After recently attending the Microsoft-hosted (NASDAQ:MSFT) Data Insights Summit in Bellevue, Washington - a quasi-conference (which I'm told Microsoft will host annually into perpetuity) focused on announcing, highlighting, and displaying updates to Microsoft's business intelligence (BI) engine "Power BI"- I'm now convinced that Power BI: 1) is the single best BI engine/platform available, 2) stands little chance of being unseated as such (in the near term, if ever), and 3) stands a good chance at being as important to the general productivity suite at Microsoft as Excel. No need to "bury the lead" here. I'm confident in all three core bullet points to this note.
Yes, I understand these are all strong statements. Yes, I understand these all have the potential - if eventually proved out as accurate - to reshape the BI-landscape as well as Microsoft's share price on all durations. In that, I'll try to justify all of the above within the body of this note. If you're a Microsoft investor, especially a "buy and hold forever" investor, you're going to want to stay in the loop here.
But first, to provide context, I should note that I've followed the evolution and development of Power BI since its inception. I've also followed since the early days of the space many other BI platforms. I've written about many for Seeking Alpha - including those engines from Tableau (NYSE:DATA), Qlik (NASDAQ:QLIK), Datawatch (NASDAQ:DWCH), Dell (privately held), IBM (NYSE:IBM), Amazon (NASDAQ:AMZN), and Salesforce.com (NYSE:CRM). So, if that's any justification, I think I have a wide enough sampling of the space to make such claims. Also, I've been both positive and negative on all the above engines, including Power BI, at times during coverage. I think that I can accurately state that I've not been a "prisoner of the moment" or a "fanboy" outright of any platform, even of Power BI (which I'm now strongly fighting the urge to go full fanboy for post-Data Insights Summit). The general point is, it's only recently that I've decided that Power BI is now and will continue to prove out to be the eventual winner in the highly competitive BI space. Still, for those that have followed my running BI-narrative at Seeking Alpha, I thought that post-Data Insights Summit, the narrative deserved an update.
To take a step back before plunging into the core update, it should be noted that I'm not alone in what I've professed so far; the tremors of what I've outlined were already being felt in the market prior to the Data Insights Summit. Taking a look at the recent technical share price performance of Tableau, Qlik, and (to a much lesser correlated extent) Datawatch, one can see that serious concerns about several spatial variables - most importantly "competitive landscape" - have weighed on all three public companies. These "concerns" have been growing with each quarter since the initial soft-launch of Power BI - evidence easy enough to extrapolate using dates of launch (of Power BI) and share price performance.
Tableau and Qlik Share Price Performance 12-Months Prior to Power BI Launch:
Tableau and Qlik Share Price Performance Post-Power BI Launch:
(via Atlas Consulting)
But it isn't just concerns that have pressed on valuations for the trio, it's been realization of concerns. All three public companies have experienced meaningful deceleration of overall growth, meaningful deceleration of forward-looking key metric growth (these vary by company but, for example, Tableau's "License Revenue" fell for the third sequential quarter at last quarter's reporting), and meaningful deceleration of upsell ability (again, indications of this vary by company but this is an all-important measure of overall health). While some in the analyst community have been quick to excuse the concerning financials and key metrics at the trio, some haven't been. Several analysts have directly noted Microsoft and Power BI as headwinds which are in the very least adding to what ails the valuations at these companies. I happen to think Microsoft and Power BI are much more responsible than simply being "headwinds" to healthy growth of the trio. Again, I think Power BI has evidenced itself - and no more visibly has it ever done this than at the Data Insights Summit - as the clear front-runner BI engine in the space.
If Looks Could Kill...
Admittedly the weakest and most subjective contributor to my argument in favor of Power BI's space-wide platform dominance is that the platform's aesthetics are a step ahead and a step above its competitors. Frankly, after power-using Power BI - although I do in fact use point solutions in platforms provided by both Dell and Datawatch (more on this later) - all other platforms "feel" generic. Again subjective, but I think the "feel test" matters in gaining widespread adoption from non-data science enthusiasts (or what IBM calls "citizen analysts") and in ultimately gaining the holy grail of "traction" from a user base. Regarding IBM, this is the primary reason - improving the feel of its own Watson Analytics BI platform - for it spending money to deploy its own recently updated Expert Storybooks.
Microsoft engineers, at least the ones I had the pleasure of speaking with at the Summit (including Principal Group PM Jono Luk), agreed entirely with me. In fact, aesthetics (and really the general user interface) is a huge focus for the entire development team at Power BI. This is where we move beyond the subjective of aesthetics and into the business of aesthetics.
After having been blown away in the opening keynote by the new (for once Microsoft-created) data-visuals being released now or in the immediate term (it had been a while since Microsoft had released an internally generated data-visual worth using in high volume) what struck me most was that Microsoft 1) has entered into the "entertaining" and 2) that Microsoft has learned from its ecosystem of contributors. Both, to me, are cultural shifts with CEO Satya Nadella's signature across them.
