When Oracle Corp. acquired Hyperion in March of 2007, suitors began sizing up other major business intelligence companies as merger material--whipping up an acquisition frenzy that continued through the year with SAP AG leading Business Objects to the altar and IBM Corp. landing Cognos. By year's end, SAS Institute Inc. was the only major independent BI company without a partner, and happily so, management says, coyly--repeating protestations by Hyperion, Business Objects and Cognos before they were snatched up.
While it was immediately clear that the rapid-fire buyouts would forever alter the BI landscape, several questions were left up in the air. Would BI sales continue to grow in the U.S. and abroad? How would the vendors split up the market? Would this be the end of best-of-breeds? And would SAS remain independent?
Well, the answers are in. Two recent studies assessing the BI playing field in mid-2008 have weighed in, evaluating the effects of the unprecedented consolidation and providing a comprehensive review of the fallout.
For starters, demand continued to grow, a solid 13% worldwide in 2007, to a total of $5.1 billion, according to Stamford, Conn.-based Gartner Inc. However, North American sales didn't fare as well, climbing just 5%, compared with a whopping 16% increase in 2006. "A weakening dollar and a slowing economy means vendors will have to get used to a much larger proportion of revenue coming from outside the United States," says Dan Sommer, a senior research analyst at the information technology research consultancy and an author of the new report, Market Share: Business Intelligence Platform Software, Worldwide, 2007. "The drop in U.S. growth will be buoyed by overseas expansion," he adds.
And while market research consultancy IDC has lowered its short-term forecasts "just a bit" of late, Dan Vesset, vice president of IDC's business analytics research, says the firm does not expect the BI market to sink to the 2% to 7% growth rates recorded during the last market downturn from 2001 to 2003. Looking ahead, Vesset adds that as BI "starts to get to the mass market" and a new generation of BI-savvy business leaders emerge, long-term growth will continue.
Looking back at 2007, Oracle, SAP, IBM and Microsoft tightened their grip on the BI market, with combined sales accounting for nearly two-thirds of the global BI market, up from one-fifth in 2006, according to Gartner. SAS, meanwhile, resisted a trip down the aisle. And many of the more modest shops remained independent, but they garnered a much smaller slice of the cake. Market share for smaller participants declined 6.2% to 25.8%, Gartner says. "That marks a pendulum shift from a market driven by best-of-breeds to one dominated by mega-vendors," says Sommer.
But don't count the best-of-breeds out, says IDC in its report, Worldwide Business Intelligence Tools 2007 Vendor Shares. "An influx of new, innovative start-ups focused on various niches of the BI market will occur over the next two to five years," the report says.
IDC identified more than 200 BI tools and data warehousing platform vendors worldwide in 2008 that continue to develop cutting-edge products. Then, in the mating cycle of the software industry, they too will be swallowed up by the voracious giants, analysts say.
Among the big guys, Gartner says, Business Objects led the pack in worldwide BI platform revenue last year. And with SAP AG's acquisition of Business Objects, the combined company accounted for 26.3% of the global market, or $1.3 billion. In second place, IBM and Cognos sales added up to a 14.7% piece of the pie, only slightly more that at SAS, which accounted for 13%, or $752.3 million.
Similarly, accounting for all Hyperion BI platform revenue, Oracle increased its market share to 10.6%, or $484.5 million. Oracle was No. 1, however, when it came to market share growth, with a 105% jump year-to-year.
Of course, some products grew faster than others. The burgeoning advanced analytics market, which represents about 19.5% of BI sales, grew 13.1% year-over-year to reach nearly $1.4 billion, showing signs of pent-up demand.
SAS was by far the dominant player in that sector, with a 32% market share. But SPSS Inc. and Microsoft, the second- and fourth-place vendors in this sector, experienced the greatest sales increases, 17.8% and 20%, respectively.