The New Adventures Of Old Business Intelligence

Taking advantage of these opportunities often means solution providers must become well-versed in specific vendors' product lines. And that can be a gamble with the ongoing consolidation within the BI software industry as big vendors buy small and not-so-small companies. Oracle's $3.3 billion buyout of Hyperion Solutions in April is just the latest in a long line of acquisitions (see "Shopping Spree," right). And speculation that major BI software suppliers Business Objects or Cognos could be acquired by IBM, SAP or some other IT industry titan is ongoing.

Deals like Oracle's Hyperion acquisition can be dicey for channel partners. Solution providers accustomed to cozy relationships with smaller vendors may get lost in the shuffle when their supplier gets acquired by a giant company with thousands of channel partners. "There's a good chance the whole partner model might change. Or the terms and conditions might change," says AMR Research's Hagerty. Several vendors contacted for this story said they might try to recruit Hyperion VARs during the merger.

"I think vendor consolidation is part of the customer buying decision today," says Bridgette Chambers, vice president of enterprise business solutions at Comsys, a Houston-based IT services company that partners with SAS Institute, Business Objects and Cognos. Customers worry about committing to a vendor's technology and facing big expenses if that technology disappears after an acquisition. Customers are trusting their solution providers for advice, and, for that reason, Comsys partners with multiple vendors, Chambers says. "It's how we maintain that agnostic position in the market. Then you really have an opportunity to serve the client and not the vendor."

One thing about the BI industry, however, is that it appears in no immediate danger of consolidating to the point where it's dominated by just a few humongous vendors, as has happened with ERP and CRM software. For every vendor that disappears in a buyout, a dozen more pop up. "As quickly as large vendors consolidate, small start-ups will keep bringing innovative business intelligence solutions to the market," Forrester's Evelson says.

And there's no shortage of such start-ups. Some BI software developers, such as Pentaho and JasperSoft, are following an open-source business model. Endeca Technologies develops software that combines elements of BI and search technologies. Some small vendors are offering on-demand BI tools, including SeaTab, which is enlisting solution providers under a channel partner program it inaugurated in November.

While it's early in the game, a number of solution providers are taking a serious look at open-source BI, especially open-source reporting tools. Over the past year, 1Answer executives have debated whether to expand the company's Hyperion-related services or explore open-source options, ultimately settling on the latter. Open-source BI software "dramatically lowers [the total cost of ownership], and it opens up opportunities for creativity," Nilsen says. The company is evaluating vendors. Nilsen estimates that broad acceptance of open-source BI software is still a year away. 1Answer also considered signing on with an established vendor like Cognos or Business Objects. But Nilsen's perception is that those vendors are very focused on winning sales to large companies. "The new frontier for business intelligence is the market for small and midsize companies," he says.

Some solution providers foresee fierce competition in the SMB space between open-source BI products and the expanding BI product line offered by Microsoft. Over the past several years, Microsoft has built reporting and data-analysis capabilities directly into its SQL Server database, essentially making those tools available to a wide audience for free and, some say, putting pressure on other vendors' pricing of reporting tools. "It takes a really powerful value proposition to convince [customers] that they should use something other than the tools embedded in SQL Server," Madrona's Finken says.

Although Microsoft's share of the fractured BI market remains less than that of market leaders Business Objects, SAS Institute and Cognos, its BI product sales in 2005 grew more than 35 percent, according to market researcher Gartner.

NEXT: How Microsoft plans to maintain that momentum.