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Business Intelligence's Feeding Frenzy

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Despite concerns about a potentially weak 2008 for software companies, there's one sector of the business that continues to draw startups and acquisitions at a brisk pace: business intelligence software.

"Business intelligence is no longer a back-office, nice-to-have application," said Forrester Research analyst Boris Evelson. "It's the next business differentiator."

Variously called corporate performance management, profitability management, and a host of other names, business intelligence tools help companies look deep into their customer and transactional data to make decisions about how to run more effectively.

Increasingly, businesses are finding the ability to make those decisions highly desirable.

"Companies used to compete by being more productive," Evelson said. "But it's very difficult to compete today based just on price and services."

As a result, BI specialists have become prey in a mounting surge of consolidation. Beginning with Microsoft's purchase of ProClarity in April 2006, many of the independent BI software companies have since been snapped up in an rush of acquisitions.

"In that sector, there almost aren't any names left anymore -- they're all gone," said Robert Johnson, associate director of technology coverage at investment research firm Morningstar.

In March, Oracle acquired Hyperion Solutions for about $3.3 billion. In October, SAP upped the ante with its acquisition of Business Objects for $6.7 billion. And the next month, IBM announced its intention to acquire Cognos for $5 billion.

The remaining players, including SAS, MicroStrategy and Teradata, are likely to be in the sights of larger companies looking to cash in on what has become a full-fledged boom, according to analysts.

The reason for the consolidation isn't that BI software is being commoditized. Rather, it's becoming a major competitive advantage for both vendors and customers, according to industry watchers.

"The way [companies] compete today is, when I create a campaign, if my analysis of who my target customers are is better than yours, I'm going to get more customers," Evelson said. "That's a process run by BI applications."

The biggest business gains for customers is going to be in BI apps," he said, which is why the big software players -- "the Oracles, SAPs and IBMs" -- are acquiring BI companies.

This article was first published on InternetNews.com. To read the full article, click here.

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