While the online analytical processing (Olap) sector grew by a healthy 45 per cent to about $2 billion in 1998-99, leading vendors can expect to start losing market share over the next year as Microsoft starts making an impact.
This includes Hyperion, which consolidated its position as the number one Olap vendor last year with a 29 per cent share of the market, following its merger with Arbor. The move pushes Oracle firmly into second place, with its own market share slipping from 20.7 percent to 17 percent.
But Nigel Pendse, author of the Olap Report, says that as Microsoft and its application partners come out with packages based around OLE DB Server next year, it will have a profound impact on the sector.
"There?s no doubt that Year 2000 concerns are playing a part in putting back major decisions, but the real problem is these vendors are looking at the world through old eyes or have serious management problems," he claims.
He also notes that the market is becoming more rather than less fragmented as new entrants ride the Microsoft wave.
"Cognos says the food hasn?t been served yet, but it hasn?t noticed that the likes of Knossis have already eaten it," he says.
Knossis is a tools vendor that is developing applications based on the Panorama technology that Microsoft acquired from Israeli firm, Panorama Software, in 1997. It claims it will have between 30,000-50,000 seats by the end of the year.
But Rob Zalums, Cognos UK?s managing director, retorts: "Sure we had problems in the middle of last year, but I can tell you we?ll blow the doors off Nigel?s predictions this year. This is fun, and I have absolutely no worries."
As for Hyperion, Pendse says: "The merger worked out far worse than anyone thought. Arbor took an underwhelming product set (Hyperion) and then told the sales people they were walking on fire. It lost a lot of good sales people and is really late with the next version of its Olap engine."
But Tony Speakman, Hyperion UK?s marketing director, responded: "I thoroughly accept the market is more competitive, but having been through very painful mergers, I can assure you ours was the least difficult I have experienced. Perhaps Nigel may not have complete information."
But in a market where fragmentation on the back of new entrants like Microsoft is creating uncertainty, the potential for casualties increases. Pendse says that Gentia, which reported losses of $3 million last quarter on sales of $6 million, is "looking for a buyer and perversely, this is having the effect of holding customers back from making a buy decision".
Paul Martin, Gentia?s VP products admits: "Nigel?s right to some extent. We?re focusing on getting solid partner programmes in place and I am far happier about the prospects going forward than I was a few months ago."
Gentia has just announced a successful pilot with Andersen Consulting for Credit Suisse and says the BBC is using its k.wiz predictive modelling tool for programme planning.
But even if Pendse?s views are not taken into account, the Olap and business intelligence markets are changing significantly and it seems inevitable that only the most nimble will survive. The fact that the market is fragmenting is surprising, but provides a potential breathing space for vendors as they jostle for position.
And it is the rise of applications based around OLAP and business intelligence tools that is defining the change.
"It all gets boring when, as has happened, the products become commoditised. It will be the applications that are more important in the future," says Pendse.
This is especially true in the customer relationship management (CRM) and enterprise performance measurement (EPM) markets, where the need for Olap and business intelligence offerings is rising rapidly and will become significant over the next two to three years.
Arthur Bird, senior vice president of Europe at TSC, which specialises in loyalty based applications, says: "A lot comes down to design, but I do believe there is a strong case for extending the analytic capabilities of existing data warehouses. These need to do a lot more than at present as many service organisations know little about their customers."
Bill Crothers, lead UK and European partner with Andersen Consulting?s CRM group adds: "It?s important that customers take a holistic view and that will include looking at their warehouse tools."
In the EPM space, vendors such as Peoplesoft and Oracle have said they intend to provide applications that build on the ?balanced scorecard? approach recommended by Kaplan and Norton.
But, while Pendse agrees this is a fruitful area for growth, he does not see that there is sufficient differentiation between the various analytic applications and expects added value to come from the consulting community.
"They?ve all read the same book, they all do much the same thing. I can?t see mileage in this from a vendor perspective," he says.
And Pendse also believes that customers still do not know how to shortlist products correctly. "I am consistently amazed at the bizarre shortlists that line up a jumbo jet against a moped and a Ferrari," he says.
Too often there is a disconnect between what the business needs and what IT understands, he explains. "IT is finding it difficult to understand that underneath the marketing, there is a great deal of technical difference between the products," he says.
Pendse also warns that adding a Web interface to an application does not change its architecture and customers needing good scalability should evaluate what is on offer very carefully.
While it is clear that the Olap and business intelligence markets are undergoing upheaval, it is far from clear whether current market leaders will retain their positions.
The vendors have all put product strategies in place to enable them to focus on the application needs of the buying community, but whether this will be enough to adjust to the demands of a commoditised market remains to be seen.
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