Microsoft (NASDAQ:MSFT) vaulted into dominating PC applications when it developed its Office Suite concept a long time ago. Before this suite people bought best-of-breed applications for word processing, spreadsheets, presentations and personal databases. Microsoft arguably did not have the best of any of these applications but had a set of “good enough” applications that (kind of) worked together and were simpler, as well as, cheaper than buying the best-of-breed products. Lotus 1-2-3, WordPerfect and Aldus where the best products once but they have long since faded from most people’s memories. Since becoming the dominant player, Microsoft has increased its Office Suite’s functionality and complexity over the years.
In data warehousing and business intelligence, software companies have introduced suites for various categories of software including BI, data integration and data modeling. Each category of suites were created after software companies initially developed best-of-breed products that targeted specific or niche BI, DI or data modeling tasks. The vendors expanded each of these niches until they overlapped other niches. Over time, either through internally developed product extensions or very commonly via acquisitions, companies developed software suites that provided the functionality of many niches. BI pure-play vendors such as Hyperion Solutions, Business Objects and Cognos developed their BI suites and extended their footprint by acquiring dozens of smaller companies and absorbing their niche products. These companies were themselves bought by the software titans: Oracle (NASDAQ:ORCL), SAP (NYSE:SAP) and IBM (NYSE:IBM). Besides BI suites, these same software titans have also put together data integration and data modeling suites.
The conventional wisdom is that the suites sold by the software titans will dominate their markets. Based on industry analyst market evaluations and the amount of press released on these products you would think history was repeating itself, i.e. these products are dominating their software category just as Microsoft has done with Office in the desktop application market. There are similarities. The most obvious is that these suites do eliminate the need to buy multiple best-of-breed products and then integrate them together. But the flip side is that these suites have, as they have expanded functionality, gotten more complex and costly. Microsoft Office has also gotten more complex and costly but there is one significant difference between Office and these new suites: Office because pervasive first and then got more complex and costly. Microsoft captured the market and became the only viable option for companies. It did that by saving companies time, money and resources. BI, data integration and data modeling suites have not become pervasive and there are plenty on options for companies to deploy. History may not repeat itself.
Companies are looking for BI and data integration software that provides the functionality they need but at a reasonable cost in terms of people, skills (both IT and business user), time and budget. The suites may be the most features packed offerings available in the market but that does not mean they are the best fit for everyone. These suites have not become pervasive for a key reason: too high a TCO (total cost of ownership). This provides a market opportunity for software vendors such as MicroStrategy (NASDAQ:MSTR), Actuate (NASDAQ:ACTU), SAS, Dimensional Insight, QlikTech, Information Builders, SAS and others. In addition, TCO is a prime driver for the interest being shown in open source and On-Demand (or SaaS software-as-a-Service) software offerings for BI and data integration.
Will the software titans win as conventional wisdom implies? Will it become Microsoft’s market based on its dominance of the Office applications, in particular, Microsoft Excel? Will some company breakthrough and become pervasive by offering BI and data integration at a reasonable TCO (of course they will likely be acquired before they become pervasive!)? Or will the market continue to be fractured?
The journey will take time. There will be hype and surprises.
Features alone will not win the battle.