Giants gear up for the business analytics challenge
Big spenders go shopping
Business analytics is the latest IT takeover battleground, driving mergers and acquisitions among major corporate IT vendors as enterprises look to turn their data into valuable information that will give them a competitive edge.
IBM, one of the vendors scrapping for supremacy in this space, expects the market for business analytics to be worth more than $200bn a year by 2015, with its own share of the pie targeted at $16bn.
As Gartner analyst Dan Sommer told Information Age earlier this year: "Vendors aggressively market their capabilities in this area. Revenue growth is as much a function of vendor push as a demand pull.”
However Philip Howard, research director at Bloor, comments: “There are lots of interesting developments but there’s also lots of hype.”
The huge business analytics market is still fragmented, though you might ask for how much longer, considering the rate at which the data warehousing giants are acquiring companies – whether start-ups, niche operators or smaller competitors – to fill out their range of offerings.
“There’s certainly more demand in the US than the UK,” says Howard. “The US is about 18 months ahead.
"There’s also more demand among Web 2.0 companies, while traditional companies tend still to be playing with technology such as Hadoop on a trial basis.”
Web 2.0 companies, of course, have huge amounts of unstructured data and are generally more comfortable playing in this environment.
Runners and riders
In the past five years, IBM has given analytics a lot of time and attention: $14bn worth on 24 analytics-related purchases.
In the past 12 months it has bought (or agreed to buy) the data warehousing company Netezza for $1.7bn, Canadian risk analytics firm Algorithmics for $387m and UK crime prevention and fraud intelligence and analytics firm i2 for an undisclosed sum (but probably $500m, if Financial Times sources are correct.
IBM also continues to pour millions of dollars into the Telfer School of Management at the University of Ottawa, investing in research on business analytics software in the fields of social media, healthcare operations and ecological and environmental monitoring.
IBM is betting a large chunk of its future on success in business analytics
IBM is betting a large chunk of its future on success in business analytics, but it has competition.
SAS is a longstanding player and the largest independent software vendor in the the business analytics space. This year SAP also announced its entry into the market with its Hana platform: it already has a €400m order pipeline and expects to generate $100m in revenues in its first year.
In August, HP said it was considering options for its PC business and announced its intention to buy Autonomy for $10bn – a figure equivalent to 11 times revenue. Autonomy is the UK’s largest software company by market cap, specialising in pattern recognition and “meaning-based computing”.
The deal, which has yet to go through, has attracted unfavourable comment from analysts and commentators, based mainly on HP’s worsening business performance and puzzlement at HP senior management’s strategy.
But HP too appears to be betting big on business analytics, having also bought a niche data analytics firm called Vertica earlier this year. HP’s current chief executive Leo Apotheker was formerly head of SAP, so perhaps he has SAP 2.0 in mind.
Inevitably then, it looks like one end of the market will see the companies with the deepest pockets and the biggest R&D budgets hoovering up the smaller companies they need to round out their offerings.
Small but perfectly formed
At the other end of the scale there are a many niche players developing interesting data analytics applications.
Australian company OptAlert, for example, markets a safety system aimed at haulage companies and businesses with large vehicle fleets.
The system monitors a driver’s level of alertness to detect any onset of drowsiness: drivers wear glasses that measure their blink rate and send real-time information to a dashboard in the vehicle.
“We’re starting to see the ability to analyse structured and unstructured data in the same tool,” comments Howard.
Another company, The Box, is using data analytics to turn the accepted business model on its head. The motor insurance company fits a telematics box to the car to gather data on the times of day it is used, its speed on different types of road, the number of breaks taken by the driver, smoothness of the driving and so on.
The company then provides insurance on a mileage rather than an annual basis and rewards good driving with extra mileage. ®