Bundles of Opportunity

Bundling agreements can be beneficial for both vendors and their customers, who are exposed to more BI functionality. However, there are risks for the customer.

In mid-October, IBM and Business Objects announced an agreement which included IBM bundling a starter edition of Business Objects software with IBM DB2 and IBM DB2 Warehouse; in particular a starter license of Crystal Reports Server will ship with DB2 while a starter license of BusinessObjects XI will ship with DB2 Warehouse. In addition, Business Objects will distribute a limited use license of DB2 Warehouse with BusinessObjects XI as well as with its CFO Performance Management applications.

In early November, Software AG announced an OEM agreement with Cognos to embed Cognos 8 BI in future releases of Software AG's WebMethods product suite. In July, an OEM bundling agreement between SAP and Informatica included Informatica PowerCenter, PowerExchange, and Metadata Manager software with SAP's performance management and analytic applications and with the SAP NetWeaver platform for master data management and BI.

Bundling agreements can be beneficial for both vendors and their customers. While the intended goal is to provide complementary technology (after all, of what value is a database if an organization doesn't have the means to populate the database or to report on and analyze its content), bundling agreements also serve to develop new prospects who will hopefully gain firsthand experience with the bundled software. As the bundled software typically involves a limited-use license (e.g., designed to work only with, or only licensed for, the software it is bundled with), it serves as a vehicle to seed new prospects that the vendor hopes will purchase full, general-use licenses and/or to sell them the vendor's other products and services.

Furthermore, as new users are exposed to the technology, in particular business users utilizing BI technology (other than an Excel spreadsheet!) for the first time, these users may grow comfortable with the bundled software and, in their desire to deploy it with other software, influence their organizations to acquire full use licenses.

Indeed, prolific bundling agreements were one of the sales channels that Seagate Software, long before it was renamed Crystal Decisions and prior to its acquisition by Business Objects in 2003, employed to help achieve its widespread popularity. While some agreements are no longer in effect, a small sampling of the products with which Crystal Reports was bundled included BEA WebLogic Workshop, Great Plains Dynamics (since acquired by Microsoft), Hyperion Essbase (originating back when it was Arbor Essbase), IBM WebSphere Studio Application Developer, Microsoft Visual Studio .NET, and SAP Business Information Warehouse.

Frequently, the vendor bundling third-party software with its own also has partnerships with the third party's competitors and must walk a fine line so as not to alienate any of them. While a vendor may bundle or even resell one partner's software, it still wants to leverage its business relationship with its other partners; consequently, in many cases the licensing and reselling arrangements are non-exclusive. For example, IBM, despite its pending acquisition of Cognos, has partnerships with numerous BI vendors, as does Business Objects with many database, data warehousing, and application vendors.

These relationships, many of them quite strong, currently remain intact. After all, coopatition (i.e., cooperation and competition with the same partner) and multiple alliances are a way of life in the software world. However, bundling alliances are often far from permanent, and when up for renewal might involve a different partner offering comparable functionality. Fortunately, in most situations where I have seen this occur, arrangements were made for the continued support of the bundled software. Most often support was provided by the vendor of the previously bundled software who many times also included an offer to heavily discount a full-use license.

As an aside, I should note that SAP executed its OEM agreement with Informatica in July, before SAP announced in October that it would be acquiring Business Objects. Because Business Objects has strong data integration technology (as a result of acquiring and enhancing technology it acquired from companies including Acta Technology in 2002, Firstlogic in 2006, and Inxight in July 2007), I suspect that SAP will ultimately replace the Informatica technology with the Business Objects technology it will soon own.

Siebel, acquired by Oracle in early 2006, also licenses Informatica's technology for use with Siebel Analytics (now Oracle BI Enterprise Edition). Given Oracle's October 2006 acquisition of data integration vendor Sunopsis and the capabilities of its own Oracle Warehouse Builder, I suspect that the Informatica relationship with Oracle is also at risk. Additionally, IBM's pending acquisition of Cognos will likely diminish the strength of its relationships with its other BI partners and it remains to be seen how just long-lived its bundling agreement with Business Objects will be.

About the Author

Michael A. Schiff is a principal consultant for MAS Strategies.

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