Business Intelligence Software Market: Europe, 2002 (Executive Summary) Executive Summary

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1 Business Intelligence Software : Europe, 2002 (Executive Summary) Executive Summary Publication Date: 9 January 2004

2 Authors Fabrizio Biscotti Colleen Graham This document has been published to the following place codes: SOFT-WW-EX-0150 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

3 Business Intelligence Software : Europe, 2002 (Executive Summary) The slow economy and changes in buying patterns and priorities have had a huge impact on new license revenue for vendors of business intelligence (BI) software in Europe. Most have seen a steady drop in license revenue. Vendors have struggled to overcome smaller deals, tactical projects, longer sales cycles and heavy competition. The high growth of the past two years is now a dim memory. Standalone Vs. Composite BI Software In order not to double-count license revenue, Gartner Dataquest tracks only products that are sold as stand-alone solutions. In a "stand-alone" view of the market, SAS leads the field, followed by Business Objects, Cognos, SAP and Hyperion (see Table 1). Table 1 Business Intelligence Software New License by Vendor: Europe, (Stand-Alone View) Vendor ($M) 2000 ($M) 2001 ($M) 2002 Share 2000 Share 2001 Share 2002 Rate 2001 Rate 2002 SAS Institute % 19.3% 22.5% 2.2% 11.8% Business Objects % 19.9% 15.8% -4.3% -23.6% Cognos % 11.7% 14.2% -15.4% 17.2% SAP % 3.6% 3.0% 75.6% -21.6% Hyperion % 8.0% 8.0% -14.8% -4.6% Others % 37.5% 36.5% -4.9% -6.4% Total % 100.0% 100.0% -4.2% -3.9% But in the BI market, this view distorts the market's real performance. This is because several large software vendors have begun to sell BI tools as both point solutions and bundled in their application suites. In some cases, vendors sell BI only as a bundle within a suite. The most visible examples are: SAP, which sells Business Intelligence Warehouse as a point solution and bundled into the mysap application suite Oracle, which offers BI functionality within its Oracle 9i products Microsoft, which offers its BI platform, Analysis Services, only as part of SQL Server The "composite" view of the BI market has two components: the revenue generated by stand-alone products and an estimate of the revenue generated by selling BI functionality embedded in software suites. Table 2 summarizes our composite view of the BI software market in Europe Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

4 2 Business Intelligence Software : Europe, 2002 (Executive Summary) Table 2 Business Intelligence Software New License : Europe, (Composite View) ($M) 2000 Country s ($M) 2001 ($M) 2002 Share 2000 Share 2001 Share 2002 Rate 2001 Rate 2002 Embedded % 11.5% 13.0% 127.9% 10.4% Stand-Alone % 88.5% 87.0% -4.2% -3.9% Total % 100.0% 100.0% 2.6% -2.3% The growth in sales of embedded BI in the past two years has been phenomenal. This is because vendors selling BI as a bundle can draw on a large existing customer base and generate revenue from up-sales and cross-sales, even during tough times. Companies often look for "good enough" BI functionality, along with a high level of integration with existing systems and low cost. A software suite vendor can generally guarantee all these elements. Looking at the market from a stand-alone view reveals a decline in sales in 2002 of almost 4 percent. From a composite perspective, the market declined less severely, at about 2 percent. The future of BI software is increasingly related to this composite view. Vendors of business applications and databases are increasing their BI offerings as embedded functions of their software suites. The United Kingdom, Germany, France, Italy and the Netherlands are the primemarketsforbisoftwareineurope.figure1showstherelativesizeofthe country markets in Western Europe. Figure 2 shows country markets in Eastern Europe. Figure 1 Business Intelligence Software New License by Country: Western Europe, 2002 France (16%) Italy (9%) Netherlands (7%) Others (5%) Switzerland (4%) Spain (4%) Sweden (4%) Belgium (3%) Germany (19%) United Kingdom (30%) Total, 2002 $531.2 Million Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 January 2004

5 Business Intelligence Software : Europe, 2002 (Executive Summary) 3 Figure 2 Business Intelligence Software New License by Country: Eastern Europe, 2002 Russia (8%) Rest of Eastern Europe (8%) Hungary (5%) Czech Republic (20%) Baltics (3%) Romania (2%) Slovakia (2%) Ukraine (1%) Belarus (1%) Bulgaria (1%) Poland (50%) Total, 2002 $15.8 Million Gartner Dataquest Perspective The market in Eastern Europe accounts for 3 percent of the license revenue generated in Europe. This market will continue to perform considerably better than the Western European one, but will remain well below 5 percent of the total. Gaining new license revenue in the immediate to near future will be extremely tough for vendors. The most optimistic forecast predicts an improvement in early 2004 as the European economy begins to recover from the downturn. Realistically though, European IT budgets may not experience an upturn until mid-2004 at the earliest. The continuation of longer sales cycles and reduced license revenue should therefore be expected. These circumstances will result in intense competition, centered on additional product features and greater price discounting. However, given that this has already been necessary for more than a year, smaller vendors will feel the strain more than larger ones. Trading on reputation alone will not guarantee new license revenue in such difficult times, and good vertical expertise, strong sales, service and reliable channel partners will all be crucial elements if vendors are to weather the stagnant European market. Financial filings for the first half of 2003 indicate that overall market conditions are improving. In addition, the number of mergers and acquisitions announced in 2003 would indicate significant shifts in market share. This could greatly affect the competitive environment, as cautious customers favor larger, more well-known suppliers, putting smaller vendors at a disadvantage. Gartner Dataquest's market share study assesses the market shares of BI vendors based on new license revenue. But other factors also contribute to a vendor's strength. Prospective customers of BI software vendors should base their selections on a range of criteria, including the size and growth of the vendor's installed base, and the company's ability to meet well-defined customer requirements. In addition, businesses should always consider a vendor in terms of innovation, R&D and execution Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 January 2004

6 4 Business Intelligence Software : Europe, 2002 (Executive Summary) Link For the full market share and market size information, see "Business Intelligence Software : Europe, 2002," which is published as an Excel pivot table to the Software Europe Cluster: SWSF-EU-MS Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 January 2004