The business intelligence bounce

No IT supplier has escaped the economic downdraft that has swept through the industry during the past two years. But there are a few areas where conditions have been considerably less chilly than others.

After a brief shaky period a year to 18 months ago, the business intelligence (BI) software segment has shown mostly robust growth. Indeed, this sector owes much of its strength to the negative factors that have ravaged most others.

The economic downturn has made businesses keen to manage risk by knowing exactly what is going on in their operations. They also want to measure performance at every level. And, importantly, they must be able to provide a transparency of business activities that shows trustworthiness and sound corporate governance. All these factors play into the hands of the major BI vendors.

The clearest example of this is Cognos, which sells data query, analysis and reporting tools and applications. As it has re-centred its marketing on ‘corporate performance management’, sales have stayed at late 1990s levels. In the opening quarter of its fiscal year, Cognos reported revenues up an impressive 25% to $150.6 million.

Unlike some companies, Cognos did not grow by substituting services activities for licence sales. For the quarter, the company’s business intelligence licence revenue rose 18% to $56.7 million; services revenues, at half that, rose by almost 30% to $28.6 million. Separately, revenue from product support surpassed that of licence sales – up a steep 33% to $64.1 million – because of the recent introduction of a new version of the Cognos suite, Series 7. The one area of concern is that only 38% of revenues came from software sales in the quarter.

Perhaps most surprisingly, though, the company’s growth was helped by sales in Europe, which rose 40% to $47 million, while North American revenues were up a relatively modest 14%.

Another factor that boosted the company’s performance was its $160 million cash acquisition in January of Adaytum, a vendor of financial performance management software with trailing 12 month revenues of about $57 million.

Cognos also reported a rise in the number of large corporate sign-ups. The company clinched nine contracts worth more than $1 million, an all-time high, and 58 contracts greater than $200,000. That included customer wins at BASF, British Gas, Electrolux, Fujitsu, JP Morgan Chase and Visa.

The bottom line measure of how the company has improved its performance in the past year is that it has turned a net loss of $11.1 million in the fiscal first quarter of 2002 into a $10.1 million gain in this latest three months.

Crystal clarity

But Cognos is not the only success story in the BI sector. One of its chief rivals, privately-held Crystal Decisions, has recently filed for an initial public offering on Wall Street and in doing so has opened its books to scrutiny.

For the past quarter available, ending 28 March, the company – like Cognos, Canadian in origin – posted revenues up 30% to $73.0 million and doubled its net income over the same period a year ago to $8.1 million. There is one slight blemish in the IPO filing: although software licence revenue still represents 63% of Crystal Decisions’ business, licence sales fell in its latest reported quarter – the first time in the company’s recent history that licence sales have fallen from one sequential quarter to the next.

Crystal Decisions’ strong figures are helped by outside sales channels that bring in a third of its revenues. One of the largest sources of outside revenue is a decade-long agreement with Microsoft under which Crystal Reports was originally bundled with Visual Basic and is now part of its developer’s suite, .Net Studio, and the Microsoft Business Solutions applications products. Also, SAP “incorporates” the company’s high-end Crystal Enterprise suite, as well as its Reports product, with SAP Business Warehouse 3.0.

As its growth and profitability indicate, Crystal is not listing because it needs money. It has $91.7 million in available cash on its balance sheet and says it will use the money it hopes to raise (more than $100 million) on growth and acquisitions.

Given its growth curve, Crystal should report $270 million to $280 million for its full fiscal year to the end of June, confirming its place in the super league of BI software companies alongside Cognos, Business Objects and SAS Institute. The question now in many industry-watcher’s minds is: Is it serious about floating in a dead IPO market, or is its prospectus a signal that the company is a tasty acquisition prospect?

