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Datamonitor: Acquisitions and Consolidation in the Business Intelligence Market Intensifies Competition
Independent Market Analyst Also Foresees Additional Market Turmoil From End-User Base

by Maroushka Kanywani, Editor, Dashboard InsightThursday, September 4, 2008

London, UK, September 4, 2008 - The business intelligence (BI) market has been a hotbed of activity over the last two years, witnessing a flurry of large-ticket acquisitions. In the last year alone, three of the largest independent pure-play providers have been acquired by larger software conglomerates - Cognos by IBM (NYSE: IBM) , Business Objects by SAP (NYSE: SAP AG), and Hyperion by Oracle (NASDAQ: ORCL). This has resulted in the consolidation of a market once dominated by pure-play vendors, ushering in commoditization which poses a threat to smaller and larger vendors alike. In a new report "Business Intelligence: Consolidation and Beyond", independent market analyst Datamonitor expects competition to intensify further, as larger players bridge gaps in their offerings and present a holistic portfolio to their clients and smaller and pure-play vendors try to establish themselves firmly in their respective niches. Datamonitor also foresees additional market turmoil from an end-user base that is in two minds, some waiting for stability and others for bundled offerings that could result in lower prices.

"Pure-play BI vendors are slowly waking up to the fact that they are no longer competing with their immediate peers", says Surya Mukherjee, senior BI analyst with Datamonitor's technology team and the report's author. "Software conglomerates are fast integrating the value chain by acquiring capabilities across the spectrum of BI offerings and delivering them at lower prices. On the other hand, smaller vendors are desperately trying to stay relevant to their end-users. Competition can only intensify from here on. Whatever be their strategy, successful companies of tomorrow will be those that can successfully realign themselves with market realities." Although competition will increase, opportunities from the BI market will still remain substantial in real terms. Business Intelligence comprises a broad category of application programs and technologies for gathering, storing, analyzing, and providing access to data to help enterprises make better business decisions.

According to Datamonitor the global BI market stood at $4.4 billion in 2007 in license revenue alone and it expects this to reach $7.9 billion by 2012.

Opportunities will remain significant in real terms. In addition to the already existing user-base for BI solutions, Datamonitor expects the addressable market to expand as BI touches more users across organizations on its journey to pervasiveness. The typical demographic of a BI user is expected to be extend beyond analysts and power users, reaching departments and empowering employees lower down the hierarchy. Innovative offerings from vendors such as improved mobile interfaces and in-memory capabilities will also ensure BI products reach a larger and non-traditional end-user base.

As market dynamics change, technology will become increasingly customer-focused Datamonitor expects future innovations in the global BI market to be incremental but increasingly customer-focused, catering to specific end-user problems.

Promising technologies such as in-memory analytics and natural language processing will aim to analyze previously unexplored enterprise data faster. Increased demand for mobility in the enterprise will also spur growth in the traditionally ineffective mobile BI area.

"Developing market-issue specific BI modules is currently a key focus area for vendors", says Mukherjee. "Developing vertical and functional specialization will serve as a key differentiator in the future."

The convergence of the BI value chain and integration of offerings will require differentiated strategies The entry of software conglomerates such as IBM, SAP, and Oracle has resulted in a shift from a disaggregated value chain to a more converged one. Given the high growth opportunities of the sector and the high degree of commoditization within layers, the segment may witness further consolidation, resulting in a fully integrated value chain.

According to Datamonitor, larger vendors will most likely start adopting competitive strategies such as bundled product offerings and price reductions, while exploiting their expansive sales and distribution networks to put smaller vendors under pressure. However, Datamonitor points out that smaller vendors can effectively target niches and develop vertical expertise to position themselves in gaps.

Mukherjee concludes: "Larger vendors will try to bundle and stack discrete BI applications with adjacent technology areas to realize economies of scale. Such bundled applications have the potential to flatten the BI market. To combat these moves, smaller and less diversified firms will have to demonstrate industry alignment, maintain strong relationships with end-users, and nurture innovation as a differentiator."

End Notes for editors: Datamonitor's report "Business Intelligence: Consolidation and Beyond" provides an overview of trends across the BI market. This report provides comprehensive analysis of the business intelligence (BI) market focusing on market opportunities, evolution of technology, the competitive landscape, customers' concerns and vendors' go-to-market strategies. Surya Mukherjee is a senior BI analyst with Datamonitor's technology team and author of the report.

About Datamonitor

Datamonitor is the world's leading provider of online data, analytic and forecasting platforms for key vertical sectors. We help our clients, 5,000 of the world's leading companies profit from better, more timely decisions. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for seven industry sectors: Automotive & Logistics, Consumer Markets, Energy, Financial Services, Healthcare, Retail and Technology. Datamonitor maintains its headquarters in London and has regional offices in Frankfurt, New York, San Francisco, Chicago and Sydney.

See www.datamonitor.com for further details.

Contacts
Krishna Rao
Datamonitor, London
Tel: +44 (0)20 7551 9336
krao@datamonitor.com

Lonnie Coates
Datamonitor, New York
Tel: +1 212 652 5334
lcoates@datamonitor.com

Denis Mason
Datamonitor, Sydney
Tel:+61 2 8705 6903
dmason@datamonitor.com

 

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