"Downturn? What downturn?" ask BI vendors

While the IT industry chews its fingernails and tries to make up its mind whether to proclaim the tech recovery officially on or off, one sector has been quietly enjoying good times.

Vendors of business intelligence (BI) software - which monitors a company in real time and adjusts its behaviour to boost efficiency – are experiencing something of a boom. Butler Group estimates the global BI market could reach $10bn by 2005. The analyst house believes the market will be worth around $6bn, with IDC putting the UK market at around $340m.

So why is BI - led by companies such as Business Objects and Cognos - turning in a consistently positive performance in the face of a downturn? Cognos CEO Ron Zambonini told silicon.com that he believes it's the downturn that's keeping the BI space ticking over.

"Money's tight at the moment," he said. "Business intelligence gives a good return on investment (ROI) and you can prove it quite easily – and most customers will make you prove it."

But that doesn't mean BI companies aren't hoping for the end of the downturn. Zambonini says a healthy economy is better for BI suppliers because it puts consumers in a buying mood.

Kirsten Jefferies, product marketing manager at Business Objects, agrees. She said BI's constant ROI will keep it in favour with the accountants for a while to come, although she does predict a shake-up in the sector as companies look to streamline their providers.

"Companies will start cost-cutting and rationalising their vendors, looking for one to meet all their business requirements," she said.

Ian Charlesworth, senior research analyst at Butler Group, thinks the market will start to undergo a period of consolidation, as BI firms look to become end-to-end suppliers.

"Vendors have historically focused on the front-end of business intelligence – analytics and so on – but now they're looking at the back-end too - extracting data, storage," he said. It's a logical move, considering that all business intelligence is only as good as the data it uses.

"Previously, they had no control over their data and that wasn't good enough – you need to be sure that it's accurate. It's absolutely essential," he said.

Business Objects recently announced its acquisition of fellow BI provider Crystal Decisions, best known for its reporting software. According to Business Objects, the move will make it around 30 per cent bigger than rival Cognos in terms of customer numbers.

Does the acquisition keep Zambonini awake at night? "No, it sends me fast asleep. They'll be offering the same products and people buy products, not companies," he said. Zambonini, however, said that Cognos is happy to be operating in the same space as Business Objects, describing them as "good competition".

Despite the rivalry, Zambonini describes the relationship between the companies as "not like the Gunfight at the OK Corral'."

That doesn't mean that it's all sweetness and light either: he added that the acquisition will keep Business Objects busy for the next couple of quarters and that if the company were "aggressive at attacking, we could do some damage".

Jefferies doesn't agree. "We won't be taking our eye off the ball," she told silicon.com. "At the moment, business intelligence is a two horse race. Next year, it will be a one horse race... We've enjoyed [Cognos'] competition and we're looking forward to our dominant position in the market."

However, there's one company with its eye on business intelligence that might well give both Cognos and Business Objects a few sleepless nights: Microsoft.

Zambonini says he believes that it'll be worth watching Gates and co's moves in the area. Business Objects, however, has more to lose by taking on the Redmond Goliath: Crystal Decisions software is already embedded in Microsoft software.

Jefferies, however, takes a pragmatic view of any potential friction: "We're positive about having a continued relationship with Microsoft – their entry just validates that it's a strong marketplace."

While Charlesworth agrees that Microsoft is a significant player in the market, he rates Gates as a bigger threat to business intelligence than either firm is willing to admit.

"They're pretty dominant at the moment and they have a stranglehold in certain areas. The challenge is for them to extend it end-to-end. They're working on it – and they have an aggressive roadmap for the future," he said.