Which Way To Go In BI?

David Jones, director of London-based Paragon Consulting Group, is one merger away from winning a bet. Anticipating the wave of consolidation sweeping through the business intelligence software market, he correctly forecast Oracle's recent takeover of Hyperion and Business Objects' purchase of Cartesis. If IBM picks up Cognos, one of the last sizable pure-play BI vendors left standing, Jones will be three-for-three and 100 pounds richer.

The issue is of more than just sporting interest to Jones. Paragon, a specialist in business performance management technology, is a longtime partner of Hyperion and Cartesis. Like thousands of other VARs and solution providers, Paragon is navigating a rapidly shifting market and finding itself thrust into new vendors' partner ecosystems.

"The whole issue is around execution," Jones said. "If the mergers are well-executed, it's only going to accelerate the market. But the dynamics are changing. Now we have three megaplayers—SAP, Oracle and Microsoft—and two or three really big BI players."

Acquisitions aren't the only force reshaping the BI landscape. Driven by more stringent compliance regulations and an increasing enterprise focus on using IT to guide business-process improvements, companies are placing higher priority on deriving useful, user-friendly analytical information from their reams of corporate data. For the second year in a row, BI applications topped the list of technology priorities in research firm Gartner's annual CIO survey.

Sniffing market opportunity, application vendors are beefing up their portfolios in an effort to hang on to customers that would otherwise look elsewhere for analytics, forecasting and reporting tools. Microsoft is poised for a cannonball dive into the high end of the BI market later this year, when it ships the new PerformancePoint Server software it created by meshing its technology with applications acquired from ProClarity. Meanwhile, Oracle is shopping to supplement the powerful analytics software it got with its Siebel acquisition, and Business Objects is undergoing a comprehensive overhaul aimed at giving it the strength and scale to compete with the application giants.

Solution providers are already feeling tremors from the seismic shifts. To adapt to the new realities, some are eyeing new alliances: "It took a bit of time for Oracle to get their arms around how to sell BI, but this year they're coming on pretty strong," said Sid Banerjee, CEO of BI services firm Claraview, Reston, Va.

"Any company that wants to be in this space should look at them very seriously." Banerjee said his firm is likely to add Oracle to its partner network, which currently includes companies such as SAS, Business Objects and Cognos.

Others are bracing for the impact from Microsoft, Redmond, Wash. The company's marketing push—it hosted its first BI conference this month, headlined by Steve Ballmer—is attracting increased customer interest, resellers report. Golden Consulting Group in Bloomfield, Conn., recently began hosting "Dueling BI" seminars facing off wares from Microsoft and Business Objects, both of which it partners with. The debut event packed the room, Golden Consulting President Ken Dixon reports.

"Business Objects is still ahead of Microsoft, from a product and functionality standpoint, but I think Microsoft will attempt to scale up as much as they can," he said.

Microsoft's looming BI assault will reverberate throughout the industry. The company's deep pockets and monopolistic hold on corporate desktops give it a valuable beachhead. With so many customers already so heavily invested in Microsoft's infrastructure, the opportunity to maximize that back-office foundation and take advantage of users' familiarity with front-office applications like Excel is a strong selling point, VARs say—and those who have started kicking PerformancePoint's tires say it's poised for a strong start off the blocks.

Computer Generated Solutions (CGS) in New York is a longtime Microsoft partner that has two clients participating in PerformancePoint's early adopter preview program. Those customers have been favorably impressed by the software's ease of use and functionality, according to Helene Cole, CGS' vice president of product strategy. One, custom pool installer AnthonySylvan Pools, has cut from hours to minutes the time it takes to create custom reports on metrics like division profitability.

"My take is that Microsoft is in it to own this market and win. From our perspective, every prospect that we bring it up to is really intrigued by it. Customers are looking to leverage the Microsoft stack," she said.

Next: One Potential Tripwire

One potential tripwire: Microsoft has a mixed track record with splashy version-one software launches. The CRM industry quailed before Microsoft CRM's 2003 debut, but when the software finally shipped, customers ran into serious usability problems, and functionality significantly lagged that of Microsoft's more-mature rivals. It took another three years for Microsoft to ship a competitive version.

