Management Update: Gartner s BI Magic Quadrant Update Sailing in Rough Waters

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1 IGG H. Dresner Article 11 September 2002 Management Update: Gartner s BI Magic Quadrant Update Sailing in Rough Waters Although the business intelligence (BI) market continues to ride out the economic storm better than most software markets, Gartner advises that through year-end 2002, enterprises should be wary of instability in this area. Many CIOs and other enterprise executives are looking for insights on which vendors will be leaders in the business intelligence (BI) industry. Although the BI market continues to ride out the economic storm better than most software markets, Gartner advises that through year-end 2002, enterprises should be wary of instability in this area. How Is BI Used in Enterprises? It is useful to start with some background information about BI, such as the way in which it is used and its strategic value to enterprises. Gartner surveyed more than 600 enterprises in the United States and Europe to get information about their BI initiatives (see Figure 2): Figure 2 Survey Results: How BI Is Used in Europe and the United States 100% 75% OLAP (online analytical processing) Advanced analysis 50% Standard reporting 25% Ad hoc queries 0% Europe United States Gartner Entire contents 2002 Gartner, Inc. 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.

2 The strategic use of BI is not as high as many people might believe from the vendor marketing campaigns and trade press. By far, BI is largely used for bread and butter work. Ad hoc queries and standard reporting, in both the United States and Europe, comprises approximately two-thirds of all BI use. Advanced analysis is a relatively small category 22 percent in Europe and 15 percent in the United States. OLAP (online analytical processing) has a higher adoption rate in the United States (22 percent) than in Europe (15 percent). The good news for enterprises is that a lot of advantage can still be gained from established BI deployments by making them more strategic. The good news for vendors is that the market can become much more educated, and upsell possibilities exist. The Strategic Value of BI Strategic BI can refer to strategic deployment or to the insight it delivers i.e., the strategic use of information. Strategic deployment means that BI becomes embedded in the systems and processes of the business to build a more-agile enterprise that can anticipate and react faster than its competitors to changing business conditions and new profit opportunities. Strategic use of information focuses on how well the enterprise is meeting predefined goals and objectives. Furthermore, it provides perspective on and directly supports how the enterprise is able to change its ways, going beyond improving current operations. The strategic value of BI is a combination of the degree of strategic deployment and strategic focus of the information and positions of five typical uses of BI within a deployment/information use matrix developed by Gartner (see Figure 3). Figure 3 Strategic Value of the BI Model: Typical BI Uses and Objectives

3 Strategic Focus of Information Knowledge is power Applied mathematics SV = High Stand-alone BI applications SV= Med Insight as the business Corporate performance management SV = Full Tactical Management reporting SV = Low Bread and butter CRO/BAM SV = High Operational BI Tactical Deployment Strategic BAM Business activity monitoring CRO Customer relationship optimization SV Strategic value Management Reporting. The bread and butter of BI, these systems are at the core of tactical deployment of tactically focused information. Many enterprises start with these systems, which contain aggregated information with a very specific focus (e.g., serving a business unit), answering predictable types of questions. Hardly any infrastructure is needed for this type of deployment. Strategic value is low. Packaged Stand-alone BI Applications. These range from operationally focused such as sales forecasting, budgeting, activity-based costing to strategically focused such as balanced scorecard tools, simulation and business planning. Most of these applications are standalone and serve a limited amount of users. However, suites of applications are emerging. Infrastructure is often limited, or aimed at supporting only the suite itself. Applied Mathematics. Among the oldest forms of BI, applied mathematics has been used since the 1970s. It uses decision support systems and statistical tools and applies operational research techniques. Used by skilled analysts for ad hoc analysis, the output can be highly strategically focused, but these systems are rarely widely deployed. A solid data warehouse infrastructure makes this kind of analysis much more productive but, in many cases, flat files are still used. Customer Relationship Optimization (CRO) and Business Activity Monitoring (BAM). In this area, information is used for tactical purposes (supporting processes), but has a high strategic value, because it affects the whole enterprise. To succeed with CRO, an overall customer view across all channels is needed, ideally providing real-time recommendations during customer contact processes. BAM aims at providing BI at a very operational level and is a key driver in enabling the zero-latency enterprise. A full data warehouse infrastructure is needed. It should have an online or even real-time component in the form of an operational data store. There should be high availability, the infrastructure should include integration broker processes and, for workflow, it should contain business process modeling technologies. Corporate Performance Management. This provides full strategic value. All examples are combined, sharing a common infrastructure. There is a vertical closed loop, translating strategically focused information to operational plans and feeding back aggregated results. There are also

