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Caveat Emptor: The Impact of Vendor Consolidation on Business Performance Management Buyers

Published: October 17, 2007

How will vendor consolidation impact buyers of performance management and business intelligence technology? With fewer choices, will the selection of a vendor be easier?

Just when we thought the industry consolidation activities were coming to a close, the news of SAP’s planned acquisition of Business Objects alerted us to the reality that the market is still not fully settled. As you may have read in Craig Schiff’s blog, it is obvious that the acquisition frenzy has now moved beyond obtaining technology to fill product offering holes, and is now more about augmenting top line revenue, client count and distribution channels. The larger SAP’s redundant product mix will surely keep their product strategy team up late at night trying to decide where they will invest, which products they will maintain, and which they will sunset.  SAP had a planned strategy in place to double revenue by 2010, and this multi-billion dollar move puts them well on their way. There are plenty of editorial articles on the financial perspective of this acquisition.

But how will this news impact buyers of performance management and business intelligence technology? In the enterprise market, end users now have fewer choices. If you wish to purchase from your preferred database or ERP vendor, Oracle, SAP, Microsoft, Infor and mid-market focused Exact Software each have a value proposition and products worthy of consideration. The companies recently acquired by these vendors will each attempt to maintain their “open” status regarding connectivity to other transactional systems, but depending on the company, that may get more difficult over time. If you wish to buy your performance management and business intelligence applications from a source database independent vendor, Cognos, SAS, and Clarity Systems are the leaders left standing – for now.  In addition, for mid-market to small businesses, there are still plenty of choices. Less well known, but still enterprise-strength KCI has successful clients in the upper end of mid-market to enterprise level. Budgeting upstart Adaptive Planning has stirred up the mid-market with their easy-to-use, hosted planning application, and have started to move up to larger enterprise clients. Centage, Prophix, Alight Planning, Host Analytics and Satori Group are all slugging it out in the mid-market and SMB category.

So if you are a large enterprise in the midst of a business performance management (BPM) initiative, which direction should you turn? A Goldman Sachs survey showed that more than 60% of CIOs preferred to purchase their business intelligence solution from an independent vendor – not an application or database vendor. If your enterprise has standardized on single database or ERP platform, there are benefits worth considering in sticking with that same vendor for BI and performance management. These benefits will typically involve ease of data flow from source systems to your BPM application, both in terms of transactional data load and consistency of metadata across applications. In our experience, only a sub-set of companies has successfully standardized on a single database or ERP platform; most have a hodge-podge of data platforms obtained by different operating units while under the same corporate umbrella or obtained through merger and acquisition.

In addition to your source systems, if you are a more advanced performance management-oriented organization, you may already have your analytic applications running on multidimensional, relational or hybrid databases. With Oracle’s Essbase, Cognos’ Applix TM1 and Microsoft’s Analysis Services (MSAS) as the most common multidimensional databases, your team’s development and administration experience in this area should be an important factor in your decision. In each case, products are supported directly from the vendor as well as through partners/resellers. As an example, Clarity Systems supports both Essbase and MSAS, Cognos has a long list of partners that have developed applications on top of TM1, and Microsoft is currently extending their partner base with their recent extensions in the business intelligence arena.

In many cases, these acquisitions will take a bit of time to work themselves out.  Based upon experience, vendors may take 12-36 months to sort out their development plans and select their go-forward product platforms. In the interim, these companies have clients willing to pay them to maintain the existing array of products that have been acquired. This “business as usual” approach will be more and more common, and the larger vendors will try to keep the momentum of their acquired companies’ products. In this case, you need to get contractual commitments that the product you are buying is going to be supported in the medium to long term. Keep in mind that approximately half the cost of your deployment is software; the other half results from the configuration and implementation of your systems. Even if the next generation of software is “free,” you will have real costs to migrate your application to the new platform.

One final concern is the selection of the implementation team you will tap to assist in deploying your initiative. This is an important step in the process and, as mentioned earlier, typically at least matches the cost of the software purchased. You have a choice of working with the vendor directly, or going to a local partner that you may have worked with in the past. The concern here is that, similar to products, these vendors will go through changes in their channels and partners – selecting their longer term prospects for channel strength and pruning their less productive partners. Many of these entrepreneurial implementation firms have tremendous domain expertise and detailed knowledge of specific products; they may choose to find greener pastures if they do not care for the direction of their historic vendor/partner.

So, will fewer choices make decisions easier for performance management buyers? In the short to medium term, I believe the answer is no. This situation adds complexity as buyers need to bet on their platforms of choice, knowing full well that today’s solution may not be supported in 24-36 months. Do your research, push for contractual commitments on product development and support plans, and don’t cut corners in your evaluation process.  Let the buyer beware.

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