Business Objects To Grow Organically And Acquisitively

It is no secret that the mid-market is the place to be for Business Intelligence (BI). The segment is growing almost 50% faster than the enterprise segment in terms of BI adoption. As opposed to the old days when no one except for the larger enterprises could afford to buy BI, mid-market companies are now beginning to invest big time in acquiring BI tools and other decision support capabilities.

So, it’s no surprise that BI vendors, big and small are diverting their efforts towards securing a sizable share of the mid-market BI pie. One such vendor is Business Objects which in the last few months has toiled really hard to make its mark among the mid-market BI shoppers.

Going after Mid-Market

Business Objects recently released the second edition of Crystal Decisions, a “plug and play” BI appliance designed for the mid-market businesses. This one is a follow up to the first, Crystal Decisions Standard edition which was aimed at first time BI users. Called Crystal Decisions professional, this edition is a sophisticated suite with high data integration capabilities among other things. But that’s not all, there’s a third installment yet to come out. Scheduled to be launched in mid-October, Crystal Decisions Premium Edition will have performance management capabilities such as score cards, metrics, and goals.

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Besides this, the company is already offering some BI tools via the SaaS or the hosted channel. It also has a dedicated mid-market business unit with marketing and sales teams to tap opportunities in the space.

But Business Objects is not the only BI vendor chasing mid-market customers. Realising the big bucks to be made, other BI big guns such as Cognos, Hyperion and SAP are also trying to get in on the action. So how will this affect Business Objects’ play?

According to Todd Rowe, vice president and general manager, Worldwide Mid-Market Business Unit, Business Objects, “Among our larger competitors, we have a clear head start in the mid-market space. We believe the advent of our larger competitors is only going to help our cause. Reports suggest that out of the total number of mid sized companies only 15% of them have got any sort of BI, which essentially means that there are plenty of opportunities up for grab. The entry of the likes of Oracle and SAP will help educate the market about BI, create awareness in general and help boost BI penetration rates. We are likely to be the biggest benefiters of this because we are the only BI company that has a portfolio of offerings tailored especially for mid-size customers.”

Mid-Market underserved by large BI players

However, the mid-market BI space is very different from the enterprise segment and it’s a different set of rules by which the large BI vendors will have to play.

“If you take a look at the enterprise BI market, the top four-five vendors such as Business Objects, Cognos, Hyperion, SAS account for majority of the market share. It’s completely opposite in the mid-market segment. Here close to 80% of the market is controlled by smaller, niche vendors and the bigger vendors account for a small portion of the market. Estimates suggest that as many as 18-20 smaller BI specialists account for the majority of the mid-market segment. Hence for the larger vendors it’s going to be not a fight against one or two but many,” said Rowe.

The reasons for this situation are many. Traditionally pure play BI vendors never really paid attention to the mid-market customers because they didn’t have the dollars for buying BI. Another issue that led to the failure of bigger BI vendors in the mid-market space was the offerings themselves. The larger vendors never really designed BI solutions for the tier-II companies. All they ever did was present dumbed-down versions of their enterprise offerings to these mid-sized companies, which didn’t meet their requirements and failed. Also, these initial offerings were fairly complex in nature and often too expensive for the mid-size wallets.

By doing this, larger BI vendors inadvertently made room for smaller BI player to develop and sell their offerings to these customers looking for BI.

Fragmented market may lead to M&A

The highly fragmented nature of the mid-market is also likely to invite consolidation through merger & acquisitions (M&A) in the coming years. The M&A activity could just come in as means of acquiring tailor made offerings for the mid-market space as the larger vendors may not want to develop those capabilities in house. It could also serve as a means of acquiring an installed user base and grow the market share for the larger vendors.

“There is a window of opportunity for two-three years time after which the mid-market will be much more consolidated just like the enterprise application space,” said Rowe.

Does this mean that Business Objects has something planned for the future?

“Although we do not comment on specific acquisitions, if you look at the last four quarters we have acquired one or two companies every quarter and chances are that we’ll continue to do so in the coming months. We as a company aim to grow both organically and acquisitively,” answered Rowe.