Cognos’ 4th quarter revenues were USD 284M, up 12% year on year. The 4th quarter (ending February for Cognos) is the strongest one traditionally, but this run rate means that Cognos has the tantalising prospect of hitting USD 1 billion in revenue in the next financial year, clearly a major milestone.

The results were quite strong across the board, with more deals in excess of USD 1 million than the company has ever achieved (25 deals of this size) and revenue growing in each region (9% US, 16% Europe, 18% Asia Pacific) though the currency effects flatter the European figures (6% growth in local currency terms).

Of this revenue, USD 92M was in license revenue (USD 238M for the year in all) which has potential for improvement since migration to Cognos Version 8 is reportedly sluggish; perhaps only 10% of customers have migrated so far.

Overall the figures are solid rather than dazzling, as reflected in the share price performance, but still indicates that the BI industry is in generally healthy shape.

There was a curious piece of “analysis” that appeared a few days ago in response to IBM’s latest data warehouse announcments:

http://www.intelligententerprise.com/showArticle.jhtml;jsessionid=ZOETRZHF0SWBMQSNDLOSKH0CJUNN2JVN?articleID=198000675

In this gushing piece, Current Analysis analyst James Kobelius says: “IBM with these announcements becomes the premiere data warehousing appliance vendor, in terms of the range of targeted solutions they provide”. So, what were all these new innovative products that appeared?

Well, IBM renamed the hideous “Balanced Configuration Units” (you what now?) to “Balanced Warehouse”, a better name for sure. Also in the renaming frame was “Enterprise Class” being renamed to “E Class” (hope they didn’t spend too many dollars on that one). In fact the only supposedly “new” software at all that is apparent is the OmniFind Analytics Edition. The analysis credits this as a new piece of software, which will come as a surprise to many of us with memories longer than a mayfly e.g. the following announcement of Ominifind 8.3 is on the IBM website dated December 2005:

http://www-306.ibm.com/common/ssi/fcgi-bin/ssialias?subtype=ca&infotype=an&appname=iSource&supplier=897&letternum=ENUS205-342

In fact the whole release seems to be around repackaging and repricing, which is all well and good but hardly transports IBM to some new level it wasn’t at, say, a week ago.

Let’s not forget about “new services” such as “implementation of an IBM data warehouse” - well, that certainly was something that never crossed IBM’s Global Services mind before last week. Now, I’m not a betting man, but I would be prepared to wager a dollar that IBM have a contract with Current Analysis - any takers against?

The excellent blog “The Cranky PM” does a fine job of poking fun at the supposedly objective views of analyst firms that are actually taking thick wads of dollars from the vendors hat they are analysing e.g.

http://www.crankypm.com/analysts_whores/index.html

I wonder what she would make of this particular piece of insight?

Just in case you were in any doubt that the BI software industry is going through a relatively healthy phase, you may like to ponder the latest USD 46M purchase by Microstrategy. A niche technology company perhaps? Nope - a new private jet (a Bombardier Global Express XRS to be precise) for CEO Michael Saylor. This was reported recently in, amongst others, the Washington post:

http://www.washingtonpost.com/wp-dyn/content/article/2007/02/04/AR2007020401106.html

Saylor has always been a charismatic but eccentric character e.g.:

http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A2889-2002Jan5

but even so. This is a company that in December 2006 had USD 79M in cash (past tense). Its 2006 revenues were USD 313M (up from around USD 269M in 2005) and profits of nearly USD 71M (unaudited). This makes it an unusually profitable enterprise software company. However just what the board of directors were thinking when approving this particular purchase can only be a matter of speculation. Even though Saylor has a large stake in the company surely this is the kind of thing that boards of directors of public companies are supposed to be for? Perhaps it will encourage some blue sky thinking.

Still, pity their public relations manager. You have to be impressed with the creativity here: the plane “will facilitate more effective communication and more rapid coordination with its global employees, partners, and customer base” according to their SEC filing. Good one; this wins my “brassiest PR” prize of the week.

There is a survey this week about current BI issues and trends:

http://www.dmreview.com/article_sub.cfm?articleId=1076572

I always tend to be a little sceptical about such surveys since you are never sure how representative the sample base is, but with that caveat there appear to be a few interesting themes. