Is the BI Software Market Maturing?

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Is the BI Software Market Maturing?

IDC just published its latest report “Worldwide Business Intelligence Tools 2005 Vendor Shares” on the state of the business intelligence industry . According to IDC’s research, worldwide software revenue grew 11.5% in 2005 to $5.7 billion.


“IDC expects the market to maintain this level of growth for the foreseeable future," said Dan Vesset, IDC’s Business Analytics research director and the report’s author. "Although there are signs of a shift in the competitive landscape, BI tools remain an attractive market for software vendors and one of the top investment priorities for end-user organizations."

The two subjects of interests are the growing business demand for business intelligence and the competitive marketplace for software vendors.

The report states that business intelligence is “something without which organizations can’t succeed. However…(it) still has a long way to go in reaching all the necessary people and processes in companies, government agencies, hospitals, and universities.”

Therein lies the exciting promise of BI that is building upon its own successes. BI has enabled great business value at many companies, but its impact is really just beginning to be felt. Up until now business implementations have targeted analysts, managers and “power users” within enterprises, but broader adoption is starting to take hold in the remaining 80% of enterprises’ employees.

Compliance, competitive pressures and intercompany connectivity between customers, suppliers and partners are all business drivers for wider BI adoption. In the short term, performance measurement and operational BI projects are expanding BI’s business breadth and depth. In addition, these tools have become cost- and resource-effective to start penetrating the SMB (small-to-medium) marketplace.

The report’s message on the software vendor landscape is that the market is maturing and consolidating (just ask Larry Ellison). It states that the top 10 software vendors control approximately 62% of the market. Although that may sound high, it appears to me that it does not approach other mature industries where the top few companies control 90% of market. In fact, it surprises people that so many companies are still selling business intelligence software today despite the fact that it is such a mature industry. Many of these smaller software vendors are relatively unknown despite the fact that they have quality products that offer tremendous benefits to their customers,. Smaller software firms are the source of many innovations in the BI market, and are also where some of the best software talent can be found.

But speaking of the 800-pound gorillas, the top five business intelligence software vendors, according to IDC, are:

1. Business Objects (13.9% market share)
2. SAS Institute (10.2%)
3. Cognos (9.9%)
4. Microsoft (6.2%)
5. Hyperion Solutions (5.0%)

Consolidation has already occurred from top to bottom of this industry, but more is likely.

The report refers to the battle between standalone BI (BI pure play vendors) and database-embedded BI from Microsoft, Oracle (#6, 4/3% market share) and IBM (#11, 2.4%). IDC states that the database companies have expanded their BI offerings and are growing at almost double the rate of BI pure-plays.

I think this trend is happening because the database vendors are expanding the BI functionality they offer, BI is a natural extension of their database (and data warehousing) functionality, and the offerings are a cost- and resource-effective solution. Remember pure-play BI vendors starting pushing aggressively BI consolidation a few years ago, now database vendors are extending the sales pitch to suggest the advantages if that consolidation originates from a company’s database vendor.

An interesting observation is that the number one BI tool in the marketplace, Microsoft Excel, is NOT counted as a BI tool, thus understating Microsoft’s impact on the marketplace. My take? Microsoft is a force to be watched because of:

  • Microsoft SQL Server 2005, including Analysis and Reporting Services
  • The acquisition of ProClarity, which will grow its enterprise applications business and expanding the role of Excel as a BI interface

The report states “Microsoft’s impact on the BI tools market cannot be overemphasized….it will reshape the BI tools market over the next 15 years.”

The business intelligence market is certainly healthy and growing. Has business intelligence reached the tipping point where it will finally become pervasive for enterprises both internally and externally with their customers, suppliers and partners? Will it become pervasive in enterprises of all sizes and not just the Fortune 500? It is an exciting time to be a business intelligence practitioner.

But remember, it’s all about the data!

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