Business intelligence software market looks to hold its own during recession

Don't expect to see business intelligence (BI) vendors lining up behind banks and the auto companies for federal bailout money anytime soon.

They're doing just fine, recession or no recession, and are likely to continue doing so for years to come, thanks in part to strong demand from first-time BI buyers, according to a recent report by Forrester Research.

The Cambridge, Mass.-based research firm expects the BI software market to reach nearly $13 billion in revenue by 2014, up from $8.5 billion last year. A significant portion of those dollars will come from first-time buyers of BI tools and software, the report stated.

While the BI market is mature from a vendor and technology perspective, it is still fairly immature in terms of user adoption, said Boris Evelson, a Forrester analyst who contributed to the report. Nearly half of Evelson's client inquiries are from companies looking to deploy BI software for the first time.

I would never use the term recession-proof, but we are definitely seeing fewer cancelled or reduced investments in BI than we see in other markets. Boris Evelson Principal AnalystForrester Research

That's a large pool of potential customers that will help BI vendors weather the current economic downturn, generally considered to be the worst since the Great Depression. The market will also benefit from the perception that improving efficiencies and saving money through BI and data analytics is even more important during a recession than during good times.

"I would never use the term recession-proof [to describe the BI market], but we are definitely seeing fewer cancelled or reduced investments in BI than we see in other markets," Evelson said.

At SAP, for example, its Business Objects group posted double-digit software and software-related services revenue growth in 2008, accounting for two-thirds of SAP's overall revenue growth for the year, according to a company spokesperson. SAP reported 11.57 billion euros ($14.59 billion) in total revenue in 2008, up from 10.24 billion euros ($12.91 billion) in 2007.

"People have remarked that our portfolio is relatively recession-proof, and our results in Q4 seem to back that up," said Jonathan Becher, senior vice president of large enterprise marketing at SAP. "Despite a difficult economy all along, we did quite well."

In its most recent filing, rival IBM Cognos reported a 12% increase in revenue for the first nine months of FY 2008, to $777 million, compared with $694 million during the same period last year.

"We've grown for 20 straight years through two pretty significant downturns in the marketplace – one in the '90s and one earlier this decade with the [dot-com] bubble bursting -- so I'm really confident that customers are going to look to invest in this type of capability to help them through these difficult times," said Rob Ashe, former Cognos CEO and now general manager of BI and performance management at IBM.

Revenues increased in 2008 to varying degrees for a number of the remaining independent BI vendors as well, including MicroStrategy and SAS Institute, which grew revenue by nearly 8% and just over 5%, respectively.

The current BI market is actually bigger than the $8.5 billion the Forrester report caps it at, Evelson believes. This is due mainly to BI-style tools that are sold as part of ERP packages, as well as HR and customer analytics tools, which were not included in the estimate.

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Among these emerging technologies are predictive analytics, which combines data mining and statistical analysis to predict future events. Forrester forecasts that predictive analytics will account for $2.1 billion in revenue by 2014, up from $694 million in 2008, largely to the benefit of the mega-vendors SAP, Oracle and IBM.

Evelson believes that business activity monitoring (sometimes called complex event processing), text analytics and column-based databases are also poised for significant growth among BI technologies over the next five years.