Ultradent Products Inc., a dental equipment manufacturer based in South Jordan, Utah, is cutting its business intelligence (BI) tool spending significantly this year.
Ultradent, which has budgeted just $100,000 for BI and performance management (PM) spending in 2008, mirrors the spending and adoption patterns of many organizations that invested heavily last year and is now concentrating on getting those tools up and running, according to recent research.
"Our spending for BI was primarily in 2007, purchasing the tools that we are implementing this year," vice president of IT Erwin Fisher said in an email interview.
That is not to say the market is suffering. Spending on BI and PM technologies and services will reach $57.1 billion worldwide in 2008, according to a new survey by AMR Research.
In the U.S., BI and PM spending is expected to increase by 4.2% over last year, to $24.7 billion, thanks in part to increased demand for external consulting services. Expenditures on analytic infrastructure technologies – including data warehouses and data marts – will also enjoy significant growth in 2008. That stands in contrast to the greater emphasis placed on analytic applications such as dashboards and budgeting and planning software in 2007, the survey found.
The swing from spending on business-user-oriented software one year to more IT and infrastructure-related technologies the next is indicative of companies building out their BI and PM programs, said John Hagerty, an AMR analyst and co-author of the report.
"In 2007, BI and PM spending was very much around things like planning and forecasting and analytic applications -- things that put information into the hands of business users," Hagerty said. "Now, it's switched back to more infrastructure-related purchases for 2008."
The report surveyed 400 IT and business professionals across numerous industries in the U.S., China, France, Germany and the U.K.
Business intelligence and performance management consulting services get a boost
The BI and PM consulting business is also expected to rebound from its relatively weak showing in 2007, when more companies hired internally to meet BI and PM needs, according to Hagerty. In 2008, spending on external BI and PM consulting, including outsourced services, will exceed $20 billion, more than making up for a slowdown in software spending.
In contrast, spending on BI and PM software is expected to slow in 2008 because of the struggling economy, the report found, though not enough to contract the overall BI and PM markets.
"It's an economic issue. [BI software] is the one area where people can curtail expenditures," Hagerty said. "When people start to expand the use of BI and PM, there's a very good chance they already have licenses for stuff they haven't deployed yet. So, as opposed to buying new licenses, what they're trying to do is make what they have work better for them."
Reaction mixed to BI market consolidation
Among respondents, 54% said the recent market moves have affected their BI and PM deployment plans, while 46% said they have not.
Of those companies that said market consolidation would affect their BI and PM plans, 44% said they would accelerate adoption of products from acquired vendors, 27% said they have slowed their adoption of existing BI and PM technologies, and 17% said they were re-evaluating their BI and PM strategies. The consolidations have caused 9% of respondents to stop BI and PM projects altogether until the mega-vendors reveal more detailed plans for their acquired BI and PM portfolios.
How companies react to the consolidating BI and PM markets depends entirely on individual circumstances, Hagerty said. "I think you have a real mixed bag, and you can't say that there's a standard way that all customers of certain types will react," he said. "It's going to be really based upon where they are in their BI and PM lifecycles."
Overall, though, Hagerty said the mega-vendors – SAP, Oracle and IBM – have improved their market positions through the acquisitions.
"On balance, the power is shifting to these larger vendors," Hagerty said. "It doesn't mean that the competition [with independent BI and PM vendors] is over and these guys have declared victory. I just think the preference of buyers tends to favor large firms with more delivery capabilities both on the services side and the software side."
And don't forget about Microsoft.
"Microsoft kind of gets left off to the side because they didn't acquire anybody, but they are almost always considered as a viable alternative that people initially look at," Hagerty said. "Just pure size gets them notice." Microsoft's BI products include SharePoint Server and Office applications like Excel.
BI and PM spending is expected to continue on an upward trajectory into 2009 and beyond, good news for BI and PM vendors of all sizes. A vast majority of respondents, 84%, said their BI and PM spending will grow or remain the same next year. "Given this outlook, we predict sustained BI/PM spending growth through 2012," the report said.
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