Chief Information Officers (CIOs) have ranked business intelligence (BI) projects as the number one technology priority for 2007 with revenue expected to grow 12 percent in Australia topping CDN$91.8 million.
Following the release of a global survey of 1400 CIOs, Gartner Inc. said BI platform revenue in Australia will grow at an annual compound growth rate of 10 percent to reach more than CDN$131 million by 2010.
This will create a tough market for software vendors with Gartner predicting that BI revenue from the “mega vendors” such as Oracle Corp., SAP AG and Microsoft Corp., to grow three times faster than revenues from the BI pure-play vendors in 2007.
Worldwide BI revenue from the “mega vendors” will grow 20 percent in 2007 compared to six percent for the pure-play vendors. In 2006 the “mega vendors” had just over 20 percent of the global BI market and Gartner predicts this will increase to more than 30 percent by 2010.
At the company’s inaugural Business Intelligence and Information Management Summit in Australia, which kicks off in Sydney Tuesday, Gartner Research Managing Vice President Ian Bertram will outline the future of BI and how it will impact the business environment over the next 10 years assessing the opportunities and challenges it presents to Australian organizations. “BI has become a strategic initiative and is now recognized by CIOs and business leaders as instrumental in driving business effectiveness and innovation,” he said.
However, Bertram also cautioned that while BI is recognized as a strategic priority at management level, BI is not well understood among company employees.
He said an increased focus on training will be crucial in 2007. A central theme at the conference will be data quality and integration, with visiting Gartner research vice presidents Ted Friedman and Andreas Bitterer providing advice on how to remove the ‘garbage in, garbage out’ problem to allow data to drive growth. As companies put a more strategic focus on BI, they are also taking steps to reduce the number of vendors and tools deployed in their organization.
In the past, each department bought their own BI solutions, resulting in an explosion of different tools across the business. Today they are looking to use the same systems across the business to ensure a standardized and rational way of analyzing and measuring the same data, and to increase impact and operational efficiency. The Asia Pacific market for BI platforms increased 22.7 percent to more than CDN$282 million in revenue in 2005, according to Gartner Dataquest’s latest market share report released last month.
Australia represented more than 43 percent of the market and the top five BI platform software vendors in the region by revenue is Cognos, SAS Institute, Microsoft, Business Objects and SAP. Gartner warned BI vendors that price pressures, increased competition and consolidation spell tough times ahead.
“The big software companies are well positioned because they have embedded BI into their platforms and they are selling into a large installed base,” Bertram said.
“They may not always represent the best solution, but they are easy to install for a company that already has their platform in place. As companies try to standardize, it is convenient and in many cases cheaper to keep the same vendor.”
“We will also see an aggressive push from Microsoft this year with the launch of Microsoft Excel Services as part of Office 2007 and the associated Performancepoint Server applications that will use Excel,” he said.
“This will be particularly attractive for small and medium sized businesses as standard BI functionality applications suddenly become available at a reasonable price.” Despite the increasing presence of the “mega vendors,” Gartner believes traditional pure-play vendors will continue to hold the majority of the market during the next few years.
However, increasing competition means they need to communicate their value-added services more clearly and they need to commit more resources in terms of time, money and focus to cut through the noise created by the “mega vendors.”
If not, Gartner said they face the risk of the competition moving into other markets, such as performance management, as mega vendors look to expand their offerings. It is an opportunity for enterprises to take advantage of the highly competitive environment to negotiate contracts and buy basic BI functionality at lower prices.
But Gartner stressed the need to prepare for changes in technology and products. More importantly, in order to use BI to drive business transformation Gartner recommends changing the way the information architecture and application portfolio are implemented and managed.
This includes changing the way BI is integrated into business processes and to establish a BI competence center which includes the formation of a steering committee.
Finally, there should be a greater focus on developing user skills and instilling a BI culture across the organization.
“To make BI a truly strategic business initiative, it must be supported by a governance model and an appropriate organizational structure such as the competence center. Buying technology will not be enough and education of users is crucial to success,” Bertram said.