The 'dirty little secret' of business intelligence

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...

...simple spreadsheets to their first experience in business intelligence. It was a wizard that would have the step-by-step guide to building reports, or adding dashboards. We have a catalogue of the different types of report.

So these things are really point-and-click and suitable for people who are not very technical at all. Now the price point is between 50 and 70 percent less than the enterprise [product]. In fact, for the standard edition, it starts at £14,000, as opposed to £70,000 or so for the enterprise product.

What is nice is that business intelligence used to be for the privileged few. This is almost like business intelligence for the rest of us.

This may be a simple question, but what are SMEs using it for?
Well, they are using it to create reports — but not only for reports but [also] for creating dashboards. Which product lines are selling well and which are not? What geographies are selling? Which customers are most important? Those sorts of questions. They are looking at revenue forecasts based upon historical information. Marketing will use it to create marketing campaigns. We see human resources using it in terms of attracting and acquiring talent. If I lose people, why am I losing them?

Which industries are they coming from?
Financial services is the second largest market and manufacturing is our largest — and that is both discrete and process manufacturing. Financial services is more retail banking and insurance and not as much brokerage services and commercial banking. Third would be the public sector at the council level.

Which countries do you do well in?
Europe is about 30 percent of the revenue of the SME product line, of which the UK is by far the largest [customer]. If you just look at Europe, 26 percent of the revenue comes from the UK. We have over 25 partners in the UK selling mid-market and they are primarily systems integrators or solution providers. If you look at distributors or resellers, we have another 150.

Presumably a lot of them are coming from the ERP side of things and most of them will be using SAP. If the deal to sell to SAP goes ahead, would that make integration easier?
Indeed. What is interesting is that we estimate we have 37,000 customers in the mid-market globally, of which 17,000 have some form of ERP. So we tell them that, since they have some form of ERP anyway, they will want some insight into the data they have. So business intelligence becomes a logical extension of ERP, be it from SAP or otherwise.

How big is the mid-size business now?
Last year it was 30 percent of the company in revenue; this year we should be at 37 percent. Our goal is that, by 2010, it becomes 50 percent of the company.