BI Vendors Play The Good Host

by Rajendra Chaudhary    Oct 13, 2006

The success of the Software-as-a-Service (SaaS) model with customer relationship management (CRM) applications seems to be affecting the strategies of the Business Intelligence (BI) community.

Key players like Business Objects, SAS, Cognos, Hyperion have taken quite a liking to the idea of hosted application delivery with top executives from these companies touting the SaaS approach on more than one occasion in the recent times.

According to Bhavish Sood, principal analyst, software markets, Gartner, “The primary incentive for these BI vendors in offering their applications via the SaaS channel is the opportunity to capitalize on the burgeoning SMB customer segment. Smaller businesses are now willing to invest in BI because of increased awareness about its benefits. However, lack of resources, financial and otherwise, constraints their ability to deploy costly BI software. The inherent ability of SaaS to reduce these price points to their fractions, is what’s working to its advantage.”

But these generic SaaS-related benefits are not enough to fuel greater adoption of hosted BI applications among small enterprises.

BI requirments tend to differ greatly among customers and intense application customization tends to increase associated costs. In order to make the hosted offerings viable while still maintaining reasonable margins, application providers have to find ways to cut down on customizations.

Shedding more light on this aspect, Sood said, “Since smaller organizations often require highly customized BI tools for specific business functions and have specific requirements such as extracting key metrics, generating reports, running ad hoc queries, it makes more sense for them to choose a pre-built, customized, less expensive on demand alternative instead of deploying traditional BI applications that will not only cost more but require the customer to build a specialized infrastructure from scratch.”

And if initial hosted BI offering are anything to go by, vendors seem to have got this part right. The current offerings available via SaaS from leaders such as Business Objects and SAS aren’t the fully loaded, feature rich applications they offer otherwise.

In light of such arguments, the validity of hosted BI may seem impervious, but there is a flip side to the story as well - the quality of hosting service providers.

John Schwarz, CEO, Business Objects agrees that one of the key factors in having a successful on demand BI venture is finding the right hosting partners. “Unless one ensures a robust and scalable hosting infrastructure that addresses concerns such as service outages and security and offers high availability, it’s extremely difficult to win customers,” he said.

And even if the vendors get the right hosting, the final outcome will depend on the users’ acceptance levels.

Giving a perspective on the maturity levels of Indian customers and their willingness to experiment with the on demand trend, Sood said that Indian customers are only warming up to the idea and it will take some time before they start adopting SaaS as the preferred channel.

“They are still grappling with the notion of putting the business data beyond the safety of their own company firewall. However, these fears will evaporate as SaaS continues to matures,” concluded Sood.