Has The BI Market Consolidation Been Crystal-Clearly Actuated? Part Two: Market Impact




Event Summary

The frantic first week of June that marked an outright internecine war in the ERP space, seems to have been somewhat repeated in the second half of July, but this time in the business intelligence (BI) market. The following acquisitions were announced:

  • Business Objects will acquire Crystal Decisions

  • Hyperion will acquire Brio Software

  • Actuate Corporation has completed the acquisition of Nimble Technology

  • Geac and SSA GT have acquired Comshare and Elevon

  • Lawson Software has acquired Numbercraft

For a comparison of the consolidations taking part in the BI market versus those among ERP vendors see "BI Market Consolidation Compared to ERP Market Consolidation".

This is Part Two of a three-part note.

Part One detailed current acquisitions in the BI Market.

Part Three will discuss Competition and make User Recommendations.

Market Impact

While one could find some elements of similarity (e.g., market share bolstering and cross-selling opportunities) with the ongoing raging consolidation in the overall enterprise applications market (particularly in the mature ERP segment), the onset of consolidations in the BI market still has much more to it than meets the eye. One group of reasons would lie in different current evolutionary states between ERP and BI markets (i.e., the mature and highly penetrated first vs. the still fragmented and far from being saturated latter), while the others would come from peculiar factors, such as Microsoft's intended foray into the reporting sector of the broader BI market with its recent unveiling of SQL Server Reporting Services, slated for a foreseeable future and forcing those directly affected (particularly its still quite involved partner Crystal Decisions) to make defensive moves. Hence, Crystal, with already interesting genesis (see Seagate Software 'Crystallizes' Its New Name: Crystal Decisions) and particularly successful recent past, had recently announced its IPO intentions for ~$172 million, and it was also logical to expect acquisition suitors to start knocking on the door.

Consequently, the above Business Objects and Hyperion acquisitions have a few common traits such as 1) the bigger vendor availing itself of complementary products, 2) the bigger vendor with a more complex product acquiring a smaller competitor with simpler/cheaper products, and 3) both acquisitions have reshuffled the BI/analytics market ranking pushing once leading Cognos beneath, at least revenue wise. Also, the sales and marketing programs of the merged companies largely complement each other Crystal and Brio have been more successful at selling to the CIOs as opposed to reaching the finance department or boardroom, whereas Hyperion and Business Objects, conversely, have sold mainly to the CFOs and CEOs. Increasingly, their imminently more rounded CPM suites will become a joint sale to finance and to other business areas like sales and marketing, product development, operations (inventory management, quality control, production planning), customer service, and to the IT organization as well.

Still, the two mergers have at least the following two major differences:

  1. The functional rationale - Hyperion has seemingly had more reasons to extend its OLAP infrastructure and expanding CPM product line to include Brio's query and reporting capabilities, whereas Business Objects' focus remains mainly within reporting and interactive analytics, but the acquisition gives it a well-oiled organizational infrastructure, thereby exceeding Cognos and Hyperion in revenue, licenses, customers and OEM partnerships. Both Business Objects and Crystal have established channel partnerships built on the capability to embed within the context of the partner application. Indeed, the merger should place the merged Business Objects in the leading BI/reporting market position and, in this slowly but surely maturing market, product footprint and financial stability will soon mean more opportunities and the clout to compete.

  2. The level of despair - Brio Software, while nonetheless the top BI player, which brings lots of innovative technology as a dowry (see Brio Technology Expands Support for WML and XML and Brio Technology Enters the ETL Market), has long been financially troubled following up on a poorly executed acquisition of Sqribe Technologies in 1999, and has since been in need of a white knight to ever compete against Cognos and Business Objects, whereas Crystal and his future parent have been two of the best performing software providers lately.

