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Analysis

Is the traditional BI market in decline?
Gerry Brown By: Gerry Brown, Analyst - Digital Marketing & CRM, Bloor Research (Moved)
Published: 14th October 2010
Copyright Bloor Research © 2010
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Almost unnoticed, BI vendor QlikTech announced its Initial Public Offering (IPO) and started trading on July 16th 2010 at $10 per share. It would have been a good buy. Today QLIK shares are trading at $22.59.

QlikTech reckons its revenues will be c. $205m for 2010. More noticeable are its growth rates. Previously, as a private company, these were hidden from public eyes. Revenues for the 1st half of 2010 were up 60% over the previous year to $95m. Highly profitable licence fee revenues represent 62% ($59m). Wow. The enterprise licence pricing model still works in QlikTech's case then (NB QlikTech has no SaaS offering). These are growth figures of envy for the legacy BI vendors.

QlikTech claims to be "redefining" the BI market by providing "a low risk alternative to costly, all-or-nothing, enterprise-wide deployment requirements". Tableau is currently running a campaign stating "The BI Platform is dead". Pentaho, Jaspersoft and Actuate are claiming extraordinary levels of adoption for their free or low-cost versions of their open source BI software. As Carrie Bradshaw (of Sex And The City) might type: is the traditional BI market in decline?

When it comes to quantifying traditional BI market growth I am reminded of Jerry Maguire's American footballer client who shouts down the phone "Show me the money!"

Microstrategy hasn't increased its BI software licence revenues in the last 5 years and is now predominantly a services company. Their services: software mix in 2009 was 73%: 27%. Information Builders' revenues have remained virtually static over the same period, so have Actuate's. SAS' revenue growth has been in low single digits since 2008 and their historical revenue curve looks like a classic marketing text book Market Life Cycle curve, now plateauing. SAP, Oracle, IBM and Microsoft don't publish separate BI revenue figures, but if they did, none would be growing at anything like the way that QlikTech is.

This should really come as no surprise. When one talks to corporate BI buyers they rarely mention high BI investment figures. They talk with a degree of caution and pragmatism, of bite-size measurable projects rather than big roll-outs. Justifying BI spend in difficult economic times is challenging. Few BI projects offer jam today, and the lure of longer-term efficiency and effectiveness improvements often doesn't cut it when project and budget priorities are set by executive management.

However, there is little doubt that the number of BI users overall is increasing. With low-cost operators such as QlikTech, Tableau, LogiXML, Pentaho and Jaspersoft you get an awful lot of BI software for $25,000. Conversely, most enterprise BI vendors don't traditionally get out of bed for deals of less than $50,000. Low cost (or 'free') BI software encourages trial and experimentation with little risk, and this is what most enterprises prefer. After all, BI project 'failures' are common.

There is however still work for BI consultants and contractors in the short term, but as IT Departments and users get their BI systems sorted out, and if 'self-service BI' à la QlikTech becomes the norm, vendor services revenues will become squeezed. Without relative size nor revenue growth, this will make the legacy BI vendors vulnerable to acquisition.

Bottom line for buyers: base your BI investments on the delivery of business objectives and goals, and look for value for money from your BI vendors. Look for those vendors who offer price transparency and accountability for helping you to architect a business solution and deliver a successful BI project. And don't believe all the hype.

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Published by: IT Analysis Communications Ltd.
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