The rise of corporate performance management

There is one sector of the IT industry that adapts itself well to changing environments. That chameleon is data query, analysis and reporting software.

Over the years, these core business technologies have been billed, among other things, as executive information systems, decision support systems and business intelligence systems. The secret is to apply the technology to the burning business issues of the day.

Currently, those issues centre round business optimisation and accountability, and the sector has taken on a new label to reflect that environment: corporate performance management.

It is a move that has met with considerable success. While the software industry has been stuck in the doldrums, the data analysis sector has remained robust, if not upbeat – something that is apparent in the latest set of company results. One of the market leaders, Business Objects, reported revenues up 8% to $126.2 million in its closing quarter of 2002, with profits at $12.8 million, a sound 10% net margin.

Behind that growth were two factors: analytical applications and the cycle of customer maintenance contract renewal.

Although relatively small, licence sales in analytic applications (packages tailored specifically for areas such as customer, supply chain and operations analysis) rose to $9.1 million, up 287% from the fourth quarter of last year. While that only represents 14% of total revenues, sales to companies such as AT&T, Ford and Vivendi pulled through additional revenue in data integration and business intelligence tools.

Digging deeper into the top line numbers, though, there were some less positive signs. The company’s overall licence revenue actually declined 9% compared with the year-ago period, although it was up 23% on the third quarter of 2002. Offsetting that decline was a 36% jump in services, reflecting a strong maintenance renewal cycle.

The annual revenue numbers (up 9% to $454.8 million) confirm Paris and Silicon Valley-based Business Object’s position as Europe’s fifth largest software company (behind SAP, Misys, Sage and Dassault). Around 50% of the company’s revenue comes from Europe, compared to 44% from North America.

One of Business Objects’ main rivals, especially in reporting software, turned in an even stronger performance over the same three months. Reporting and analysis software company Crystal Decisions reported a revenue rise of 38% to $71.2 million in its second quarter to 31 December. That was driven by a huge leap in licence sales, quarter-on-quarter, of 43%. The privately held company does not break out profit figures, but confirmed that its net income and profit margins rose, both sequentially and over the same period a year ago.

That growth was spurred by customer demand for software that can deliver dynamic reports to tens of thousands of users, but also by a new multi-year agreement with IBM focused on meeting the needs of small and medium businesses.

Related to that was the fact that the company appointed a new CEO at the beginning of the quarter: Jon Judge, former general manager of IBM’s Personal Computing Division, who left IBM after 24 years to head up the Canadian-rooted and Palo Alto, California-based company.

Accountability dividend

One of its neighbours in Silicon Valley, analytic applications and online analytical processing (OLAP) software vendor Hyperion Solutions, is another clear beneficiary of the need for increased corporate governance and tighter financial management.

The company has redefined all of its products under the business performance management tag, focusing on planning, budgeting, forecasting, financial-consolidation and reporting applications. It also sells business intelligence tools centred round its Essbase OLAP database.

Revenues in the company’s second quarter to the end of December rose 6% to $126.0 million. More encouragingly, licence revenues jumped 11% over the same period a year ago to $51.1 million. That produced solid net profits of $7.6 million.

Those margins have been improved by the build-up of business handled by third parties. Licence revenue booked through the company’s indirect channel grew to 27% of total licence revenues. A year ago that figure was 24%.

CEO Jeff Rodek says that the upbeat numbers stem from the fact that major companies around the globe need to obtain much greater insight into their financial and operational performance. As a result, the company’s revenues are now almost equally split between its financial management applications and its OLAP platform. Just 18 months ago OLAP products accounted for 60% of sales.

Another company collecting a dividend from the need to gain greater insight into corporate, as well as customer, behaviour is NCR. The company’s overall revenues were down 1% to $1.58 billion in the fourth quarter, but revenue from its Teradata data warehousing unit rose 8% to $341 million. At an operating level, the division also increased its profits 160% to $34 million.

That positive picture can be largely attributed to Lars Nyberg. When he took over as NCR’s CEO in 1995, he saw the true potential of what had become a minor and much-neglected part of the company. Sweden-born Nyberg is now handing that over, having resigned from the CEO’s position in February for family reasons. In the hot seat: Mark Hurd, COO and the former head of Teradata.

