Microsoft vies for BI market success

The software giant is investing in business intelligence software and aims to reach beyond its customers' IT departments and up to board level

Microsoft has started firing the first volleys in its forthcoming war for the business intelligence space, as it attempts to position itself as a trusted partner in the enterprise rather than simply as a technology provider./>

Although the software giant is coming relatively late to a market that has been established for more than a decade, it has been making increasingly aggressive noises about business intelligence (BI) since the end of last year.

The sector's growing importance in Redmond was also highlighted by its decision to host an inaugural BI event at its headquarters in May, which was attended by 3,000 delegates. This was used as a forum to unveil a coherent BI strategy for the first time, which revolves around the concept of "BI for the masses".

"This is the first year that Microsoft has communicated relatively well around BI and it will be a year when it tries to raise the volume in terms of what it is delivering," said Andreas Bitterer, a vice president of research at Gartner. "It's talking a lot about BI, whereas in the past, it was driven mainly by Windows and its server products."

According to Bitterer, the SQL Server database, which acts as a foundation to Microsoft's BI strategy, has now had its profile raised "even within Microsoft, and Steve Ballmer [its chief executive] is talking about it now while, in the past, he didn't." As Bitterer noted: "It seems that there's been a shift of priorities in Microsoft."

Such a shift in priorities would seem to indicate that Microsoft is trying to make itself more relevant to a business audience, in order to raise its profile at board level.

Dale Vile, a research director at Freeform Dynamics, explained that, while most people use Microsoft Office on the desktop, it tends to be thought of "as a techie, infrastructure thing".

"But Microsoft wants to be more visible and for people to appreciate it more at the business-value level. It's trying to go up the business value stack and BI is a good way to do that," Vile said.

This is not least because one of the biggest drivers of business satisfaction with IT is the ease with which it provides access to relevant information; which means that, in many instances, BI is the face of IT. This is reflected in various surveys undertaken by Gartner over the past two years, which indicate that the technology is number-one on the agenda of chief information officers, and that it currently constitutes a multi-billion dollar market.

"So it's important to Microsoft. It wants to be seen to be helping the business because it equates to account control and cross- and up-selling potential. The aim is to become a trusted partner, but Microsoft is behind the curve on that. It generally hasn't had that relationship with the business, so it doesn't have the same level of board presence as, say, IBM," Vile said.

Therefore, the goal is to build on core products such as its Office desktop productivity suite and SharePoint collaboration and content management tools to create a valuable future revenue stream. "BI represents a layer of premium-value business, which is an important difference between run-rate growth and driving growth," explained Vile.

But there are other dynamics that are pushing Microsoft to try and exploit the market. Over the past five years, companies in general, and large enterprises in particular, have increasingly been..

...transferring decision-making powers from senior to lower levels of management, and basing performance reviews and bonuses on the outcome.

This is leading to a broader requirement for information which, in turn, is boosting demand for unstructured data-based collaboration systems as well as tools to analyse structured information.

But while traditional BI vendors such as Business Objects and SAS have geared their tools towards specialist audiences and have, therefore, been able to charge a premium price, this is not so commercially viable if thousands of workers are involved.

"So the dynamics and the nature of the solutions are changing. It's about pushing smaller chunks of information to a wider audience, not the luxury of delivering it through specialised desktop solutions," Vile said

And this is where Microsoft comes in. The company has a natural front end through both Office and Outlook. It also has some control of the layer directly behind this, with the Exchange email messaging and collaboration server and the SharePoint portal, which is becoming increasingly pervasive, especially in larger organisations.

SharePoint Server 2007 now includes BI-like functionality. An example of this is Excel Services, which enables users to share host-based spreadsheet data and makes it possible to maintain a single version of the truth for auditing purposes.

The product also incorporates tools for users to create their own dashboards in order to display business information and a Business Data Catalogue to search data from back-end business systems and add it to Office applications.

