According to Business Objects' vice president for the company's mid-market strategy, Todd Rowe, the "dirty little secret" of business intelligence is that companies have in the past been happy to try and sell corporate business-intelligence products to SMEs — leaving the SMEs distinctly unimpressed.
Now, Rowe tells ZDNet.co.uk, his company has cleaned up its act and is producing products for small businesses that are more suitable for them. Business Objects may have sorted this just in time as, earlier this month, SAP revealed it was in the market to buy the company. Most were unsurprised at the move, although some analysts have been sceptical.
Talk to Business Objects, though, and the deal seems well on its way — if not yet finalised — and a marriage between the leading enterprise resource planning (ERP) vendor and one of the leading suppliers of business-intelligence (BI) software seems natural enough.
Here Rowe explains some of the thinking behind the merger, why the company has revamped its approach to SMEs, and gives more details on the aforementioned secret.
Q: Will you be happy to be a part of SAP?
A: The answer is absolutely "yes", and here's why. When we go into an account we have to deal with the fact that people don't understand business intelligence. We have to deal with questions like: "What is business intelligence?" At least in the mid-market, our biggest competition is not a company like Microsoft — it is market awareness. The potential combination, with SAP being such a strong leader, really helps address that. The news has been well received by analysts as well.
How do you define the mid-market?
We look at it both in terms of annual turnover and the number of employees. Here in the UK, it would be companies with about £500m [in income] or below, or about 1,000 employees or below. Obviously that will change from country to country. What the mid-market means in Italy is different from what it means in Japan.
Then we look at the mid-market in different sections. The needs of customers in the upper part of the mid-market will be different from [those of] customers in the lower mid-market. So a company's success or failure in the mid-market is really dependent on whether or not they have the channel coverage in each of those sectors. In fact, the first question we have to address is: "Why are we interested in the mid-market?" We get asked the question: "You can spend so much time with the high-end market, why even waste your time with the mid-market?"
Well, for one thing, the mid-market is growing 50 percent faster than the enterprise market. According to IDC, the mid-market in the BI space is growing at 12.5 percent, compared to the enterprise market which is at 8.3 percent.
The second reason is the profitability. The profit margins are much greater in the mid-market. The majority of our business goes through channel partners, and channel partners manage most of that cost of sale and, therefore, it is a lower cost of sale to Business Objects and, therefore, a much higher profit margin.
The third reason is that, at least in the BI market, the competition is very, very fragmented. If you do a quick exercise and count how many vendors it takes to get to the top 80 percent in market share, in the enterprise space there are only five vendors: Cognos, Hyperion, MicroStrategy, Business Objects and one other.
Do the same exercise in the mid-market and there are 18 vendors. So there is no clear leader yet, and that means there is market share there for the taking.
What makes you think you have an advantage over the other suppliers?
In February we did two things that no major BI vendor had done before. One was to create an entire business unit specifically around the mid-market, so there are over 1,000 employees specifically around small and mid-sized companies. They are not just in sales and marketing but back around engineering and then all the way through customer support.
So, rather than just talk about it, this is a fairly significant investment in fixed cost — putting our money where our mouth is, so to speak.
The second thing we did was, we launched a product line specifically developed for the mid-market. Here is why it was really important.
The dirty little secret in the BI space was that we had all sold to the mid-market in the past, but what we sold was our same enterprise product, which was fairly complex and much more expensive. Then we simply slapped on a discount and said this was our mid-market offering. Cognos did that, MicroStrategy and even we did it.
So what we did was, we said: "We can do something a bit more effective than that." So we created this product line which is a suite of products and a stair-step approach of increased functionality as you increase from one product to another. So, when we built the product, we had three guidelines: simplification, accessibility and sensible pricing.
So you offered a cheaper price and the same functionality?
The functionality was important. We realised that small and mid-sized companies had the same requirements as larger companies so we couldn't just rip out functionality. Small and mid-sized companies have the same requirements as their enterprise counterparts. So we thought we should simplify, not just by taking out functionality but by adding it. How? We added wizards for the first-time user moving from...