Finding your niche in on-demand BI

Business intelligence is a relatively new category within the software-as-a-service world, and we’ve seen a number of new, niche players appear on the scene – not to mention offerings from established vendors. It’s an emerging market, one that shows promise, but one that is rife with challenges. It’s also a market where resellers have to figure out how exactly they can make money.

Established vendors have acquired BI solutions, such as SAP/Business Objects, IBM/Cognos and Oracle/Hyperion, while others, such as SAS, have played in this space from the beginning. Then there are a number of small, niche players, such as PivotLink, BlinkLogic, Oco and LogiXML.

In a recent report, Forrester found that BI is one of the harder markets to move to an on-demand software model. There are a number of hurdles to BI in the cloud: It’s still in the early stages of adoption, and early adopters are skeptical as to its potential, especially where large volumes and real-time data transfer are concerned. And the SaaS BI space is still largely unproven. Integration across multiple data sources (including SaaS, hosted and on-premise) remains a challenge.

However, the report adds, “The potential of SaaS BI is strong, particularly its potential to improve the end-user experience and access to analytics as well as its ability to enable collaborative or benchmarking-type reporting scenarios.”

Clearly, vendors are seeing opportunities, because there’s a lot of investment going on. SAS, the largest privately held independent software company in this space, is spending US$70 million on a cloud computing facility at its headquarters in Cary, N.C. to expand its on-demand business analytics offerings. The facility will include two 10,000-square-foot server farms, with the first completed in mid-2010. But SAS says the market is driving its investment, not the other way around. It’s been providing on-demand business analytics for years, including vertical-specific solutions around everything from drug discovery to revenue optimization.

According to data straight from the field, IDC Canada found that 94 per cent of IT-level respondents (CIOs and IT managers) would prefer to use traditional license and maintenance for their BI needs, while only seven per cent prefer SaaS. And 81 per cent of line-of-business respondents would prefer to use traditional license and maintenance, while 10 per cent prefer SaaS.

“When you look at on-demand versus on-premise, SaaS has been pitched to line-of-business to get around and away from IT departments, and that’s why it can grow – they pay for what they actually use, not for what it costs to set up,” said Nigel Wallis, research director of software and services with IDC Canada. “It has the appeal of a quicker time-to-business value, which really appeals to the line-of-business in these volatile economic times.”

The caution, however, is that BI tends to look like low-hanging fruit, but there’s a lot of work that needs to be done to make it successful – otherwise you’re grabbing a whole bunch of data that may or may not be accurate and trying to drive real-time trends out of it. And, if the data isn’t accurate, it may actually be worse for decision-making. Partners have a role to play here in terms of best practices to set up data warehouses and govern data quality.

Adapting to a new business model

As with other SaaS plays, partners often get some sort of referral payment and are typically the first point of contact if the customer requires changes or professional services. The dilemma is that many customers would rather go to the source and work with the ISV rather than the hosted partner, said Wallis. Last year, when IDC Canada asked which channel they’d prefer to use for BI, 48 per cent of respondents said they’d go to the software vendor, as opposed to 17 per cent who would use a systems integrator or IT service provider and another 15 per cent who would use a VAR.

For partners, it’s a matter of how they adjust to this new world. What value-added features do they bring to the table? Can they offer a vertical-specific hosted model rather than the generic vanilla flavour that the software companies play in?

The demand is there and it’s growing – the question is whether or not the licensing model behind SaaS BI is something that partners can take advantage of, said Gareth Doherty, research analyst with Info-Tech Research Group. If you’re a VAR, you’re not going to be able to assist as heavily on the implementation side. SaaS is typically hosted outside of the firewall, so the vendor is going to be doing a little bit more work.

But there are still some opportunities for partners. In a recent channel partner survey, Info-Tech found that close to 50 per cent of organizations have implemented or have plans to implement a SaaS BI solution – though that doesn’t indicate whether they also have an on-premise solution. One of the main motivations for adopting a SaaS version of BI is, first and foremost, that it offers a low-cost approach by eliminating the need for any additional infrastructure.

