, business intelligence vendors--there are dozens of them--have been snapping up each other over the past few years in an attempt to round out their product lines and acquire customers. Why the frenzy? The BI market--including everything from data extraction middleware to desktop data analysis tools to data warehouse servers--is in the neighborhood of $50 billion a year and growing at a percentage rate in the low teens, says Ben Barnes, HP's newly hired general manager of business intelligence. BI ranks near the top of many companies' technology purchase plans. When InformationWeek asked 300 business technology managers about their project plans for 2007, 44% had data warehouses on their lists and 43% had data analysis tools.

In a market dominated by acquisitions of small, specialized companies, Oracle's deal to buy Hyperion is a blockbuster. Hyperion is the leading provider of financial planning and management software, including tools for monitoring and analyzing a company's key performance metrics. That's a niche, but a very attractive one because CFOs are the ones using Hyperion's apps. "This is the system of record for financial reporting and regulatory filings for most of the Fortune 500," Oracle president Charles Phillips said last week during a Webcast. In addition, Hyperion's online analytical processing server, used for "multidimensional" analysis, is a step up from Oracle's own OLAP engine. Oracle plans to keep the Hyperion sales force intact.

The acquisition, subject to regulatory approval, gives Oracle a stronger BI portfolio with which to pursue enterprise application rival SAP. Only a week earlier, SAP disclosed plans to acquire Pilot Software, a private company that also sells performance management software, though not on the same scale as Hyperion.

With Hyperion, Phillips says, Oracle will play in five areas of BI: foundation services such as data integration and access; BI dashboards and reporting tools; databases and other data stores; analytical applications such as those sold by Hyperion; and "transactional" applications, such as ERP and CRM, that generate business data. In other words, the whole BI software stack. No other vendor has all those pieces.

Three big independent BI vendors remain: SAS Institute, with revenue last year of $1.9 billion; Business Objects, with revenue of $1.25 billion; and Cognos, on pace to exceed $1 billion in fiscal 2007. Hyperion is comparable in size to Cognos. Smaller players include Informatica, Information Builders, and MicroStrategy. Cognos CEO Rob Ashe argues independent vendors excel in heterogeneous computing environments: "Customers share their data in many different places."

HP also is positioning itself as "the Switzerland of the BI world," says Barnes, whose new BI unit sells data warehouse software, servers, storage, and services but is partnering with Business Objects, Cognos, Hyperion, Informatica, MicroStrategy, and SAS to provide the pieces it lacks. But neutrality may be easier said than done, as HP increasingly bumps up against another of its partners: Oracle.

Microsoft looms large at the lower end of the market. For years, one of the great unfulfilled promises of BI--and there have been many, including the elusive "one source of the truth"--has been that it would become an everyday tool for everybody in the company. "Our strategy is to go after 10 times the footprint of a traditional performance management solution," says Chris Caren, general manager of Office business applications for Microsoft.

Microsoft's BI line includes analysis services in the SQL Server database, visualization technology acquired last year with ProClarity, Business Scorecard Manager, and, of course, the Excel spreadsheet. The ProClarity tools and Business Scorecard Manager will be replaced by Office PerformancePoint Server 2007, a business performance system due in the next few months that supports budgeting, forecasting, and scorecards. In the second week of May, Microsoft will host its first BI conference, in Seattle. "It's really our coming-out party," Caren says.

Microsoft argues that companies can push BI to more employees and partners because it makes the tools easier to use and more affordable. Instead of Ph.D. specialists running algorithms against data sets, average bookkeepers can point and click using an Excel add-on. "It's self-service data mining," says Caren. Microsoft will have to prove that; experience tells us it won't be that easy.

At Xcel Energy, BI tools are indeed moving beyond senior-level number crunchers. Beginning next month, Business Objects dashboards will give call center personnel views of customer information, such as a person's geographic area, to help determine which bill-payment options are most likely to work for a customer.

THE ACTION ISN'T OVER

For Business Objects CEO John Schwarz, the Oracle acquisition comes as a relief. Business Objects was considered a target itself--Schwarz won't comment on whether he had talks with Oracle--and that raised questions. "When we went to get down to business, the first question was, 'Who's going to buy you?'" he says.

Not that it's over. Either Business Objects or Cognos would fetch at least $3 billion from a handful of possible suitors: HP, IBM, Microsoft, and SAP. Each has been expanding its BI portfolio through acquisitions that, so far, mostly have been small. Business Objects has acquired seven companies over the past three years, including Crystal Decisions, SRC Software, and FirstLogic (see chart below).

Mark Lack, financial and analysis planning manager with Mueller Inc., a manufacturer of steel buildings and metal roofing that uses Cognos tools, says he doesn't mind that market consolidation will lead to fewer but stronger BI vendors. "You'll see technological innovations that you've never seen before," he predicts.

BI vendors are under pressure to deliver more options to customers, Schwarz says. "There's an urgency and emphasis on this technology," he says. "Most organizations are under tremendous pressure to improve their performance." Customers are asking for complete packages, he says, including modeling and predictive analysis tools; dashboards and scorecards for managing processes, workflows, and performance; and data integration tools.

IBM comes to the market with a focus on its DB2 database software, middleware, and professional services. Like other BI vendors, IBM has made some gap-filling acquisitions, including Alphablox, Ascential Software, and Unicorn Solutions over the past three years. A year-old Information On Demand initiative aims to deliver information, both structured and unstructured, where and when it's needed. IBM acquired content management vendor FileNet for $1.1 billion and introduced a data integration server last October called Information Server. "I call this third-generation business intelligence," says Ambuj Goyal, general manager of IBM's information management software.

Earlier generations--query and analysis, then analytics--remain the domain of specialists such as Business Objects, Cognos, and Hyperion, he says. All three provide tools for analyzing data collected by IBM's Information Server.

Increasingly, search technology is being built into front-end analytical tools. Business Objects this month will introduce an upgrade to its flagship Business Objects XI that includes internally developed search capabilities. Cognos and enterprise search company Fast Search & Transfer have integrated their technologies, and Hyperion recently began offering Hyperion System 9 Smart Search for Google, which lets users search Hyperion's repository using the Google Enterprise Appliance.

IT'S A SLUGFEST

So who's the loser in the Hyperion acquisition? Oracle wants the world to think it's SAP.

Don't believe it, says Doug Merritt, SAP's general manager of suite optimization. SAP counts about 13,000 deployments of its own BI platform, NetWeaver BI, and 11,000 of its data warehouse, SAP Business Warehouse. The Pilot deal gives it performance management software. "SAP hasn't been asleep at the switch," Merritt says.

In an assessment of the BI market released in January, Gartner placed Oracle in the leaders' quadrant, along with the big four independent vendors--Business Objects, Cognos, Hyperion, and privately held SAS--noting the newly branded Oracle Business Intelligence Suite that came from the Siebel acquisition. SAP straddled the edge between challengers and leaders, along with Microsoft and Information Builders, according to Gartner. Says Merritt, "It's a slugfest between all of us."

With Hyperion about to disappear into Oracle, Oracle claiming supremacy, Microsoft squeezing licensing costs, Teradata breaking out of NCR, and HP plowing in, the slugfest has only just begun.

With John Foley