OEM Partnerships Affected

Additionally, the recent spate of intra-market mergers complicates many soon-to-be former and/or still ongoing OEM partnerships, such as between Hyperion and Crystal, Business Objects' use of Hyperion's Essbase XTD analytic platform, while it is worth noting Business Object's use of Adaytum prior to its acquisition by Cognos and of TopTier prior to SAP's acquisition (see Business Objects Teams With TopTier For Analytics). The market segment has also been riddled by a number of patent infringement lawsuits in the past (see Business Objects Objects Again and Business Objects Outguns Brio Technology in Patent Dispute).

Where both acquisitions again have similarities would be the challenge of the products' overlap, and the fact that the precise products' roadmaps are yet to be produced. The Brio acquisition has some potential for Hyperion given a reasonably little product overlap, the physical closeness of the vendors' headquarters, former partnering in the past (with a result that Brio can query Essbase XTD cubes) and the clarity of who will be the boss in the common household. It is likely that Hyperion will integrate Brio's products into its suite to deliver more reporting and richer ad hoc capabilities within its Hyperion Financial Management and Hyperion Planning applications and to extend custom applications built with its OLAP platform, rather than pursuing a standalone BI initiative and alienating a number of partners and customers that are currently using other BI products. Still, at this stage, it is not clear what happens between Brio Intelligence and Hyperion Analyzer, Hyperion Reports and Brio SQR, or Brio Metric Builder and Hyperion Performance Scorecard equivalent products (i.e., convergence, one product's discontinuation, or dual strategy). Whichever direction Hyperion plans to take, it will have to quickly articulate its strategy to the market.

While Business Objects will claim that there is more overlap in marketing message than in the products per se, and it will focus on stressing the differences (i.e., Business Objects is largely deployed to power users for on the fly' query and reporting due to its semantic layer's ability to abstract the data structures, and to management users through dashboards and scorecards, while Crystal is primarily used by IT professionals as a tool to design and disseminate reports out to very large user communities), it has been a very rare occurrence to see that in a merger of companies making similar products at least one product has not been affected. However, in addition to two scorecards products (i.e., Crystal Performance Scorecard vs. Business Objects Performance Manager) the vendors will have similar tools involved in creating reporting products such as semantic layers, query engines, design environments, formatting and rendering engines, distribution engines, and so on, and will likely have to decide on a single set of components, which will be a grueling and emotional task down the track.

Challenges

In addition to products' rationalization, the integration at sales and cultural levels will be challenging. While Business Objects have had a solid acquisition track in the past, Business Objects should not discontinue the Crystal brand in the same way the Acta or Blue Edge brand names were easily discontinued after recent acquisitions, since Crystal means both revenue and renowned products (and even a bigger brand name in North America than Business Objects), while Acta and Blue Edge meant a mere functionality. Cultural dissimilarity and power clashes between two strong matrimony partners have often flawed the software mergers, and unraveling Crystal's strong channel and OEM partnerships may likely result in conflicts, when Business Objects' staff start targeting these. Further, Business Objects used to have alliance with Adaytum for financial reporting, and it continues to prefer alliances for extending its reach into modeling, planning, and budgeting. While the focus on enterprise reporting is notable, sooner or later, Business Objects will have to acquire its own planning solution or be relegated to a weaker competitive position in the broader CPM marketplace.

On the other hand, since CPM typically enters most corporations in the area of financial planning, Hyperion, having a core competence there, has achieved a significant penetration like its financial analytics peers (e.g., Cartesis, Comshare, Cognos, Longview Solutions, Informatica, etc.). However, CPM has begun to spread into other business areas, and it might realize its true success in any organization when it pervades, e.g., quality improvement, supply chain management (SCM), customer relationship management (CRM) or product lifecycle management (PLM). Therefore, the BI vendors with strong financial management products including Hyperion and Cognos may be well positioned to extend BPM into the enterprise, but for the time being they are still perceived as pure-financial players.

This concludes Part Two of a three-part note.

Part One detailed recent events.

Part Three will discuss Competition and make User Recommendations.

 
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