At the departmental level, the SQL Server database is also a popular option. Over the past few years, Microsoft has been adding more and more functionality to create a kind of BI layer within its offering and, in April 2006, the vendor also purchased ProClarity to provide it with analytics tools. This means it now provides an easy way for organisations to exploit basic data-warehousing and data-mart functionality at the low-end, and the analytics tools will be further enhanced in the next version of SQL Server, code-named Katmai, which is due to ship in 2008.

"The advantage, and the card that Microsoft will play, is the idea of pervasive BI and pushing information out to a broader audience. The ace is its control of the desktop and the layer immediately behind and, as people move to Office 2007, it will attempt to sneak in through that desktop entry point," Vile says.

Among lower-end and mid-market companies, which are less willing than larger players to buy specialist tools, Microsoft is likely to become a dominant player. It also has an advantage given its incumbency — "unless it screws up", suggested Vile.

But it is a different matter at the high-end. "Microsoft has tried for a while to position its offerings as an end-to-end BI solution, but while this kind of proposition resonates with small to medium businesses, it completely misses the mark with large companies that are interested in more plug-and-play solutions," says Vile.

Most large organisations have fragmented BI deployments, which have grown up at the departmental level or in relation to different applications such as SAP. This means that they are less likely to be...

...attracted by a rip-and-replace strategy and more interested in standards-based frameworks that can tie all of these disparate domains together, particularly as the usage of BI continues to broaden out.

"The framework will be where the real battleground is for BI. Microsoft would dearly love the .Net framework that underpins its BI stuff to be the default, but so would Oracle with its database and Fusion and SAP with NetWeaver and its Business Information Warehouse — and they are big players in the enterprise", Vile explained.

These vendors have been extending out their core applications and building in BI functionality to try and position themselves as a hub for some years now. But IBM is another key player with its high-end DB2 database and data-integration software, although it currently has no reporting or analytics applications in its portfolio.

"The large enterprise is quite a complex landscape so there's no way that Microsoft is going to go in there and just take control, because there are big powerful incumbents that are after the same space. So here Microsoft will push the interoperability message and the situation will play out on an account-by-account basis," said Vile.

A key issue around investment, however, will be where customers place their emphasis in terms of decision-making. If the back-end large data-warehouse layer is perceived to be the most important, the traditional enterprise players are more likely to win out.

If the focus is on the middle layer, which is about pulling together disparate back-end data sources, Microsoft is in with a fighting chance against vendors such as IBM with Notes, and Bea Systems with its WebLogic portal. But if the front end is considered the most crucial area, then Microsoft is well placed to gain.

But Redmond may also make some headway as customers increasingly look to rationalise their disparate BI offerings and standardise on fewer vendors, in order to reduce costs and cut maintenance and support burdens. It may also appeal because of its pricing strategy, which is already having a commoditising effect on the wider market.

"Microsoft will try to move higher up the food chain, as that's where the money is, and it is likely to have some success due to its very aggressive pricing. So the pure-play vendors will have to look over their shoulders because, as history tells us, when Microsoft goes after a market it's there for good. It may lose money at the start, but it's got deep pockets and it's in this for the long-term," Gartner's Bitterer said.

Moreover, although the vendor may currently be positioning its portfolio as a discrete set of offerings and will continue to do so for some time, as evidenced by the planned release of its PerformancePoint Server 2007 business performance management (BPM) application in the autumn, this will change over time.

"Microsoft needs to do what it's doing now to earn its stripes as there's a perception that the BI market is about specific solutions, and so it needs to explicitly position its deliverables. But over time, we'll see its BI capabilities being increasingly positioned as options and they'll move from being discrete to being an integral part of other products," said Vile.

This will inevitably lead to market consolidation, with Oracle's acquisition of BPM supplier Hyperion in March being the first indication of the move about to take place.

The most likely purchasers are the big infrastructure players such as IBM and HP, and the most obvious targets are the pure-play BI vendors.

"Whenever Microsoft goes to a market, it becomes a key player, which means that other vendors have a habit of being acquired or being pushed into niches. So in a few years' time, when the big infrastructure players have moved in, the market will look very different, and it's pretty much ready to make a big shift now," Bitterer said.

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