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Bi Convergence & Consolidation

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Some thoughts on the trend toward consolidation in the BI marketspace...

By: Bert 19:53, 1 May 2007 (EDT)

Break out your Crystal Ball….With Business Objects’ announcement of their purchase of Cartesis, Oracle purchasing Hyperion, and numerous other small acquisitions over the last few years (IBM/Ascential (2005), Microsoft/ProClarity (2006), Business Objects/SRC (2005)), you have to believe several other smaller BI, DW and tools vendors must be nervously looking over their shoulder these days wondering who might be next. Unless you define BI as DW, ETL, OLAP, Budgeting, Planning and Rule Based Analytics (RBA), you risk being crushed or swallowed in this market. The trend seems to be a “redefinition” of business intelligence to include a much more robust view of the classic goal of “turning data into information”. Let’s call this recent trend of consolidations reflecting the merger of similar technologies, convergent combinations.

But what do all of these convergent combinations mean to most users in the marketplace looking for clear direction in the BI world? If we follow the latest in conventional wisdom, there is a looming convergence in the disciplines of traditional and OLAP reporting, data warehousing, RBA applications and (for some reason) budgeting and planning. At one level, we intuitively see the appeal of one data model, one development environment, one user interface, (one throat to choke), etc.. At another level you need to ask how am I really going to get there and what is it going to cost me? (Did I mention portals, delivery and security)? If you were looking for a budgeting solution and already have a data warehouse and OLAP standard, what are you really hoping for in convergence? If it is a quick combinations of proprietary technologies and approaches to BI (or budgeting), you may want to re-think the notion of “quick”. Most of the recent convergent combinations have taken a period of years before the code lines really began to merge. Additionally, how long is this industry consolidation going to take and what should we be doing now to prepare for it?

Probably, the most fundamental question facing many customers should be asking is whether the consolidation is bringing new technologies or approaches to market or if it is simply re-packaging currently available technologies. In the case of the Oracle/PeopleSoft acquisition, new technologies are being borne of the Fusion Middleware offerings. Specifically, new SOA and BPEL services and processes are coming to the fore that merit serious study by legacy PeopleSoft and Oracle customers who are seeking solutions that extended legacy product solutions. In other combinations, there may be fewer breakthrough technologies (disruptive technologies) available to customers of the combined entity that were not available before the combination. Rather, the value to customers comes more from the synergies of the combination than from immediately available, “new-to-the-market” solutions. The value of new or disruptive technologies can be rather easily substantiated by a business case or an ROI model where new products, customers or channels (for example) can be identified and exploited. In these cases, the value of a convergent combination is reasonably clear. But what about the more strategic combinations such as Oracle/Hyperion, or Business Objects/Cartesis (or SRC)? Are these “game changing” moves that will impact your decision making today or are they more far reaching?

Let me ask the question another way: First, if you made a firm decision to use Hyperion Planning over Business Objects (or vice versa) because you preferred its features, functionality and usability, how does Oracle’s acquisition fundamentally change your decision? Second, when do you realistically expect to see a fundamental change in the underlying Hyperion product? Six months? One year? Longer? If your decision was for Hyperion over Oracle EPB, how has the acquisition fundamentally changed your decision drivers? Most folks will answer this question by saying “I just want to wait and see what they are going to do with it?”. (Here “they” are the acquirer and “it” is the target. You can substitute whichever sample convergent acquisition that you want). My response is that if you really need the technology, what difference does ‘it’ make? Most of the factors behind a customer’s decision to purchase a specific BI tool were same before the acquisition as they were after it. If you are expecting the acquisition to yield significant fruits in terms of product features and functionality, be prepared to wait at least one business cycle before making your decision. How many of us have experienced the “joys” of a Release 1 product. It is a special customer who is willing to bet the success of their project on this. So at the end of the day, the more fundamental questions that you should be asking (again, let’s assume that there is no major, imminent technology shift due to the merger) is a) how long am I willing to wait for breakthrough technology and b) how long should I anticipate the current technology to yield value? Taking a page from our finance manual. if your NPV is positive, buy now. If not, wait.

So, back to the crystal ball…if you gaze into the future and you see real game changing approaches coming to market as a result of a convergent combination, it probably pays to wait and see before committing to a sizeable investment. Otherwise, go with your instinct – and your rational analysis. What made you favor one product over another, is not likely to reverse because of an acquisition – at least not within your planning and investment horizon.

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