Business Intelligence: Consolidation and Beyond (Strategic Focus)

Against the backdrop of a looming recessionary environment in its major end-market, the BI market is witnessing a flurry of large ticket acquisitions and rampant commoditization leading to slowdown in growth rates. This report aims to provide clarity to vendors and investors in BI solutions by simplifying the dynamics of this changing market and forecasting future growth opportunities.

Report Highlights
The BI market has been abuzz with acquisition and consolidation activity over the last two years due to the entry of several large software vendors. Consolidation has been beneficial for most acquiring and acquired vendors but is starting to affect independent pure-play vendors.

In such a turbulent market, technology evolution has been relatively tepid but increasingly customer focused, as evident from the proliferation of bundles tuned to end-user needs. Emerging technologies such as in-memory analytics and natural language processing also look promising and expand the boundaries of BI analysis.

Datamonitor analyzes the changing dynamics of the market and calls for a re-evaluation of go-to-market strategies by each vendor. Datamonitor believes vendors should assess the diversity of end-user needs and increased competition and target specific channels to reach customers.
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Table 1: Major acquisitions in the business intelligence market, 2006-2008 5
Table 2: Current BI bundles consist of product and industry bundles 18
Table 3: Future BI bundles will combine BI with other applications to derive actionable intelligence 18
Table 4: Respondents' mobility investment plans 23
Table 5: Probability of various BI features to be offered on mobiles 24
Table 6: Respondent's preferred approach to buying BI 41
Figure 1: Some BI vendors are growing at a higher pace than their acquirers 7
Figure 2: BI vendors exhibited higher margins than their acquirers in 2007 8
Figure 3: A majority of BI vendors are witnessing a slowdown in revenue growth rates 10
Figure 4: Several BI vendors are reporting a decline in gross margin 11
Figure 5: Growth rates are stabilizing to more sustainable levels 12
Figure 6: Relatively mature segments such as retail banking will witness a gradual slow down 13
Figure 7: High exposure of BI vendors to financial services customers could put them at risk 15
Figure 8: The mobile applications market is growing at a healthy pace 22
Figure 9: Number of respondents that currently use or will use mobility solutions 23
Figure 10: Acquisition multiples and sizes of four major BI M&A deals (2006-2007) 30
Figure 11: Traditional value chain: limited overlap between layers resulting in commoditization 31
Figure 12: Consolidated value chain 33
Figure 13: Scenario planning diagram 35
Figure 14: Take hosted BI offerings to the UK, Benelux, Australian, and French markets 39
Figure 15: Targeting SMEs requires a formidable local and national reseller base 40
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