The business of intelligence

Business Intelligence (BI) is one of the few bright spots in the otherwise flat enterprise software market, fuelled by the claim that a company can boost productivity by investing in BI reporting tools.

This is an tempting concept for today's businesses, and the potential growth of this sector is attracting several large IT vendors.

Microsoft recently entered the space with applications aimed mainly at small to medium-sized companies. IBM also announced that it is planning several initiatives this year to grab a bigger slice of the action including a new version of its main BI product, Data Warehouse Edition.

But despite the competition, Business Objects -- one of the two or three frontrunners in the market -- is attempting to set itself up as the de facto choice when it comes to BI applications. The vendor claims that the returns for those companies that opt to invest in its technology can average around 400 percent.

Following the launch of the latest version of its flagship product, Business Objects Extreme Insight (XI) ZDNet UK caught up with the company's chief executive and founder Bernard Liautaud to discuss competing with Microsoft and the impact of regulations such as Sarbanes-Oxley.

Are you happy with the term business intelligence -- do you think it describes what you do adequately?
Yes, I like the term. At the end of the day, I think what we are doing is enabling intelligent businesses. It's about building intelligence into a company by using information better. To me, an intelligent enterprise does three things: it practices the concept of information democracy which is everyone should have access to information. Not all the information, but everyone should be informed. The second piece is driving performance through the use of metrics, and score-cards and goals. The third piece is sharing information with external constituencies and partners and suppliers. If you do these three things well then I think you improve the performance of the enterprise and you are an intelligent business.

You have claimed that the market for BI applications is pretty untapped so far. But if the software is so useful why haven't more companies rolled it out? What is the major inhibitor to adoption?
I think sometimes there is a problem with the philosophy of the company. Sometimes they don't see the strategic value of BI. Sometimes BI is viewed as a small, tactical reporting tool -- 'Yeah, you need reporting but it's not that important.' But I think those companies that get it, really get a lot of value out of it. I believe the high-performance organisations are those that take BI seriously, who think that by deploying information to a large number of users, they are improving the effectiveness of the decision making process.

Do most companies have their internal systems in a good enough state to take real advantage of a sophisticated BI platform? Is integration of systems the real mountain that has to be climbed here?
I don't think it's a huge mountain. I think that a lot of companies that have BI implementations may have done them in a fairly tactical way. They may have a little bit of Business Objects here, a little bit of something else there. As they finish up their transaction systems, they are saying 'Are we really able to take advantage of all that data with lots of small systems or is it time to standardise on one across the advantage?' I'd say about half of them have got the point where they have the infrastructure to get to the point where they are thinking about standardisation.

What effect have regulations such as Sarbanes-Oxley had on your business? Has it been a real shot in the arm for BI vendors or has it just been another factor shaping the market?
Sarbanes-Oxley has added a lot of costs into the IT operation but it hasn't necessarily translated into a huge amount of software sold. I think a lot of people thought they were going to sell a lot of software off the back of it but I think the IT departments have realised that they have a lot to do just to document their procedures and to secure what they are doing. I think the reaction has been a lot of strengthening the existing processes in the organisation as opposed to buying a lot of new software.

So Sarbanes-Oxley has almost been a motivator for companies to get their IT house in order?
Now they are going to look for more compliance, more openness, more transparency but I think that first phase has been to get in shape because you need to get compliant by the end of 2005. Afterwards it will be, 'How can we optimise all of this so we don't have to do all these processes manually?'

You're trying to create a complete set of applications for BI. At the moment how many of your 29,000 customers are using other BI vendors' software too?
I think you need to distinguish the enterprise customer from the mid-market customer. With 29,000 customers, a lot of them are in the mid-market. We have a couple of thousand customers in the larger enterprise and all the others are in the smaller environments. That theory of standardisation really applies to the larger enterprise. The smaller companies tend to have one supplier but they haven't expanded to a large number of users and haven't expanded it to it full extent.

In terms of objective, one of the objectives we have is to expand our footprint within our customer base, within our enterprise base. The other objective is to acquire more customers at the lower end of the market as this is relatively untapped.

Microsoft could have potentially been a significant competitor to Crystal Decisions in the market of reporting tools aimed at smaller companies. Did this shape Crystal's Decision to allow themselves to be acquired by Business Objects?
It certainly played a role in our thinking. I think in general our strategy was that the market is consolidating, it is going to be appealing to larger firms, whether it's Microsoft, Oracle, SAP, and at the same time customers want to have a safer choice and want to buy from the leader and we should be that leader. The stronger we are, the better armed we are to fight off any other entrant.

Business Intelligence seems to be fairly robust compared to the rest of the enterprise software market. This hasn't gone unnoticed by the likes of Microsoft, IBM and Oracle. Do you see increasing competition from those companies in the future?
I think we will see more competition. But at the same time the market is growing and I believe there is space for a lot of players. However I think the lion's share of the market will go to an independent leader. What customers want is a solution that enables them to access all sorts of data and applications in the company. I don't believe a customer is going to pick a Siebel front-end to access SAP, it just doesn't make sense and the reverse either. But they will pick Business Objects to access both SAP and Siebel and to merge the data.

How close are you to providing that complete breadth of applications?
Today we are able to access anything. We have multiple customers who are accessing Oracle, Siebel, PeopleSoft using our software in the same company. That is a big part of our value proposition to large enterprises.

Your latest platform, Business Objects XI, has improved integration with Microsoft Office. Have you had any similar requests from customers to integrate with OpenOffice.org or Star Office?
I think at this point it is too early. It is already a big step to say 'Hey, BI can now become a part of the day-to-day office environment.' We are not at a point now where we are seeing significant customer demand for the others.

A few open source CRM vendors have recently emerged. Do you see a similar thing occurring in BI?
Not yet, I would say. Open source is something I look into a lot, I am on the board of MySQL and I have a good understanding of that business. I think every enterprise software company should be well aware of what is happening in that space. In BI there has been no particular effect yet but like any part of the software industry, there will be some open source initiatives. There are some open source Java-based reporting tools but it is a fairly mature market so it is going to be a little harder, but it is still a factor.

Companies such as Salesforce.com have cut a swathe through the CRM market by offering on-demand or hosted applications. Is there similar potential in the BI arena?
Definitely it is a business model we are looking into very carefully. Salesforce.com has been growing very significantly without a particularly new technology but with a new business model -- that is certainly something we have taken notice of. But no news, no plans at this point.

BI is somewhat of a different environment in some sense because a lot of companies believe the information they hold for strategic purposes is very proprietary and they are not yet ready to outsource the management of that. They can outsource a process such as sales force automation but I'd say there is a bit more time to go before companies are ready to do the same with BI.

So it’s a cultural issue rather than a technical one which is preventing the uptake of on-demand?
It’s a trust issue.

There aren't any issues around database integration with hosted applications?
No, because now you can do data integration across networks and across companies.

How much consolidation do you see happening in the market -- how many main players are there at the moment in your opinion?
The companies that really have a name in the space -- there's probably only around seven or eight of them. But there has been a big shift. If you look at how the market was three or four years ago, it was very undecided -- you had six or seven players who could pretend to be number one. Now that is no longer the case as the smaller firms have shrunk and the larger ones have grown. Today you have basically three players with critical mass; us, Cognos and Hyperion -- you could add SAS to that but they are somewhat of an unknown because of the private nature of the company. The likes of Actuate, Microstrategy, Informatica have all shrunk. My belief is there will be consolidation in the lower part of the market.

How many companies to do you see dropping out?
I could certainly see two or three companies dropping out, if not more.