In-Depth

In Post-Consolidation BI-scape, Pure Play Vendors See Opportunity

Oracle, SAP, and IBM will soon find themselves up to their respective ears in acquisition-related integration issues, BI pure play stalwarts argue

• By Stephen Swoyer
• 11/28/2007

When SAP AG acquired Business Objects SA last month, many business intelligence (BI) pure plays seemed to welcome the deal, claiming that the elimination of a prominent BI and PM competitor would help clarify things for many would-be BI buyers. More to the point, representatives from SAS Institute Inc., Information Builders Inc. (IBI), MicroStrategy Inc. and even Cognos Inc. argued that their own BI value propositions would benefit by being contrasted with the stack-focused approaches of both SAP and competitor Oracle Corp.

Now that Cognos has been acquired by IBM Corp., that value proposition has only become stronger, the surviving BI pure plays claim (see http://www.tdwi.org/News/display.aspx?ID=8704).

To an uncanny degree, pure-play competitors SAS, IBI, and MicroStrategy all seem to be reading from the same post-acquisition script. As they see it, Oracle, SAP, and IBM will soon find themselves up to their respective ears in acquisition-related integration issues. Presto, the pure plays argue: the perfect opportunity for them to pull ahead with their own best-of-breed -- and neutral -- BI offerings.

"I think it is a great opportunity for us," says Russ Cobb, vice-president of alliances and product marketing with SAS. "When I had discussions right after Oracle acquired Hyperion, some people could have said it was just marketing spin, and perhaps at the time it was. What we’ve seen over the last few months is a lot of positive momentum from our customers in wanting to maintain an increased engagement with us. We’re open. We have an open architecture. We tap into any database, any data source, [and] virtually any operational system.

Cobb sees another advantage unique to SAS -- and, by extension, to other BI pure plays "We’re innovative. Unlike these guys [i.e., Oracle, SAP, and IBM], we aren’t going to get distracted. We’re going to keep innovating."

The flip side of this view is more sobering, of course. After all, there’s a clear sense in which Cobb’s rosy vision ignores (or gives comparatively short shrift to) the attractiveness of all-in-one BI -- particularly when its purveyors either control the relational database (Oracle, IBM), the operational tier (Oracle, SAP), or some large chunk of the middleware glue (all three vendors). Why wouldn’t an SAP shop tap SAP’s own BI tools and SAP’s own data-integration middleware to get at SAP’s own operational data?

Sanju Bansal, vice-president and chief operating officer with MicroStrategy, lists several good reasons -- starting first and foremost with the glacial pace of post-acquisition integration and assimilation. Bansal says that while the idea of using SAP BI tools in tandem with SAP operational systems might look good on paper, it’s at present a pipedream, at best: SAP and Business Objects have months (at the very least, he argues) of integration legwork ahead of them. Ditto for Oracle and IBM. The upshot, he says, is that MicroStrategy -- and, by extension, its BI pure-play competitors -- are in very good positions.

Bansal cites a particularly warming precedent -- that of Informatica Corp., which (in the nearly three years after IBM’s acquisition of data integration rival Ascential Software Corp.) has grown its revenues, profits, and market share. "It’s exactly the Informatica case. When Ascential got bought up by IBM, Informatica really got a chance to get its message out and was able to race ahead," he indicates.

The Need for Neutrality

"It’s the same thing here. It’s very much a heterogeneous environment [in the enterprise] today. Companies need somebody that’s committed to being independent and that doesn’t compete with them on services," Bansal continues, noting that large services providers (such as Accenture) probably won’t welcome IBM’s stewardship of Cognos. "Companies like Accenture would be quite threatened with the fact that IBM [Business Consulting Services] would now be in competition with them if somebody were to bring in Cognos."

In any case, Bansal claims, enterprises want neutrality.

"People are looking for a clear independent vendor, one that’s agnostic with respect to system integration providers. We feel this market for independent BI is going to continue to grow," he says.

What of the lure of all-in-one BI -- especially of BI that’s tied to relational database or operational systems? It has its advantages, Bansal concedes, but -- in the final analysis -- it’s not what most customers want. "I do feel like 20 or 25 percent of the market may prefer to be a closed stack approach, but I think that’s clearly the minority." Neutrality can be fragile, especially in today’s acquisition-crazy BI segment. Consider Cognos, which (just one month ago) made considerable hay out of its own neutrality, only to have its best-pitched marketing efforts go up in smoke earlier this month, when IBM came calling with $5 billion (see http://www.tdwi.org/info.aspx?id=43875).

SAP’s acquisition of Business Objects helped recast Cognos as The Last of the Big Time BI Pure Plays; Cognos officials, for their part, were happy to play up this angle: in the aftermath of SAP’s move, they trumpeted the importance of being both independent and vendor-neutral. Earlier this month, unfortunately, Cognos got hoisted on its own petard: IBM’s $5 billion acquisition put the lie to its claim of happy BI celibacy.

What’s to keep SAS, MicroStrategy, or any of the other BI pure plays from pulling a similar about-face? For one thing, both SAS and IBI are independent players. Even though IBI nearly notched a deal to be acquired by Hyperion last year, representatives from both SAS and IBI say they’re not for sale.

"There’s a lot of companies calling all the time about acquisitions, about merging, so occasionally you look at a company and say, ‘Is this something that would make sense for us, make us more competitive, more complete?’" asked Michael Corcoran, chief marketing officer with IBI, when asked to describe the backstory to last year’s Hyperion acquisition rumors.

"We’re big believers in our engineering and our technology, and if we ever were going to do something [acquisition-wise], it would only be on the basis that those two things wouldn’t change. We would operate as we do, with the same model -- [i.e.,] working with our customers directly and continuing to engineer our products. We’re not for sale, and the only way we’d be for sale was if it was a question of being able to operate the way the way we operate and be left on our own." These last two caveats seem to be deal-breakers for most would-be acquirers in today’s climate, Corcoran deadpans.

MicroStrategy is publicly-traded, and Bansal -- for legal reasons -- says he can’t categorically deny that MicroStrategy is for sale. (Representatives from another publicly-held BI player, SPSS Inc., declined to participate in this article.) Even so, Bansal says, the Cognos example is warning enough to any company that would speak too soon -- or with a forked tongue. "We’re very committed to this idea of independence. We think there’s a tremendous market ahead for independent BI vendors," he indicates.

"We very much want to position ourselves as a Switzerland of BI. Everybody says they work with a variety of database platforms, but we optimize for each database platform in a way that’s unique. We have different versions of our software for Oracle 8, 9, and 10; for Teradata 7 and 8. No matter what database comes out, we do very deep optimization for that platform."

That’s a position seconded by SAS’ Cobb. "I don’t think it’s too much of a stretch to say that [Hyperion, Business Objects, and Cognos] will now be a lot more wed to the major offerings of their parent companies. It’s a real opportunity for us to distinguish ourselves and highlight what we can do -- to really show what platform-independent best-of-breed BI means."