First, I'm not even going to attempt to do Microsoft's new, animated data-visuals justice. I'll tell you though that you're going to want to see these new data-visuals in action because if you're in the business of BI, investing in BI platform companies, or in any way interested in the space, these are game changers. The following link will example Power BI's new "Sand Dance" animated visualization. Sand Dance, for me, is the single most important user interface/user experience development in the young history of BI. It also leaves bread crumbs to what I believe will be an integrated BI experience (with HoloLens, etc.) down the road (subject matter for another update). That matters too - especially for helping drive hardware-based sales of Surface Hub in the immediate term (yet another immediate and mid-term valuation driver for Microsoft).
But the big takeaway here is, Microsoft has found a way to allow presentations to literally show how data are correlated. Not visually explain, not visually make simpler to analyze, but to show. Again, I won't try to do Sand Dance (or several others) justice but you're going to want to know what Sand Dance is (I reiterate my call to click the link above). Outside of making presentations infinitely more effective Sand Dance (and other animated visualizations) has the potential to attract and retain entirely new classes of users. One example I can give is the television media user.
I spoke with members of the KING 5 team in Seattle who told me that Sand Dance (coupled with an already purchased Surface Hub - again, Microsoft's $20,000 Smart Display platform) has the potential to provide it a version of CNN's "Magic Wall." When it comes to marketing, familiarization, and general adoption bringing Power BI to the television media vertical is going to be huge. Don't underestimate how powerful the network effect can be in growing deployment of the platform (among other ancillary hardware and software product sales). Also, don't underestimate how mainstream usage (and highly visible examples of mainstream usage such as that potentially at KING 5) can be effective in relaxing the public as to the ease of use concerns for the platform. Again, the business of aesthetics can be and is very real. One product engineer who asked not to be named told me the biggest problem with direct BI integration to Excel was/is "ease of use connotation issues" - translated to mean that most users or potential users are simply too intimidated to try to learn Excel. I would agree with the engineer.
What's equally encouraging is Microsoft made clear that it has no intention of stopping or even slowing Power BI's allowance of custom data-visualization creation and contribution from users. Power BI's user ecosystem has been huge in providing constantly evolving, constantly refreshed, and more and more useful data-visuals that continuously expand the spectrum of use of the platform. As stated above, if I have one complaint about the platform that isn't capacity-based (I'll explain my one big complaint next), it's that Microsoft has been far and few between with its creation of useful, effective data-visuals (company created); given that the development team has been so focused on underlying platform capacity improvement this isn't all that big a concern of mine in the overall scheme of things. The user ecosystem has been doing most of the heavy lifting in this regard so to see Microsoft 1) realizing this, 2) acknowledging this, and 3) finally stepping up with a data-visual set that is a tectonic shift for the space means more than I can articulate.
Microsoft's general cultural shift to one of being more inclusive of ecosystem and user base is apparent and it's well-appreciated by this user. Those users familiar with Excel - and what a pain it can be at times and just how intimidating it can be to new users - know how big user inclusion is to overall proliferation of platform, eventual collaboration, and to ultimate use case expansion. If folks aren't using the platform (or are too afraid to try) - what use is the platform?
Microsoft has worked tirelessly and with a superb attention to detail to control the aesthetics of Power BI because it understands the power of a first impression. What it's done so far in controlling the "business of aesthetics" has been nothing short of incredible. Believe that matters to the "competitive landscape" and believe that matters to market cap on all durations (SEE: before and after Power BI launch charts above).
The Way of the Future…
So, we've established that I believe Power BI is more inviting, easier to use, and that is has a more finished/polished "feel" than the competitive set. Also, that is it's become infinitely more useful from a data-visual standpoint with the release of Sand Dance and other animated data-visuals. But what about spectrum of usage?
Capturing the non-power user is huge for adoption and creating a "learning cost" to the platform (the phenomenon that occurs when a platform becomes a "base platform" for the general public, for example Windows, and creates a "cost" to switching to a new platform (because the user is forced to learn something new which slows productivity); this is immeasurably important for retention), but how high can Power BI reach? How powerful is Power BI from an enterprise standpoint? Up to this point, pre-Data Insights Summit, the answer was not very. At least "not very" from a differentiation standpoint. To be fair, I'd say pre-Data Insights Summit Tableau had the product of use for the power user from a capacity standpoint.
In trying to keep Power BI user friendly and in trying to cast a wide net Power BI had in effect handcuffed itself from an optionality standpoint. Sure, it had made a "one size fits all" platform for the non-power user. But in this, it hadn't really opened up the Microsoft vault of potential. That changed with the opening keynote at the Summit.
Microsoft - among other things - is introducing to Power BI better/more expanded governance (including role-level access governance), tenant-level usage reporting (to make sure the platform is actually being used), deepened integration with Excel (which will make the broader productivity suite and its licensing that much stickier at enterprises), and integration with Cortana (which will exponentially expand the usage of natural language deployment of Power BI; this is huge). All of these are meaningful improvements to the platform and will be undeniably attractive to enterprise customers and prospects. This matters to valuation (again I would point to the share price charts in the introduction of this note). This will also matter to the ability for Microsoft competitors to, well, compete. I can tell you, in my opinion, Microsoft now has the single most comprehensive BI platform from a sheer functionality standpoint in the entire space. Even if you're a fan of other platforms, not a single other platform can do what Microsoft can do (at this point) when factoring in total Microsoft ecosystem integration (this is pre-Surface Hub and pre-HoloLens). That too matters to valuation.
