Which Way To Go In BI?

One potential tripwire: Microsoft has a mixed track record with splashy version-one software launches. The CRM industry quailed before Microsoft CRM's 2003 debut, but when the software finally shipped, customers ran into serious usability problems, and functionality significantly lagged that of Microsoft's more-mature rivals. It took another three years for Microsoft to ship a competitive version.

The company insists it's learned from its mistakes. Microsoft's Technology Adoption Program (TAP) for PerformancePoint has more than 6,000 participants testing and reporting back on the developing software, which is slated to ship this summer.

"We're very pleased with the participation and feedback we're getting from the TAP," said Michael Smith, director of marketing for PerformancePoint. "Based on the feedback, we've made a number of changes from a usability standpoint."

A Microsoft surge would put particular pressure on the BI industry's current leader in the channel, Business Objects. Helped by acquisitions like its 2003 buyout of reporting software maker Crystal Decisions, Business Objects, San Jose, Calif., has posted double-digit sales growth for each of the past five years, generating revenue of $1.25 billion last year. That puts it comfortably ahead of the pack in the crowded BI field, but it's still a little fish compared to software heavyweights like Microsoft and Oracle.

The BI field's combination of hot prospects and smallish vendors has turned it into a "buy or be bought" M&A battleground. Hyperion's takeover was so expected that its partners just shrugged: "We wondered when it was going to happen and whether it would be Oracle, IBM or SAP," said John Nilsen, vice president of sales at 1Answer Solutions, Englewood, Colo.

While Business Objects has long been on Wall Street's radar as a likely buyout target, the company leadership is maneuvering for independent survival. Since John Schwarz replaced founder Bernard Liautaud as CEO in September 2005, Business Objects has been working through a comprehensive overhaul aimed at building out its end-to-end offerings. Its $300 million Cartesis acquisition, announced in April, gives it a powerful set of performance-management software tailored for CFOs.

Partners are generally pleased with the moves Business Objects is making, though they've run into a few potholes while navigating the new road. Most visibly, Business Objects' campaign to compel all partners offering training services to become authorized education partners—and to pay fees for that designation—sparked bitter outcries. A sizable third-party training ecosystem had grown up around Crystal Reports' software, and those partners didn't look kindly on Business Objects' pressure tactics. Even some partners that did pony up for the training license remain annoyed about it.

"They corralled us in," said Bob Vander Woude, vice president of sales and marketing at Preferred Strategies in Soquel, Calif. A J.D. Edwards specialist, Preferred Strategies runs customized training classes that focus specifically on using Crystal Reports with customers' actual J.D. Edwards ERP data. It's now paying for generic manuals it doesn't use, because Business Objects insisted that all authorized education partners buy the official training materials for their clients.

Joe Guerra, director of BI at Andrews Consulting Group, Cheshire, Conn., recalled another oops: Last year, Business Objects pushed partners to provide their prospect lists. Reluctantly, Andrews Consulting did—then saw all of its prospects turned into named accounts for direct-sales pitching. To Business Objects' credit, though, it immediately pledged to fix the situation, Guerra said. "It's like anything in business—if you go in screaming, it's going to get ugly. If you go in reasonably, they respond reasonably. We've talked with them, and this won't happen again," he said. "We've very pleased with the relationship that we have."

If Business Objects stumbles, plenty of rivals are poised to snap up its partners. One reseller that had a falling out with Business Objects, Creative Technology & Training Solutions (CTTS) in Shelby Township, Mich., is now happily partnered with Cognos, which knows it needs to grow its partner network and is working hard to keep its VARs happy, according to CTTS founder Michael Ward.

Oracle continues to snap up rivals and partners; Andrews Consulting says it will probably extend its ties with the company, which is attracting more interest as it deepens its BI offerings.

And SAS, a company whose statistical software is considered the industry's gold standard, is wooing resellers for its fledgling channel program. Launched in August, the program is too new to judge, participants say—Claraview hasn't closed many SAS deals, but sees strong interest, Banerjee said. With annual revenue of nearly $2 billion, privately held SAS could become a major BI force.

For partners that stay standing, the BI shakeup may simply be a welcome sign of a dynamic market. Sales at Paragon Consulting are booming, according to Jones, who said he's not worried about the new ownership of two of his closest partners: "We're not fazed or frightened by it. We see it as an opportunity. As long as they understand the skills we bring, I think we'll get along famously."