The advent of Microsoft?s Plato online analytical processing (Olap) software in September will lead to drastic price cuts and consolidation of this entire section of the decision support market.
But, worryingly for the other server vendors in this massively overcrowded market, the impact of the new product will be felt within the next six months as customers start delaying their buying decisions, according to Nigel Pendse, author of the 'Olap Report'.
Pendse explained: ?If the Microsoft product can do 80-90 per cent of the things the established offerings can for 10 per cent of the price, what would you go for? Relational olap can take up to a year to implement, so customers are going to start driving a hard bargain or will wait to evaluate Plato.
He continued: "In the short term, this will affect buying decisions and people will start delaying. They?ll make do with their desktop tools for a while longer.?
But Keith Dean, UK managing director of Olap server vendor Information Advantage, said he did not go along with such prophecies of doom.
?Microsoft will change the landscape because it will come onto the market at the low end with a low cost product. But SQL Server is only really suitable for data marts and is sold via the channel. Data warehousing has generally been more solutions-oriented and the top 500 are not going to build their data warehouses on SQL Server. The market will divide into a high and low end,? he said.
Meanwhile Plato - the codename for the Olap software Microsoft bought from Israeli software house Panorama last year - will be shipped on the same CD as version 7.0 of the SQL Server database, codenamed Sphinx.
This means that Olap products will soon start flooding the market in volume for the first time in the long history of the technology. Some 300,000 customers are expected to test Plato in the first restricted beta alone, compared with an existing customer base of approximately 1,000 each for current market leaders, Oracle and Arbor.
And although pricing has still not been finalised, Microsoft is only expected to charge about $2,000 for a 10-user system. This compares with products such as Arbor?s Essbase or Gentia, which cost $100,000 for a 10-concurrent user licence. As a result, vendors will have no choice but to cut prices in order to compete.
Pendse said: ?The day when people were spending #5 million on a data warehouse are coming to an end. A lot of people already think they?re too expensive and if Microsoft offers them a cheaper alternative, they?ll live with the weaknesses. A small number will convince the board that it?s worth getting an expensive one, but not many and if the board reads it can get something cheaper, it will go for it.?
John Watton, Oracle?s marketing manager for end user tools, was not convinced that pricing was particularly sensitive in the Olap market.
?Our customers don?t just demand a lower price point, they also want the added value of consultancy, applications and a quick response to their needs. The Plato situation is parallel to the relational database market. People said that SQL Server would come in and dominate, but Oracle still have the largest share of the NT space in that market.?
Nonetheless, Pendse believes that price cuts will inevitably lead to consolidation in this relatively small marketplace, which supports over 30 tiny players. The relational database sector is five times the size of the Olap space, he explained, but boasted only three to five major players.
The most likely survivors would be Oracle and Arbor - the latter looking more likely than ever to be acquired by IBM - but the rest could well disappear or be acquired. In fact, the first wave of creative staff are likely to leave the established vendors this spring to look for new prospects, he believes.
However, client product vendors such as Brio and Business Objects would initially prosper in the new world, Pendse predicts. They could position their offerings as complementary to Microsoft?s server offering and would benefit from the increased size and volume sales in the market.
But over time, they would also be hit, as Microsoft moved into this space too.
On the other hand, the real, long term winners would be the small, innovative players that developed useful utilities or applications for Plato. Vars and ISVs could also benefit because Olap will now be cheap enough to embed in applications where it had not been heard of before.
But Peter Philpott, Arbor?s director for northern Europe, said he believed Microsoft?s one big weakness in trying to push Plato as the de facto Olap standard was not having a direct salesforce to sell it.
?The Olap space is a completely different ball game to the packaged application market and has to be treated differently. IT departments have certain requirements and they expect us to understand them. You can?t ignore Microsoft, but focus is really important here and we will differentiate ourselves by offering a high end Olap development environment for the enterprise,? he said.
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