Intelligent profits – The evolution of business intelligence

“The interesting part for us is that we will benefit from the entry of larger players because they generate more demand, more interest and more acceptance of BI technology,” says John Schwartz, CEO of BI vendor BUSINESS OBJECTS, who reported revenue of $294.5 million, for the quarter ending 30 June 2006, up 12% from $262.4 million in the year-ago quarter.

However, this growth came mostly from the US where revenues rose 36%. In both Europe and the Asia-Pacific region revenues actually fell, 8% and 10% respectively. Schwartz attributes this to a lag in customers upgrading to its Business Object XI platform. The first release targeted its Crystal Decision customers, who are predominately located in the US. Schwartz says the release of XIR2 should see revenues rising in Europe soon.

It also reported a healthy 78% revenue increase for its enterprise information management solutions, although this is partially inflated by its acquisition of data quality vendor FirstLogic.

Also benefiting from the buoyant BI market was HYPERION SOLUTIONS, where revenue rose 18% to $223.9 million for the quarter ending 30 June 2006. However, its full year results were more modest, with revenues up 9% from $702.6 million in 2005 to $765.2 million.

This late surge in growth was attributed to its new Hyperion System 9 platform which generated the vast bulk of Hyperion’s fourth quarter revenue, and added 22% to the year-on-year licence revenue growth.

Hyperion has recently signed a deal with data integration vendor INFORMATICA, which will integrate its System 9 business performance management software with the Informatica PowerCenter technology, improving its data access to third party systems.

The deal is typical of Informatica’s new partnering strategy, which has also seen it ink agreements with software-as-a-service (SaaS) vendor to migrate customers to the AppExchange platform.

This approach, along with its own push into offering cross-enterprise data integration facilities, has contributed to its revival in Informatica’s fortunes. For its second quarter ending 30 June 2006, revenues rose to $80.8 million, up 26% from $64.2 million in 2005.

But not all BI vendors have enjoyed successful quarters. For Canadian-based COGNOS, it has been an unsettling three months as they faced a review by the US Securities and Exchange Commission (SEC) into revenue allocation practices. And while it was cleared of any wrongdoing, the resulting delay in filing its annual 10-K report to the SEC, and rumours of a possible sale to IBM put a slight damper on sales: for its first quarter ending 31 May 2006, revenues rose a modest 8% for the period, up to $217 million from $200.1 million in the previous fiscal year.

Elsewhere, software giant MICROSOFT continues its drive into the business intelligence market. Its BI products span multiple divisions, including its Business Solutions unit – where revenues were up a healthy 16% year-on-year, to $280 million – and its Information Worker unit, which largely consists of its Office and SharePoint Portal Server sales; revenues here were up just 6% at $3.13 billion. But Microsoft executives will need to see its BI and enterprise application products grow at a faster rate, as its other markets reach maturity.

Overall, Microsoft reported revenues rising to $11.80 billion for the quarter ending 30 June 2006. Profits at the company were down to $2.83 billion from $3.70 billion in the 2005 quarter. This was partly because of a $351 million legal charge relating to its ongoing anti-trust battle with the European Commission.

Rising Sun

Meanwhile, a resurgence in fortunes at SUN MICROSYSTEMS has drawn comparisons to a similar turnaround at document services company Xerox five years ago, according to a report from UBS Investment Research. Under the leadership of new CEO and president Jonathan Schwartz who replaced founder and long-term CEO Scott McNealy in May this year, Sun has embarked on a rigorous cost cutting exercise, including reducing its workforce by 13% – similar to Xerox Anne Mulcahy’s approach of shedding entire business divisions to restore profitability when she stepped into the CEO’s seat in 2001.

But the layoffs came at a cost: a $228 million restructuring charge pushed Sun into a net loss of $301 million for the fourth quarter ending 30 June 2006, down from a profit of $50 million in the year-ago quarter.

Demand for the Solaris operating system, however, pushed revenue up a healthy 29% to $3.828 billion, up from $2.974 billion.

“Our position is steadily improving,” said Schwartz. “We’re making excellent progress returning Sun to growth and profitability. Revenue, bookings and backlog are all up substantially – indicating we’re gaining traction, market confidence and share.”

Further reading

Information Builders singular approach, July 2006

Business Objects hangs on to the hunt, May 2006

OLAP of the gods: Successful BI roll-outs focus on users, December 2006

Hyperion scales up, November 2005

Microsoft to put BI in Office 12, October 2005

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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