Key supplier financial results – February 2003
Company   Description   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net inc ($m)  
Actuate Corp Enterprise reporting s/w 4Q02 31-Dec 27.3 -5% 0.7 -3.3
Ariba Inc E-procurement s/w 1Q03 31-Dec 62 12% -55.9 -157.7
BMC Software Inc Data &systems mgmt s/w 3Q03 31-Dec 349.6 9% 12.1 -94.5
Borland Software Corp Application development s/w 4Q02 31-Dec 67.1 14% 3.1 6.2
Business Objects SA Business intelligence s/w 4Q02 31-Dec 126.2 8% 12.8 14.1
Ciber Inc Systems integrator 4Q02 31-Dec 159.4 10% 5.0 0.3
Commerce One Inc E-marketplace s/w 4Q02 31-Dec 19.5 -65% -279.5 -168.3
Computer Sciences Corp IT services 3Q03 27-Dec 2,793.6 -3% 105.7 87.1
Crystal Decisions Data analysis &reporting s/w 2Q03 27-Dec 71.2 38% n/a n/a
Dassault Systemes SA* Engineering design s/w 4Q02 31-Dec 222.2 0% 50.9 41.7
Documentum Inc Content mgmt s/w 4Q02 31-Dec 66.0 30% -1.1 -1.6
E.piphany Inc Customer interaction s/w 4Q02 31-Dec 22.5 -21% -14.8 -36.8
Electronic Data Systems Corp IT services 4Q02 31-Dec 5,507.0 -5% 360.0 405.0
EMC Corp Storage systems 4Q02 31-Dec 1,489.4 -2% -63.9 -70.2
Exact Software NV* Business applns s/w 2H02 31-Dec 109.4 6% 9.4 13.6
Fair, Isaac &Co Inc Analyitic s/w &data mgmt prods 1Q03 31-Dec 146.7 73% 19.8 13.5
FileNet Corp Content management s/w 4Q02 31-Dec 89.4 3% 3.8 1.9
FreeMarkets Inc E-sourcing s/w &services 4Q02 31-Dec 42.3 -9% -3.0 -2.8
Hyperion Solutions Corp Analytic applns &OLAP s/w 2Q03 31-Dec 126.0 6% 7.6 3.7
Informatica Corp Data mgmt/integration s/w 4Q02 31-Dec 50.1 0% 1.5 -8.5
Intl Business Sys AB* Business appln s/w 4Q02 31-Dec 80.9 -13% 3.3 4.1
Internet Security Systems Inc Intenet security s/w 4Q02 31-Dec 63.1 9% -12.1 -10.3
Interwoven Inc Content mgmt s/w 4Q02 31-Dec 31.1 -30% -32.5 -27.3
KANA Inc Customer management s/w 4Q02 31-Dec 18.7 -26% 0.1 -24.2
Legato Systems Inc Storage management s/w 4Q02 31-Dec 76.6 24% -10.0 -47.9
Mapics Inc Manufacturing s/w 1Q03 31-Dec 31.1 -7% 1.4 1.9
Mercator Software Inc Application integration s/w 4Q02 31-Dec 32.3 -7% -6.9 -8.2
Microstrategy Inc Business intelligence s/w 4Q02 31-Dec 42.0 -4% 4.6 -21.0
Misys Plc* Financial sector s/w 1H03 30-Nov 816.2 8% 23.9 -0.5
NCR Corp Data warehousing/financial systems 4Q02 31-Dec 1,581.0 -1% 57.0 71.0
NetIQ Corp Systems management s/w 2Q03 31-Dec 80.3 20% 1.3 -183.0
Network Appliance Corp Storage servers 3Q03 24-Jan 228.5 15% 19.7 7.0
Network Associates Inc Computer security s/w 4Q02 31-Dec 256.0 -1% 44.2 -4.9
Nortel Networks Corp Networking systems 4Q02 31-Dec 2,520.0 -27% -248.0 -1,826.0
Open Text Corp Document management s/w 2Q03 31-Dec 43.0 8% 6.2 3.5
Quest Software Inc Application management s/w 4Q02 31-Dec 72.4 22% 4.0 -17.2
RSA Security Inc Security s/w 4Q02 31-Dec 61.0 -3% -49.8 -10.1
SAP AG* Business appln s/w 4Q02 31-Dec 2,252.3 -2% 469.3 315.8
Sapient Corp Process/performance applns s/w 4Q02 31-Dec 43.9 -35% -24.7 -29.5
SeeBeyond Technology Corp Appln integration s/w 4Q02 31-Dec 40.5 -10% -11.6 1.6
Siebel Systems Inc Customer relationship s/w 4Q02 31-Dec 394.7 -19% -38.0 65.9
Software AG* Database and development s/w 4Q02 31-Dec 119.1 -25% n/a n/a
SPSS Inc Data analysis s/w 4Q02 31-Dec 54.0 12% -2.3 -10.6
SunGard Data Systems Inc Computer services 4Q02 31-Dec 701.8 22% 95.9 65.6
Sybase Inc Database &appln dev s/w 4Q02 31-Dec 210.6 -11% -9.8 6.1
Unit 4 Agresso NV** Business applications s/w 2H02 30-Dec 108.4 4% 6.0 6.2
Verisign Inc Internet security s/w 4Q02 31-Dec 275.0 -3% -39.4 -401.1
Veritas Software Corp Data storage s/w 4Q02 31-Dec 405.7 8% -48.7 -202.3
Vignette Corp Web customer s/w 4Q02 31-Dec 40.4 -23% -160.8 -966.6
Vitria Technology Inc Application integration s/w 4Q02 31-Dec 20.1 -43% -12.0 -13.7

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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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