Monday, July 21, 2003

Vendor consolidation hits business intelligence sector

It's just been announced that Business Objects, a leading vendor of business intelligence (BI) software, is acquiring Crystal Decisions, a developer of end user reporting tools. The marriage makes a lot of sense. Business Objects targets its products at business analysts and power users. It also develops high end online analytic processing (OLAP), business performance management, scorecard, and dashboard applications. Crystal, on the other hand, focuses mostly on the end user. Its flagship product, Crystal Reports, is probably the most widely deployed report writer across a variety of enterprise systems. Most vendors have realized that there is no point in trying to develop or market their own report writing tools, and Crystal has pretty much become the standard, having OEM relationships with over 350 software vendors, including majors such as Microsoft, PeopleSoft, and SAP. Crystal Decisions--which was spun off from Seagate Technology in 2000 and was on track for an IPO itself prior to this deal--has been a rising star in the enterprise software marketplace, with revenue growth of 30% in 2002.

The BI market is highly fragmented and ripe for consolidation. The Business Objects/Crystal entity, if approved by shareholders and the SEC, will have combined revenues of over $700M, making it now the leading Tier I BI vendor, followed by Cognos and Hyperion. Tier II BI vendors include Microstrategy, Brio Software, Actuate, and Information Builders. Leading technology platform vendors in the BI space include IBM, Oracle, Microsoft, Teradata, and Sybase.

There is one risk to Business Objects, however, in acquiring Crystal Decisions. Some of those 350 OEM relationships that Crystal has built are software developers that also offer business intelligence and enterprise performance reporting functionality. How eager will those vendors be to continue to wrap themselves around Crystal Reports, if the new owner of Crystal is now directly competing with them?

The press release on the Crystal deal is on the Business Objects web site.

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