(This post is a
continuation of a series on BI
& DW Hyped trends).
The death of the independent software firm is greatly
MicroStrategy (MSTR), SAS, Informatica (INFA), Actuate
(ACTU) and Teradata (TDC) are just some of the independent firms that are probably
getting tired of hearing that they are no longer viable. And their long-time
and happy customers are probably wondering what the industry analysts and
pundits are smoking when they proclaim that the software titans have taken over
the world of BI and DW.
After all, the titans did not take the market over, but
rather they acquired companies – Business Objects (SAP), Cognos (IBM) and
Hyperion (ORCL) – who were the market leaders. If, as the pundits proclaim, IT
departments are only buying from the titans because they want “one throat to
choke” then why were Business Objects, Cognos and Hyperion kicking the titans’
butts before they got acquired?
And, do the pundits examine IDC market share numbers? The
titans and their acquired companies only had 37% of the market in 2006. That
means nearly two-thirds (!) of the market is not buying the titans-only
purchase plan. And most market share studies under-represent open source,
on-demand software and emerging technologies provided by innovative independent
Rather than opinion and anecdotal feedback (primarily from
the software titans themselves and their systems integration partners and
customers), the market place, i.e. what the customers are buying, shows that
they continue to purchase solutions from independent software firms. The
independents will continue to be alive and well.
Many companies have long-standing relationships with these
firms and are not dropping successful implementations because pundits tell them
that they should. Their business people are quite happy and productive, so why
migrate? Companies like SAS, Information Builders and Dimensional Insight (to
name just a few) have been providing successful solutions to their customers
for more than a decade. Why is that
going to change?
and emerging technologies generally come from independents and new ventures
rather than the titans. On-demand software, open source software, data
visualization, industry specific performance management solutions are just a
few areas where the innovation is coming from the independents. And it seems
companies are willing to buy that software from them.
Another reason why
independents will continue to thrive is, besides innovation, they often provide
a much lower TCO (total cost of ownership) that the titans. First, as the
titans acquire and absorb companies and products the resulting product lines
are almost always more complex and costly to use. The titans will point to
increased functionality, but there is no free lunch to gaining that
functionality; the customer pays for it in many ways.
Second, as a former software engineer, I am inclined to
believe that as your product line continues to be expanded through acquisitions
and products “integrated,” these product lines have increasing amounts of
“kludges” to get the those products to work together. I know you can use SOA
and services to “integrate” products, but these can be used as a modern
band-aid to integration. Finally, the titans’ licensing schemes always seem to
expand with each release and acquisition. The independents can much more easily
under-price the titans.
Mergers and acquisitions (M&A) have always been part of
the software industry. As any industry matures, M&A activity increases and
consolidation is inevitable. You can make a persuasive case that software
independents are unlikely to grow to be multi-billion titans themselves before
they are acquired. But it is tough to make the case that many independents
cannot exist and grow in this marketplace. The evidence does not support that
In addition, at various times in the last couple of decades pundits
made the case that IBM, then Microsoft and then Oracle so dominated the
landscape that independents could never grow and thrive. But somehow companies
such as Business Objects, Cognos, Hyperion, PeopleSoft Seibel and many others
grew to be large and then got acquired. And there are still many successful tech
firms such as Google, SAS and SAP. And we have dozens of successful
independents providing solutions that are being bought by companies across all
Just look at the large pharmaceutical and medical device
companies. They are behemoths that continue to grow organically and by
acquisition. No one in that industry is declaring the biotechs dead just because
they often get acquired. In fact, the biotechs are often the innovative
The BI, DW and performance management industry is maturing
and the titans will continue to grow both organically and through acquisition.
But the death of independent software companies is greatly exaggerated.