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Consolidation of BI players gathers pace

by Peter Traynor, Editor in Chief, Dashboard InsightTuesday, April 22, 2008

CONSOLIDATION in the business intelligence space has hit fever pitch with large players such as SAP, IBM and Oracle busy gobbling up smaller fish in the sea.


HSBC Australia chief information officer Brenton Hush says consolidation in the BI space is a driver for in-house development

Since March 2007, the three have dished out $US15 billion ($16.5 billion) to lure their prey.

Oracle offered $US3.3 billion for Hyperion, SAP made a $US6.8 billion play for Business Objects while the IBM-Cognos union cost $US5 billion.

The question now is, has the spending frenzy had a negative impact on customers and their buying patterns?

For HSBC Australia, the simple answer is yes. The bank has been using its technology resources to be less reliant on vendors in view of the mergers and acquisitions.

"Consolidation in the business intelligence space is probably a driver to why we've taken a lot of that core competency in-house," says HSBC Australia chief information officer Brenton Hush.

HSBC uses business intelligence tools from Business Objects, which was recently acquired by German software giant SAP.

"There is a real big concern about where some of that consolidation is going to end up," Hush says. "But we're in a pretty good position to ride that out without much impact."

HSBC is working on a major BI project to enhance its data analytics capabilities for content and campaign management.

"We will be able to actually analyse the activity and behaviour of our customers around certain promotions -- which obviously is a very powerful tool for our marketing team.

"The new system will recognise a customer through their logon and understand their relationship with us.

"While we use a bit of Business Objects, the OneHSBC business intelligence platform is where all the bells and whistles will be at," Hush says. The enhancements would allow HSBC to cross-sell products more effectively and understand its customers better.

The bank's decision to set out on its own is unique as it can tap into its 28,000-strong IT workforce located all over the world. This is a luxury not many organisations have or can afford, as MBF Australia's business intelligence head would tell you.

The health insurer investigated offerings from Business Objects, Cognos, and SAS Institute when it sought to apply advanced analytics to its data. After a year's research, it chose SAS. Today, MBF uses the entire SAS business intelligence suite, says Paul Ormonde-James, MBF group business intelligence head.

MBF has spent millions on implementing SAS products, but before signing the first cheque, Ormonde-James says, "I asked myself how long SAS was going to be around".

The privately held SAS has made it a point to assure MBF that it was not going to sell out anytime soon. Even if it does, says Ormonde-James, the company's analytics products are a cut above the rest and will survive.

"The big boys who've bought all these companies have a journey to go on, but SAS is already there," says Ormonde-James, who is also the president of the Australian chapter of the Data Warehousing Institute, says.

He foresees many more business intelligence projects ahead, saying: "There is no finish line when it comes to competitive advantage."

While MBF has a fairly mature business intelligence set-up, Television Shopping Network (TVSN) is just starting out. A TV shopping channel that airs on Foxtel, Optus and Austar, TVSN has about 3 million customers and 300,000 products. It hopes to grow from a $200 million operation to $500 million in five years, but without timely insight into data, that goal would be a mere dream.

So Kyle Amadio, IT manager at TVSN, decided it was best to buy an off-the-shelf product as building a solution from scratch would be near-impossible.

"Imagine having about five Access databases and each time you wanted to generate reports, you had to get the data from a legacy system via text files. The whole process of data extraction was extremely time consuming," Amadio says. With data spanning 12 years, it would take days to load and analyse, he says.

TVSN chose IQ, a Sybase product, to run on a Cognos software layer for its business implementation project, which is under way.

"The market consolidation is a good sign," says Amadio. "It forces them to be innovative and make their software stand out."

Nikita Atkins, director of performance indicators, University of Wollongong, agrees. "It was always inevitable that smaller business intelligence software makers would be gobbled up."

The university has been using business intelligence tools from Cognos and Nasdaq-listed SPSS for some five years.

By June it aims to complete a project that would make performance prediction a breeze by integrating both products.

"The bottom line is, we would be able to give the university's key decision makers just the right amount of information they require and extracting that data for them will become much easier and faster. "It used to take months but can now happen in a matter of minutes," Atkins says.

The university has spent nearly $1 million investing in business intelligence tools and in-house expertise.

Like MBF's Ormonde-James, Atkins too sees more investment in business intelligence and says Big Blue's purchase of Cognos will have no impact on these decisions.

"It's business as usual for us. I'm happy with IBM taking over Cognos. I think Cognos can teach IBM a thing or two."

In fact, market research firm Gartner predicts good times ahead for business intelligence providers in Australia.

Gartner business intelligence analyst Neil McMurchy says Australia will experience 12 per cent-plus compounded annual growth in revenue through to 2011.

"Business intelligence has become such a high priority for organisations here, because most of them have spent the last 10 years getting their ERP (enterprise resource planning) and CRM (customer relationship management) systems in place.

"As a result of these technology investments, they have amassed massive amounts of information and it costs money to do something with it," McMurchy says.

As to market consolidation, it's not abnormal in an environment where there is very good technology around, the analyst says.

And when the big guns go in for the kill, that spells the beginning of tumultuous times ahead. In the end, organisations will keep spending to obtain the competitive advantage shareholders demand. "Suffice to say people aren't jumping off cliffs over consolidation in the business intelligence space," he says.

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