4 horizontal closed loops, e.g., integrating all elements of the planning and control cycle, or addressing BAM or CRO needs. Corporate performance management makes information democracy a fact, sharing information across and even beyond the borders of the enterprise, to all employees, business partners, shareholders and, most importantly, customers. The infrastructure should be combined with the corporate extranet. BI Market Expansion In 2002, a generally weak software market has prevailed and may continue through the end of the year. The BI segment has done comparatively well, in contrast to most other software markets. Although growth has been hampered by the economic downturn, the BI market continues to expand. Some vendors, through solid execution, continue to increase profits. Challenges for Some BI Vendors However, the BI market presents an extremely challenging environment for vendors. Sales cycles are longer, deal sizes are smaller and discounting is steeper. Vendors must have superb execution and unusual efficiency to succeed. They also must have business and market focus, as well as precise execution. In addition, enterprises have shown a strong preference for incumbent vendors that are perceived as stable. That places a great deal of pressure on vendors to keep customers and investors happy a difficult task at best. Although enterprise BI suites (EBIS) and reporting as well as BI platforms have many different characteristics, the market forces apply equally to both areas. Therefore, vendors that are not focused, lack efficiency and are not considered stable will struggle in the near future. Some vendors will fail or will be acquired, yielding more market share to the remaining competition. An indicator of a struggling vendor is steep discounting or the use of pressure tactics to close a deal at any cost. Although that alone is not a reason to reject a vendor, it is cause for more serious investigation. EBIS and Reporting EBIS is a maturing market and has almost a packaged-goods feel to it, with some mass-market dynamics. In this market, brand recognition is important. Most of the significant vendors in this market are publicly held companies and are subject to ongoing regulatory financial report requirements. Therefore, financial performance good or bad is widely known and influences perceptions of stability. Brand awareness and stability (and other factors) are reflected in a vendor s overall ability to execute on Gartner s EBIS and Reporting Magic Quadrant (see Figure 4). Market trends that improve the overall completeness of vision include real-world scalability and the convergence between robust reporting and EBIS. Figure 4 Enterprise BI Suites and Reporting Magic Quadrant

5 Ability to Execute Challengers March 2002 August 2002 Microsoft Oracle Cognos Information Builders Actuate Leaders Business Objects Crystal Decisions Computer Associates Hummingbird Brio Software MicroStrategy As of August 2002 Niche Players Visionaries Completeness of Vision Cognos and Business Objects continue to outperform other vendors in this segment. With its Series 7.0 product, Cognos has improved the uniformity, usability and scalability of its product line. Although Business Objects continues to have one of the best and most-effective field organizations, Gartner expects that its recent acquisition of Acta will introduce field confusion and management distractions. Moreover, the delay in its next-generation release has affected overall completeness of vision. Crystal Decisions has demonstrated solid product and execution and continues to climb toward the Leaders Quadrant. MicroStrategy, Brio Software and Actuate have lost ground in execution, and have incurred reduced revenue and experienced financial challenges. MicroStrategy, however, has improved its overall vision, with the latest release of its version 7 product line enhancing usability and reporting features. Other vendors downward shifts are not dramatic and should not cause enterprises alarm they indicate a changing market and the need for vendors to adapt and focus. BI Platforms Unlike EBIS, the BI platform segment is a far less-mature market, selling to original equipment manufacturers (OEMs) and independent software vendors (ISVs), as well as directly to IS organizations and end users. Many BI platform vendors also sell applications as the platform s raison d être. The affinity with OEMs, value-added resellers and ISVs, and the lack of overall market maturity, create opportunities for smaller and embryonic vendors, as depicted in Gartner s BI Platform Magic Quadrant (see Figure 5). Figure 5

6 BI Platform Magic Quadrant Challengers March 2002 August 2002 Leaders SAP PeopleSoft SAS Oracle Microsoft Ability to Execute Computer Associates Hyperion Crystal Decisions Sagent MicroStrategy Arcplan WhiteLight Systems ProClarity Alphablox As of August 2002 Niche Players Visionaries Completeness of Vision Spotfire No real leaders are in this market segment, although Microsoft is close. Large vendors conflicting (and competitive) programs often prevent them from making real progress in attracting third parties to adopt their platform products. That is true for Oracle (despite the improved 9iR2 OLAP Services), SAP, SAS and PeopleSoft. Similar to EBIS, some vendor decline has occurred in execution (and vision) as a result of poor execution, dwindling resources and, in some cases, lack of focus. In stark contrast and despite the poor economy, however, some younger vendors are growing and succeeding, including ProClarity and Arcplan. In addition, Spotfire, best known in the life sciences and petroleum industries, has come to market with an innovative BI platform that offers powerful visualization and analytics, and a new software development kit for third-party developers. The Outlook BI vendors will find that new sales opportunities are more difficult to identify and close. Enterprises are more inclined to purchase from established, stable vendors. Successful vendors will have to work smarter and harder than before to find new opportunities. Through the first half of 2003, well-capitalized BI vendors will expand and upgrade their workforce and acquire hot new technologies; this will help position them favorably as the global economy recovers (0.8 probability). However, not all BI software vendors are in good financial condition. Some are barely viable and are hoping that the economy will improve quickly.

7 By year-end 2002, more than 50 percent of struggling BI software vendors will fail or be acquired because of declining market share, significant losses and a lack of available capital (0.7 probability). Bottom Line Although the overall software forecast may seem bleak, the BI segment continues to grow, albeit modestly, and it outperforms many other software categories. However, market and vendor performance will continue to be uneven. When selecting vendors and products, enterprises should look for signs of troubled vendors, and those signs include steep discounting (failing vendors often will offer the most financially appealing deals) and pressure to close deals quickly. Written by Edward Younker, Research Products Analytical source: Howard Dresner, Gartner Research For related Inside Gartner articles, see: At Random, Business Objects-Acta Deal Best for a Customer of Both Vendors, 31 July 2002 At Random, Microsoft Targets Business Intelligence Developers, 29 May 2002