Business Objects reports lower Asian revenues

But the regional numbers hardly put a damper on the software company's worldwide revenues, says CEO John Schwarz.

Business Objects reported higher global earnings during its latest fiscal quarter, despite falling revenues in the Asia-Pacific region.

During an earnings call on Thursday with ZDNet Asia, company CEO John Schwarz said worldwide revenues for its second fiscal quarter ended Jun. 30, 2006, was US$294 million, up 12 percent compared to the same period last year. The company makes business intelligence (BI) software that lets companies detect business trends from heaps of information stored in databases and ERP (enterprise resource planning) systems.

While the Americas registered revenues of US$168 million, growing at 36 percent year-on-year, the Asia-Pacific region saw a decline in total revenues, which fell 10 percent to US$20 million.

According to Schwarz, the Asia-Pacific region represents about 7 percent of Business Object's global business, with Japan and Australia accounting for the majority of revenues in this region. He also singled out China as a market with huge opportunities as the company builds its Asian presence.

"We have very aggressive expectations for Asia, and we are hoping to at least double the [revenue] contribution of Asia to our business," he added. "We believe our presence in Asia is stronger than our competition."

A question of business value
Despite the reported benefits and strong market projections, BI hasn't always had a good reputation.

In a November report last year, Gartner noted that BI was not a priority among Asian businesses. The technology consultancy said that Asian companies did not see returns from BI investments, because existing manual reporting and analysis processes still serve them well.

On this, Schwarz argued that "there is no issue" with Business Objects' customers understanding the payback from BI tools, but pointed out that the use of BI software in Asia tends to be rudimentary.

"Asian customers are using BI technology primarily for reporting, which is not the most productive in terms of ROI (returns on investments)," he said. "But as customers begin to understand the value of business intelligence for analytics, budgeting, planning and forecasting, the value of BI is dramatically higher than just [using it for] plain reporting."

Keith Budge, senior vice president and general manager of Business Objects in Asia Pacific and Japan, likened the adoption of BI in Asia to the deployment of ERP in the region. "Asia tends to be behind North America and Europe, as companies figure out how ERP supports their business objectives," he said.

But once basic infrastructure and ERP systems have been deployed, especially in emerging Asia-Pacific markets, vendors would then be able to tap into the growing market opportunities, Gartner noted.

To enhance the value of BI, market players have been boosting their offerings to include process-driven capabilities. Business Objects, for instance, has been including templates and industry best practices in its software to address the needs of specific sectors such as telecommunications and financial services, Budge said.

In the third quarter ending Sep. 30, 2006, Business Objects is projecting total revenues to range between US$293 million and US$298 million. It has also revised its total revenues for fiscal 2006 downwards, from between US$1.210 billion and US$1.230 billion, to between US$1.2 billion and US$1.215 billion.

Despite more conservative revenue guidance and suggestions that the BI market is maturing, Schwarz remains upbeat on the BI space.

He cited latest market figures from analyst company IDC, which noted that the global BI market last year grew 11.5 percent, raking in US$5.7 billion in software revenues. By 2008, that market will be worth US$23 billion.

Meanwhile, BI vendors like Business Objects, SAS, Cognos and Hyperion, are also facing increasing competition from Oracle, SAP and Microsoft--all of which have started integrating BI features into their business software.