But none of this is what I was long waiting for. What I was waiting for was the introduction of predictive analytics and helpful suggestions from Power BI. We got that too at the opening keynote. Microsoft for the first time exampled predictive analytics within Power BI.
Now, to be clear, things are starting out slow. But that Microsoft now has data-visuals that will include things like trend line modeling and other predictive analytics is huge (including for real-time data deployment usage). This, if continued to be built out, should allow power-users (I'm assuming there are others like me that do this) to stop using ancillary products as point solution providers. Currently, I use a BI solution from Datawatch to assist with pattern recognition and predictive analytics (although it too is inadequate from a completeness standpoint). Microsoft, now introducing its entire product umbrella to Power BI (inclusive of Cortana) should be able to play catch up rather quickly (that's the hope).
One Neuromorphic-IP licensing company based in California, Brainchip (OTC:AZKLF)(BRN.AX), which I follow closely believes Microsoft could be on the brink of taking Power BI into "smart suggestion" territory. If so, Microsoft could take an early, hard to unseat, defensible leadership position in huge total addressable markets like Financial Services. If I can see this opening or this "hole" in the market, you can bet the much smarter folks at Microsoft can see this opening. For me, this is the single most important development to watch in regards to Power BI; how far the platform can be taken from a predictive analytics standpoint. Considering the integration of platforms, the neural network that would need to be built out, and the level of sophistication of doing such a thing I wanted to ask a recognized expert in the field:
" (via Peter Van Der Made, CTO and interim CEO of Australian-based Neuromorphic chip maker BrainChip Holdings) If Microsoft isn't already investing heavily into solutions to take Power BI into "smart suggestion" territory that likely is only because it is looking to "buy" instead of develop; options are available from many base solutions. For instance, our SNAP is a market-ready solution, one that can literally be "plug and play" for Power BI, that can help provide an answer for one of the largest problems in financial data/analytics today - the ability to recognize patterns without having to be pre-programmed to recognize patterns. Put another way, while the majority of today's analytical engines are adequate for recognizing patterns once "deep-trained" to do so (we don't believe there is true "deep learning" in today's technology - but this is a subject for another day and another conversation) the problem is they quite literally have to be programmed for what to look for; this limits the spectrum of visibility for pattern recognition or the total scope of usage for today's typical analytical engine. SNAP, which again is one option (Microsoft has limitless optionality with its funding capacity), allows for a truly open architecture pattern recognition, especially when plugged into an engine such as Power BI ( especially if correctly integrated with Cortana), in that our chip doesn't need to be programmed for frankly anything - it simply learns to recognize patterns on its own while it processes data and learns what is within normal parameters for the data itself and what is not. With other systems like deep learning, people have to know what to look for. With the SNAP technology the chip learns to recognize any patterns that are present in the data set, even if they are not obvious to a human observer. Imagine this value when presented via Power BI to a global financial firm or a global PR firm; even a global network of Twitter mentions could be monitored (to monitor sentiment) and presented via Power BI dashboards.
SNAP learns to recognize these patterns in seconds which could be helpful if Microsoft is serious about taking Cortana into coupled-platform areas with Power BI. Deep Learning solutions need to be trained with the patterns that the user wants to recognize; they have to be known. Training a deep learning system is a lengthy operation that can take days or weeks, depending on how complex the patterns are. BrainChip SNAP learns in real time to extract patterns and label them in the data set - something that Cortana is rumored to be working on in development for natural language query.
Today's "deep learning" or "cognitive" analytical engines are the equivalent of stargazing through a piece of rolled paper - you can see into space but with limited scope and with limited capacity. SNAP, we believe has already evidenced and can evidence on demand, is a way to view the stars using a high powered telescope and/or using a mapping engine that takes in the entirety of space. It's simply a better way to drive business outcomes in that it truly is a compliment to a fine instrument such as Power BI - an instrument that can present data in easy to understand ways for easy to execute actionable understandings. Microsoft has been active as of late in acquiring "SNAP-lite" technology so we're quite aware that it has much broader, much higher ceiling intentions for Power BI. We wish them luck."
If Microsoft is first in this niche's version of the "Space Race" Power BI will move from a freemium and low-cost version (Microsoft currently only has two "pricing tiers" and one is free) to one that could charge incredible amounts of licensing fees. Yes, financial service firms (and I'm really dialing in on this vertical because this is an area I'm highly familiar with) have staff that can write predictive and pattern recognizing algorithms but as pointed out in the excerpt above - these don't "learn" and can't make "smart suggestions." Essentially, they're "monkey see, monkey do." What Microsoft now publicly appears to be leaning into is the evolved version of this and that could have ramifications that could have it preying on competitors on a much, much wider list than just BI. If the billions in market cap siphoned off its BI competitors is any indication, IBM, Oracle (NASDAQ:ORCL), Amazon, etc., had better be closely watching the BI division in Seattle.
Good luck everybody.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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