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IDC: BI giants haven't cornered the market

Despite recent business intelligence consolidation, the research firm thinks smaller providers still play an important role in the sector.

While there will be a general slowdown in growth in the rapidly consolidating business intelligence (BI) software market in the coming years, opportunities exist for pure-play, best-of-breed BI software vendors, according to a report issued this week by International Data Corp.

The market will increase to $4.5 billion by 2007 at a compound annual growth rate of 4.1%, IDC forecasts. In 2002, the market was worth $3.7 billion.

"The market continues to be somewhat fragmented," said Dan Vesset, analytics and data warehousing research manager with Framingham, Mass.-based IDC. "Nobody really dominates that segment. The point is that there was consolidation, but growth rates are obviously lower than the late '90s. It's still a market with momentum, given the weak overall IT market."

The BI market experienced double-digit growth in 1999 and 2000.

BI remains a fragmented industry. The top 10 companies have about 60% market share, which stands in sharp contrast to industries such as the relational database sector, where the top 10 have a 95% share, Vesset said.

According to the report, the anticipated lower growth rates are due primarily to the embedding of business intelligence functionality in relational database systems and an increasing focus by BI and ERP vendors on analytics tools instead of BI software.

Recent consolidation in the industry has been aimed at broadening product portfolios and, according to Vesset, opportunities exist for best-of-breed BI vendors to fill the potential gap left by the larger BI and ERP vendors.

On July 24, performance management specialist Hyperion Solutions Corp. announced it had acquired Brio Software Inc., a maker of reporting software, for $142 million in cash and stock. That came less than a week after Business Objects SA announced its proposed all-stock purchase of reporting and analytics vendor Crystal Decisions Inc. for $820 million. Then on Tuesday, San Francisco-based reporting tools maker Actuate Corp. announced it is acquiring data integration vendor Nimble Technology Inc., Seattle.

Vesset said he expects consolidation to continue.

The report suggests three ways BI software vendors can take advantage of user needs: partnering with smaller ERP, CRM and supply chain management (SCM) vendors; improving flexibility in functionality to compete with the use of spreadsheets for analytics and reporting tasks; and focusing on how BI software leverages existing investments and yields quick ROI.

Vesset listed SAS, Business Objects and Hyperion as those best positioned to meet companies' requirements. He said the future is also bright for MicroStrategy Inc., Information Builders Inc. and SPSS Inc.


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