How To Make a Smart Business-Intelligence Purchase

In a nutshell, business intelligence (BI) provides end-user access to data and information so a company can analyze that information and do something profitable with it. Analytics, increasingly touted by CRM vendors, is a form of BI -- "and CRM analytics is a particularly targeted style of BI," said Gartner (NYSE: IT) research director Kevin Strange. Due to the proliferation of options among vendors specializing in this space -- along with the developing functionalities of the suite vendors -- the decision will not be easy for firms looking to make a business-intelligence purchase.

Unlike most sectors of the IT universe, the BI market did not fare too badly last year. That is, it did not decline nearly as deeply nor as sharply as other sectors. "The growth rate for 2002 was somewhere along the flat to slightly declining scale," Strange told CRM Buyer Magazine. Once the economy improves, this sector should pick up, he added.

According to Gartner Dataquest, IT buyers will spend US$2 billion on business intelligence in 2003, and the sector is forecast to grow to $2.3 billion by 2005.

Technology of the Future

The science and technology supporting BI fits quite nicely with the future direction and goals of CRM operations, Strange noted. "Consider campaign management. Companies need to analyze their customers and profile for them their products or services."

And companies are indeed making a push in that direction. Siebel recently embedded analytics capabilities into its offerings. SAP (NYSE: SAP), Oracle (Nasdaq: ORCL), E.piphany and Kana have incorporated analytics functions as well. However, features can vary dramatically from vendor to vendor. "There are many different styles of BI," Strange said. Categories include operational reporting, analytics, ad hoc querying and advanced type algorithms.

The Purchase Decision

But as some companies gather strength through adding analytics functionality, others -- notably the smaller specialist vendors -- are beginning to wheeze. "There is a lot of consolidation happening right now," Strange said. "The weaker vendors are getting weaker, and the stronger are gaining more significant advantages. This will be the primary challenge for clients looking to implement these applications."

Without naming names, Strange cited the case of a fairly well-known best-of-breed BI vendor that has only six months worth of cash on hand -- and this after a significant investment by a dot-com. "What will happen to [the vendor] when the cash runs out? Will someone buy them? It's not likely, given that the ideal candidates have all made acquisitions over the last two years."

As in any software category, you want to make sure you are partnering with a vendor that will be around for a while, he said.

Mouse Against Falcon

That said, companies have good reason to consider the smaller players -- deemed "mouses" in a recent report on the marketplace authored by Strange. "Some companies might see a way to leverage these vendors in a manner not thought of by the competition." This, of course, is the typical argument for using a best-of-breed vendor versus a suite.

Yet, Gartner labels these vendors as "small and struggling" in its report. The so-called mouses include Sagent Technology, Brio, Microstrategy, Proclarity, Evolutionary Technologies and Hummingbird.

A second group outlined in the report is dubbed the "falcons." These are small to mid-size "focused" vendors. They include Ascential Software, Business Objects, Cognos (Nasdaq: COGN), Crystal Decisions, Hyperion Solutions (Nasdaq: HYSL), Informatica (Nasdaq: INFA) and Information Builders.

"For the most part, each of these vendors is clearly focused on delivering BI solutions, but can 'fly under the radar' of the big vendors," the report says. "What has made these vendors successful is their focus on the market and a lack of dominant BI competitors."

Giraffes and Bears

A third group, called the "giraffes," consists of vendors that are "large, but very focused," according to the report. "They know what market they are going after and have the strength and breadth to respond to market and competitive pressures." These include SAS Institute and NCR's Teradata.

SAS, for example, has been positioning itself to enlarge its market reach in response to market trends. It recently announced its entry into the supply-chain space, with the rollout of SAS Supply Chain Intelligence, a collection of existing and planned offerings.

The company's primary focus is currently in retail and consumer product goods. "We also have efforts under way in high-tech and semiconductors and are branching into pharmaceuticals," Dennis McCarron, SAS senior manager of business planning and strategy, told CRM Buyer.

The "bears," by contrast, are "large and unfocused vendors." These include Oracle, Microsoft (Nasdaq: MSFT), IBM (NYSE: IBM) and Computer Associates. "These vendors have a lot of strength and power, but are largely opportunistic in the BI market," the Gartner report says.

Build Your Own or Buy?

Strange offers yet another consideration for BI buyers -- one perhaps even more important than long-term viability of the vendor. "Companies should ask themselves: Do I want an application or a tool to build an application?" He said there is a groundswell of interest, primarily from vendors, in providing prepackaged analytics applications to targeted areas of an organization. The advantages of this approach, of course, are shortening time to market and leveraging the vendor's in-house expertise.

While the "buy" argument resonates in most software categories, Strange offers a caveat for the BI sector. "Do you really want to take on the best practices of a vendor? When you buy an analytical application, you are inheriting their decisions." He said a user might not necessarily be able to capture a data element unique to its organization -- and thereby could lose competitive advantage.

For example, "ninety-nine percent of the time, these applications don't [support] the additional data element," Strange pointed out. "They may allow you to load them, but are you able to actually use them? No, because the algorithms are very fixed and don't provide flexibility. Yes, you can fill in the blanks and click options that allow you to tweak the application, but you cannot change the algorithm itself."

A lot of organizations are falling victim to the allure of getting an application into operation as quickly as possible, Strange said, and they are failing to consider the strategic advantages of taking the do-it-yourself approach.