One week ago, post-Microsoft (NASDAQ:MSFT) Data Insights Summit attendance, I wrote in an update note on Microsoft's Power BI that its data and analytics engine had taken the "Coronation Oath" and that its engine had definitively placed itself ahead of the BI pack (inclusive of names led by competitors SAP (NYSE:SAP), Oracle (NASDAQ:ORCL), IBM (NYSE:IBM), privately-held Dell, Qlik (NASDAQ:QLIK), and Tableau (NYSE:DATA)). I also detailed how newly released updates to Power BI, debuted and/or alluded to (if the updates are to come in the coming months) at the Data Insights Summit, would allow Microsoft to accelerate an already highly effective "go-for-the-BI-kill" movement at the company (evidenced within the update note using equity pricing data-visuals). This was/is important in the "scheme of things" in that as with Artificial Intelligence (AI) and Virtual/Augmented Reality (VR/AR) I think BI is the next big market cap addition to Microsoft's equity pricing. Viewing the alluded to equity pricing data-visuals from my prior note quantifies and (I believe) validates this assumption. It appears now, in light of what was recently announced at Build, that Microsoft was still holding on to its "BI-river card" at the Data Insights Summit.
Just weeks after the conclusion of the Data Insights Summit, at its next major product and technology announce conference - Build, Microsoft announced that its Power BI would allow for direct integration to applications (apps) via an SDK (software development kit). While Microsoft already allowed for something of integration to apps via an API (application programming interface, via "pushing") the new SDK update will allow for true embedding, a service capacity via Power BI aptly titled Embedded. In my opinion, Embedded is going to make all the difference in the eventual ability for Microsoft BI competitors to fend off commoditization and an ultimate relegation to second class citizen status. I'll explain.
First, this is perfectly in-line with what is now becoming a more visible BI-takeover strategy. Microsoft, in all its diversification of revenues and all its size, clearly wants to commoditize the BI space. Why? Again, 1) it can (because it's not a BI pure player like, say, a Tableau - it's not completely dependent on the monetization of the platform for survival) and 2) much like in more traditional commodity markets this allows it to set the pace of development. That second point is going to be one that becomes more and more important with time.
Microsoft is primarily concerned right now with Power BI adoption and the creation of Power BI as a base platform; becoming a base platform (regardless of the software) allows for the attachment of what are generally referred to as "switching costs" or switching deterrents built into the process of switching an already efficient process (from an operations standpoint). For examples of how this base platform creation/switching costs attachment can create huge, recurring, and hard to replace revenue streams look no further than Microsoft's broader "productivity suite" (Word, Excel, PowerPoint, etc.). Microsoft following its battle tested productivity suite proliferation roadmap here is no surprise.
To do that, and to do that most effectively, Microsoft needs to be able to control the pace of development; controlling the pace of development will allow its platform to 1) constantly remain competitive in the very least, 2) remain a "best of breed" at the very best, and 3) most importantly continue leveraging the comprehensive Microsoft product/technology ecosystem. Why are all three levers important to control? Well, they allow for Microsoft to control adoption rates (in this instance to make sure its Power BI is the most adopted and highest resonating platform in the space). Again, to reiterate, adoption rates are generally directly associated with technology development - the more developed the platform, the higher the adoption rate.
Commoditizing BI via keeping the pricing lower/equal to competitors while also offering a better platform/service allows Microsoft to do all of the above while limiting the economics behind competitors reaching for further platform/service development. The lowest cost, at-least-baseline service provider will set the pace of development even if that means a somewhat retarded pace of development at times. The good thing for Microsoft is that, so far at least, it's not just a "baseline service provider" (thanks to it being able to leverage its comprehensive product/tech ecosystem and superb engineers; SEE: #3 above), it's a best of breed. It should also be noted that, again at least so far, Microsoft hasn't retarded growth/development of platform/service at all - it's allowing for both at breakneck paces. I'll end the micro-lesson in commodity economics here.
That said, Microsoft leaning into its app development prowess is a natural move. Embedded now not only does that, while also conveniently pointing to the convenience of the scale that Microsoft can bring to the table in other verticals (say, with Azure), but it also advances the adoption and expansion efforts of Power BI in that it improves the overall capacity and use case profile of the platform. Now, because Microsoft is allowing its data-visuals to literally be embedded into customer applications - unbranded I should note - and because Microsoft has an in-ecosystem app building platform, developers have a much simpler choice of which BI platform to use for maximum app efficacy (even if BI is not a primary selling point). None of Microsoft's pure-play BI competitors can offer such a service.
Microsoft's early adopter names - names like Milliman (finance), Solomo Technology (marketing), Highspot (sales), and Nintex (workflow management/HCM) - offer a preview into exactly which key (and huge and profitable) verticals that Embedded will offer a competitive advantage in/over. Even better, if Microsoft can prove out the value-prop of Embedded at scale it could put a huge dent into a market that IBM's Watson Analytics (via its Watson Analytics for Social Media Edition) currently targets and dominates - the marketing vertical. Currently, the only BI platform that I would choose over Power BI (and only if I was in the marketing department or had a specific marketing role at a company) would be Watson Analytics (via the Edition indicated above). That would be a nice "storming the beach" moment for Power BI if it can continue to add customers in the vertical - even if via a primary interest in something other than the BI platform itself (direct Embedding, integration with an app building platform, etc.). In chatting with a Microsoft Power BI product engineer on Friday, the company believes it can and will do just that.
All told, the mass-user familiarity that Power BI will take from potentially having widespread app integration will have marked, spatial defining benefits to the platform. Again, if realized at scale. Power BI's primary goal, above all else, is to capture "base platform" switching costs; to be so important to daily productivity that the "efficiency cost" associated with switching platforms will deter this from taking place (SEE: the broader productivity suite). I believe Embedded is a step forward for Microsoft in doing just that.
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.