Rapid consolidation among business intelligence (BI) vendors is changing a once-fragmented market into one dominated by a handful of big players.
Acquisition fever peaked in 2003, with BI vendors announcing several large deals including Hyperion's purchase of Brio Software for US$142m in cash and stock, Cognos concluding a $157m buyout of Adaytum, and Business Objects' $1,2bn acquisition of Crystal Decisions.
Market consolidation continued this year, albeit on a smaller scale. IBM signalled its intention to become a more serious contender in the BI tools market by buying Alphablox, Microsoft acquired reporting tool vendor ActiveViews to add more weight to its BI portfolio and Cognos announced the purchases of corporate performance management firms Frango and Softa.
The BI market has remained relatively buoyant compared with most segments of the software industry. According to Gartner, companies spent $2bn on BI software in 2003 and are expected to spend $2,3bn in 2005.
Nonetheless, the specialist firms that have traditionally led the BI market are facing increasing competitive pressure from enterprise resource planning (ERP) vendors such as SAP and PeopleSoft and aggressive new entrants such as Microsoft. They want to expand their product portfolios and customer bases through mergers and acquisitions.
Also driving mergers and acquisitions is customer demand for standardised BI suites that cover a broad range of needs and applications.
Companies have traditionally built their BI systems from tools and applications supplied by various vendors, an approach that causes integration headaches. IT staff have to learn to develop and manage a broad portfolio of products and often need to manually write interfaces that allow diverse offerings to work together.
"Companies find themselves with a patchwork of BI technologies that cannot respond to the deeper and broader needs of the organisation," says Asyst International technical director Paul Morgan.
"IT managers tend to make one-off' purchases of many incompatible vendor offerings. Companies then find themselves with a patchwork of incompatible BI technologies that cannot respond to the deeper and broader needs of the organisation," says Bytes Business Solutions GM Mark Neethling.
Standard BI platforms based on a single vendor's technology reduce the costs of maintaining overlapping BI environments and help organisations to reach the Holy Grail of BI: one version of the truth throughout the enterprise.
eCom Institute, an SA reseller of products from Business Objects and Crystal Decisions, believes the market consolidation will provide customers with integrated solutions that meet most of their BI needs.
"The postmerger Business Objects offers products across the full spectrum of BI solutions," says eCom Institute practice director Heinz Meyer.
Ampie Swanepoel, senior corporate performance management analyst at Dimension Data, expects consolidation to continue among small, niche players in the BI market for some time - a view shared by analysts such as Gartner.
In the longer term, consolidation will make it easier and less risky to choose BI platforms, but at present users need to choose their suppliers carefully.
Vendors generally need at least two or three years to reconcile and merge their product lines after a large acquisition or merger before they can provide an integrated platform.
