A Gartner survey shows that CIOs rank business intelligence (BI) projects as the number one technology priority for 2007. The prominence given to BI presents both opportunities and threats for BI vendors, according to Gartner.
The global survey of 1400 CIOs asked participants to name their top technology priorities for the year and BI topped the list, with other CIO concerns — such as enterprise apps, legacy application upgrades, networking and mobility — ranking lower.
Gartner predicts that this year, the BI revenues of the “mega vendors” such as Oracle, SAP and Microsoft will grow three times faster than revenues from the BI pure-play vendors.
Worldwide BI revenue from the “mega vendors” will grow 20% in 2007 compared to 6% for the pure-play vendors. In 2006 the “mega vendors” had just over 20% of the global BI market and Gartner predicts this will increase to more than 30% by 2010.
Gartner Research managing vice president Ian Bertram says BI “has become a strategic initiative and is now recognised by CIOs and business leaders as instrumental in driving business effectiveness and innovation.”
However, he also cautions that while BI is recognised as a strategic priority at management level, it is not well understood among company employees.
He says an increased focus on training will be crucial in 2007. In the past, each department bought their own BI solutions, resulting in an explosion of different tools across the business. Today, organisations are looking to use the same systems across the business to ensure a standardised and rational way of analysing and measuring the same data, and to increase impact and operational efficiency. The Asia Pacific market for BI platforms increased 22.7% to more than US$244 million (NZ$347 million) in revenue in 2005, according to Gartner Dataquest’s latest market share report.
Australia represented more than 43% of the market and the top five BI platform software vendors in the region by revenue are Cognos, SAS, Microsoft, Business Objects and SAP. Gartner says price pressures, increased competition and consolidation spell tough times ahead for BI vendors.
“The big software companies are well positioned because they have embedded BI into their platforms and they are selling into a large installed base,” Bertram says.
“They may not always represent the best solution, but they are easy to install for a company that already has their platform in place. As companies try to standardise, it is convenient and in many cases cheaper to keep the same vendor,” he says.
“We will also see an aggressive push from Microsoft this year with the launch of Microsoft Excel Services as part of Office 2007 and the associated Performancepoint Server applications that will use Excel,” he says.
“This will be particularly attractive for small and medium-sized businesses as standard BI functionality applications suddenly become available at a reasonable price.” Despite the increasing presence of the “mega vendors”, Gartner believes traditional pure-play vendors will continue to hold the majority of the market during the next few years.
However, increasing competition means they need to communicate their value-added services more clearly and they need to commit more resources in terms of time, money and focus to cut through the noise created by the “mega vendors”.
If not, they face the risk of the competition moving into other markets, such as performance management, as mega vendors look to expand their offerings. It is an opportunity for enterprises to take advantage of the highly competitive environment to negotiate contracts and buy basic BI functionality at lower prices, according to Gartner.
But the analyst firm stresses the need to prepare for changes in technology and products. More importantly, in order to use BI to drive business transformation, Gartner recommends changing the way the information architecture and application portfolio are implemented and managed. This includes changing the way BI is integrated into business processes and establishing a BI competence centre which includes the formation of a steering committee.
Finally, there should be a greater focus on developing user skills and instilling a BI culture across the organisation, Gartner says.
“To make BI a truly strategic business initiative, it must be supported by a governance model and an appropriate organisational structure such as the competence centre. Buying technology will not be enough and education of users is crucial to success,” Bertram says.