The Smart Money's On SMBs

software business intelligence

First, some numbers: Worldwide sales of business intelligence platform, analytical application and performance management software reached $9.3 billion last year, up 4.2 percent from $8.9 billion in 2008, according to Gartner. The market-research firm is forecasting that sales of those products will grow at a compound annual growth rate of 8.1 percent through 2013.

Forrester Research, which put business intelligence software sales at $8.5 billion in 2008, is predicting growth to $12 billion in 2014.

Economic uncertainty, in fact, is proving to be something of a catalyst for adoption of BI reporting, analysis and performance management software among small and midsize businesses. Not only are SMBs looking for tools to help with strategic and tactical decision-making, they want to get more value out of their information assets.

"We think that's really driving adoption of BI in the midmarket," said Jayne Landry, senior director of product management for SAP's BusinessObjects line of business intelligence software, in an interview. "We've seen tremendous growth in the SME [small and midsize enterprise] market in the last five or six quarters," she said, adding that BI software sales to small and midsize customers are growing at two or three times the rate of sales to big companies.

"We're seeing a lot of uptake in the midmarket," said Ben Plummer, director of IBM's business analytics midmarket business unit. "They realize they can't run a business on a spreadsheet anymore."

Midsize companies "are trying to get a better understanding of what's going on with their business and how they can capitalize on that," said Ken Dixon, executive vice president of marketing at Kogent, a Santa Clara, Calif.-based solution provider that focuses exclusively on business intelligence solutions and resells BI products from SAP, Microsoft and QlikTech.

NEXT: Survey Results

While nearly all large corporations have implemented business intelligence systems, many -- even most -- SMBs are just doing so now, and so that's where most of the sales are today, Dixon said.

That's backed up by the results of a survey conducted in June by market researcher SMB Group that found that 38 percent of companies with 100 to 249 employees plan to purchase business analytics software within the next 12 months, while 67 percent of companies with 250 to 499 employees will do so, and 46 percent of companies with 500 to 1,000 employees plan to buy business analytics software.

That put BI behind only Web site design and hosting software and ahead of contact and customer management applications, infrastructure software, collaboration software and financial/accounting and ERP applications.

So what are midsize businesses looking for in a business intelligence system? While they might not need something on a scale as large as BI systems implemented in big corporations, they don't want something that's dumbed down either. "The midmarket companies want the full functionality," SAP's Landry said.

"At their level, it's a strategic investment," said Mike Corcoran, senior vice president and chief marketing officer for business intelligence software developer Information Builders. "It's critical to their operations and their growth paths."

NEXT: Make It Easy

But while midmarket companies want the same BI functionality that big businesses enjoy, midsize companies need more of that functionality packaged in ways that can be implemented without a lot of customization, using more easily consumed prebuilt reports and dashboards.

"You've got to make it easy for them," Corcoran said, noting that SMBs lack the IT infrastructure and staffing resources of big companies. Oh, and it has to be affordable.

Many business intelligence software vendors have responded by developing BI software packages that are tailored for SMBs.

SAP, for example, offers the BusinessObjects Edge line of BI and performance management software packages specifically for midsize companies. In July, SAP expanded the lineup with BusinessObjects Rapid Marts, which provides packaged data integration capabilities such as prebuilt data models, and data extraction and transformation tools for moving data out of operational systems into datamarts for analysis.

IBM now has more than 600 channel partners selling Cognos Express, a package of reporting and analysis modules that debuted a year ago targeting midmarket customers with fewer than 1,000 employees. This year the company has even offered "Cost Buster" financing for the BI package to help SMBs get past affordability issues. A new purpose-built budgeting and financial planning module, now in beta test, will be added to Cognos Express shortly.

Microsoft continues its approach of building business intelligence capabilities into its mainstream products such as the SQL Server database with its embedded reporting and analytical capabilities, SharePoint Server with its built-in BI tools, and the Excel spreadsheet with enhanced charting and pivot table features. While Microsoft debuted PerformancePoint, a business intelligence application, in 2007, that product was discontinued last year and its functionality incorporated into SharePoint.

"We don't want to give our customers specialized tools that they have to get training on," said Herain Oberoi, group product manager, Microsoft SQL Server Business Group. "This way they can do more with the tools they already know."

Microsoft offers a business intelligence "competency" certification to its channel partners and nearly 3,200 solution providers have completed that training, Oberoi said.

The business intelligence software industry underwent a period of consolidation several years ago, leaving IBM, Microsoft, Oracle, SAP and SAS Institute accounting for more than 70 percent of the BI software market.

But a wave of small BI software companies is challenging the established players -- particularly in SMB markets. They include open-source BI software vendors such as Pentaho and Jaspersoft, suppliers of on-demand BI applications like Birst and PivotLink, and developers of on-demand performance management software including Cloud9 Analytics and MyDials.

Software-as-a-Service (SaaS) business intelligence systems are attractive to midsize companies because of their quick implementation time and the reduced need for internal IT resources, said Dan Sell, marketing vice president at MyDials, which markets on-demand performance management software that provides visibility into operational systems. "I just don't think these midmarket accounts could get there using the traditional BI platform approach," he said.

The major vendors aren't ignoring the SaaS space either. SAP BusinessObjects already offers BusinessObjects BI OnDemand and John Wilkinson, vice president of SME (small and midsize enterprise), thinks the number of people using on-demand BI tools could equal those using on-premise tools within two or three years.

Open-source BI software vendors play the affordability card as they target the midmarket. Big vendors such as SAP BusinessObjects and IBM Cognos "have created big, complex products" with price tags that limit the number of seat licenses SMBs can purchase, said Jaspersoft CEO Brian Gentile.

Opportunities for solution providers in the business intelligence midmarket include helping customers map out their BI needs, developing key performance metrics for specific business processes or vertical industries, and developing content such as reports, data models and dashboards, said SAP's Landry.

Kogent, for example, primarily serves the health-care industry and develops health-care-specific reports, dashboards and data models for its clients, Dixon said. While the company provides implementation services, the real value-add is in the consulting services: looking at a client's business problems and determining how business intelligence technology can help.

SAP's Wilkinson, however, doesn't think enough solution providers recognize the market potential. BI software sales through the vendor's channel aren't growing as quickly as he thinks they could be because the company doesn't have enough partners with the necessary expertise. "There is an opportunity here that is not being fully exploited by our channel," he said.