Key supplier financial results – June 2003
Company   Description   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net inc ($m)  
Agile Software Corp Ecommerce manufacturing s/w 4Q03 30-Apr 19.1 26% -3 -18.7
American Software Inc Supply chain management s/w 4Q03 30-Apr 15.0 -8% 2.4 15.3
Aspen Technology Inc Supply chain mgmt s/w 3Q03 31-Mar 79.7 -4% 0.3 -4.9
AutoDesk Inc Computer-automated design s/w 1Q04 30-Apr 210.8 -8% 7.5 17.6
CACI International Inc IT services 3Q03 31-Mar 222.0 21% 11.5 8.6
Ciber Inc Systems integrators 1Q03 31-Mar 134.5 -21% 1.6 4.6
Cognos Inc Business intelligence s/w 1Q04 31-May 150.6 25% 10.1 11.1
Critical Path Inc Internet comms s/w 1Q03 31-Mar 18.0 -24% -23.2 -26
Crystal Decisions Data analysis &reporting s/w 3Q03 28-Mar 73.0 30% 8.1 4.0
Dassault Systemes SA Engineering design s/w 1Q03 31-Mar 181.3 -7% 23.9 27.1
DataMirror Corp Data management s/w 1Q04 30-Apr 13.3 -6% 0.7 -0.9
Dendrite Int Inc Pharmaceutical CRM s/w 1Q03 31-Mar 59.7 4% 4.3 3.5
Descartes Systems Group Supply chain execution s/w 1Q04 30-Apr 14.2 -16% -9.0 -6.1
Digital River Inc Commerce service provider 1Q03 31-Mar 24.6 36% 4.0 -3.5
DST Systems Inc Financial s/w &services 1Q03 31-Mar 619.8 0% 51.4 58.8
Foundry Networks Inc Networking products 1Q03 31-Mar 91.1 46% 13.4 1.0
Fujitsu Siemens Computers Systems &IT services 2H02 31-Mar 2,858.1 -3% n/a n/a
Hewlett-Packard Co Systems &IT services 2Q03 30-Apr 17,983.0 -1% 659.0 213.0
Hummingbird Ltd Data analysis/content mgmt sw/ 2Q03 31-Mar 47.0 2% 1.8 4.7
IDS Sheer AG Business process consultancy 1Q03 31-Mar 49.1 10% n/a n/a
ILOG SA S/w components 3Q03 31-Mar 27.2 17% 3.5 2.9
Intergraph Corp Engineering workstations 1Q03 31-Mar 120.6 -2% 8.1 4.4
JD Edwards &Co Business applications s/w 2Q03 30-Apr 203.5 -9% -0.4 3.5
Keane Inc IT services 1Q03 31-Mar 204.7 -8% 10.6 5.6
Kewill Systems Plc* Supply/demand chain mgmt s/w 2H03 31-Mar 17.1 -54% 0.2 -3.7
MatrixOne Inc Collaborative commerce s/w 3Q03 29-Mar 24.0 -26% -5.3 -5.0
McData Corp Storage switches 1Q03 30-Apr 103.2 60% 5.3 -17.1
Merant Plc Change/config mgmt s/w 4Q03 30-Apr 33.0 9% 0.8 -32.4
Microstrategy Inc Business intelligence s/w 1Q03 31-Mar 37.4 5% 0.7 3.0
MSC.Software Corp Product design simulation s/w 1Q03 31-Mar 85.1 28% 1.1 -41.7
Netmanage Inc Host access s/w 1Q03 31-Mar 14.1 -26% -1.2 -0.5
Network Appliance Corp Storage servers 4Q03 30-Apr 241.6 18% 24.8 7.8
Novell Inc Networking s/w 2Q03 30-Apr 276.0 1% -28.6 -173.5
Oracle Corp Database &applns s/w 4Q03 31-May 2,832.0 2% 858.1 655.9
Perot Systems Corp IT services 1Q03 31-Mar 338.0 4% -12.7 19.4
Pivotal Corp CRM software 3Q03 31-Mar 13.1 -26% -4.4 -3.4
Portal Software Inc Communications mgmnt s/w 1Q04 02-May 32.1 3% -9.8 -12.0
Progress Software Corp Appln dev &DBMS tools 2Q03 31-May 77.6 15% 6.7 5.8
QAD Inc Manufacturing s/w 1Q04 30-Apr 56.3 27% 4.5 -5.7
Quantum Corp Storage systems 4Q03 31-Mar 235.1 2% -5.2 -21.2
Sage Group Plc Financial applns s/w 1H03 31-Mar 437.2 1% 79.4 69.6
Sapient Corp Process/performance applns s/w 1Q03 31-Mar 46.2 -11% -3.8 -54
Serena Software Inc Change mgmt s/w 1Q04 30-Apr 24.4 11% 5.8 5.0
Synopsys Inc Electronic design s/w 2Q03 30-Apr 292.0 57% 22.3 21.4
Synstar Plc Systems integrator 1H03 31-Mar 172.9 0% 4.0 0.9
Tibco Software Inc Appln integration s/w 2Q03 31-May 61.5 -4% -0.6 -56.0
Transaction Systems Architects Inc E-payment &ecommerce s/w 2Q03 31-Mar 69.3 -3% 4.1 6.8
Ubizen Managed security svcs &s/w 2Q03 31-Mar 14.3 6% -8.8 -3.4
WebEx Communications Inc Web conferencing svcs 1Q03 31-Mar 41.8 41% 6.3 1.1

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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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