SaaS can be a good fit if a customer is geographically distributed, since a Web-based hosted solution can be accessed from anywhere, or if the customer has a seasonal business, since they can add or remove subscriptions where necessary. And it’s more cost-sensitive for any organization with a strapped capital expenditure budget. Partners can still make money helping to support the solution, especially since many larger organizations are leaning toward a hybrid model.

“The major trend is the intent to get BI entrenched much more widely in organizations, so you’ll hear it referred to as workgroup BI or business unit BI. The idea now is to have everybody in the organization using BI,” said Doherty. “But most organizations struggle with wider deployments of BI, even with political issues. People don’t want to change how they’re doing business.”

Microsoft is addressing this by merging its BI capabilities into SharePoint to make it more accessible to the entire organization. “We see that as being the best way of delivering BI functionality, just being a natural part of the way that everyone works,” said Wanda Yu, senior product manager with Microsoft Canada. “A customer shouldn’t have to choose either/or, they should have a strategy that encompasses all options. A lot of customers are excited about the prospect of online services, but I wouldn’t say customers are looking to replace existing on-premise solutions.”

The partner opportunity

Customers want to make sure they’re making the right decisions and optimizing the limited resources they have – and that means everyone needs to have that information, not just top executives. Research shows that in most organizations only two to 10 per cent of employees have access to BI tools, she said, so customers are now looking to empower the rest of the organization – and potentially opening that up to mobile workers, partners and investors. So there’s a lot more opportunity to extend existing investments they’ve already made.

Microsoft has a partner framework that includes on-premise, partner-hosted and Microsoft-hosted models. “We see software-plus-services resonating best with customers because there really isn’t an organization that’s black and white anymore,” said Yu. “If you understand all three of these delivery models, you’re able to present all of them to the customer and figure out exactly what works best for them.”

“If you look at Microsoft’s new cloud strategy, there’s residuals, but the margins are so low, they’re talking about 10 per cent,” said Craig West, channel chief with NetSuite, which provides on-demand dashboard capabilities. With NetSuite, he said, resellers can earn between 30 to 50 per cent on the license business when a customer initiates a new subscription and 30 per cent on renewals.

Last year NetSuite introduced “accelerators” for new customer adds, giving partners extra credit toward tiers. “We know the economy is tough – you don’t wave a magic wand and sign a contract,” he said. “There are less opportunities out there, but there are definitely still buyers, and any business can look at the economic downturn as a challenge or an opportunity.” This is a time where the TCO of cloud computing can be a compelling message.

“Having all the intelligence right in front of you is integral to what we do, and that’s become more in demand – the notion of C-level executives and line-of-business managers having their fingers on those real KPIs and metrics they need to run their businesses,” said West. “We’ve seen that move from a nice-to-have to a must-have.”

“The on-premise players have flexible, configurable solutions, but they’re fragmented,” said Brad Peters, CEO of Birst, a provider of on-demand BI and analytics. “You end up having to fight this huge complexity and cost battle just to get some basic analytics and dashboarding up and running.” Over the past 15 years, BI has grown so complex and costly that a lot of companies can’t eat the quarter-of-a-million dollars required to implement an on-premise solution, so they just suffer through Excel.

Birst works with partners who build their own solutions on top of Birst’s platform – some specialize in specific verticals, some are more horizontal. This gives the partner an opportunity to make a recurring revenue stream and create a stickier relationship with that customer. Because BI is not a self-contained system – it lives on the data that’s fed into it – it has to integrate with other data sources, and more often than not that data is from an on-premise solution, so Birst has connectors to and other SaaS solutions.

But on-demand isn’t just for small companies – it’s becoming more compelling to larger enterprises. RBC Wealth Management, for example, one of Canada’s largest securities firms, uses Birst (what it calls RBC Dashboard) for benchmarking of financial advisor performance and identification of client segments.

“Our partners build up their own intellectual property around a given domain, which they can sell on a repeated basis,” said Peters. “They have content that is valuable and can take to multiple customers.”

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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