The company insists it's learned from its mistakes. Microsoft's Technology Adoption Program (TAP) for PerformancePoint has more than 6,000 participants testing and reporting back on the developing software, which is slated to ship this summer.

"We're very pleased with the participation and feedback we're getting from the TAP," said Michael Smith, director of marketing for PerformancePoint. "Based on the feedback, we've made a number of changes from a usability standpoint."

A Microsoft surge would put particular pressure on the BI industry's current leader in the channel, Business Objects. Helped by acquisitions like its 2003 buyout of reporting software maker Crystal Decisions, Business Objects, San Jose, Calif., has posted double-digit sales growth for each of the past five years, generating revenue of $1.25 billion last year. That puts it comfortably ahead of the pack in the crowded BI field, but it's still a little fish compared to software heavyweights like Microsoft and Oracle.

The BI field's combination of hot prospects and smallish vendors has turned it into a "buy or be bought" M&A battleground. Hyperion's takeover was so expected that its partners just shrugged: "We wondered when it was going to happen and whether it would be Oracle, IBM or SAP," said John Nilsen, vice president of sales at 1Answer Solutions, Englewood, Colo.

While Business Objects has long been on Wall Street's radar as a likely buyout target, the company leadership is maneuvering for independent survival. Since John Schwarz replaced founder Bernard Liautaud as CEO in September 2005, Business Objects has been working through a comprehensive overhaul aimed at building out its end-to-end offerings. Its $300 million Cartesis acquisition, announced in April, gives it a powerful set of performance-management software tailored for CFOs.

Partners are generally pleased with the moves Business Objects is making, though they've run into a few potholes while navigating the new road. Most visibly, Business Objects' campaign to compel all partners offering training services to become authorized education partners—and to pay fees for that designation—sparked bitter outcries. A sizable third-party training ecosystem had grown up around Crystal Reports' software, and those partners didn't look kindly on Business Objects' pressure tactics. Even some partners that did pony up for the training license remain annoyed about it.

"They corralled us in," said Bob Vander Woude, vice president of sales and marketing at Preferred Strategies in Soquel, Calif. A J.D. Edwards specialist, Preferred Strategies runs customized training classes that focus specifically on using Crystal Reports with customers' actual J.D. Edwards ERP data. It's now paying for generic manuals it doesn't use, because Business Objects insisted that all authorized education partners buy the official training materials for their clients.

Joe Guerra, director of BI at Andrews Consulting Group, Cheshire, Conn., recalled another oops: Last year, Business Objects pushed partners to provide their prospect lists. Reluctantly, Andrews Consulting did—then saw all of its prospects turned into named accounts for direct-sales pitching. To Business Objects' credit, though, it immediately pledged to fix the situation, Guerra said. "It's like anything in business—if you go in screaming, it's going to get ugly. If you go in reasonably, they respond reasonably. We've talked with them, and this won't happen again," he said. "We've very pleased with the relationship that we have."

If Business Objects stumbles, plenty of rivals are poised to snap up its partners. One reseller that had a falling out with Business Objects, Creative TechnologyTraining Solutions (CTTS) in Shelby Township, Mich., is now happily partnered with Cognos, which knows it needs to grow its partner network and is working hard to keep its VARs happy, according to CTTS founder Michael Ward.

Oracle continues to snap up rivals and partners; Andrews Consulting says it will probably extend its ties with the company, which is attracting more interest as it deepens its BI offerings.

And SAS, a company whose statistical software is considered the industry's gold standard, is wooing resellers for its fledgling channel program. Launched in August, the program is too new to judge, participants say—Claraview hasn't closed many SAS deals, but sees strong interest, Banerjee said. With annual revenue of nearly $2 billion, privately held SAS could become a major BI force.

For partners that stay standing, the BI shakeup may simply be a welcome sign of a dynamic market. Sales at Paragon Consulting are booming, according to Jones, who said he's not worried about the new ownership of two of his closest partners: "We're not fazed or frightened by it. We see it as an opportunity. As long as they understand the skills we bring, I think we'll get along famously."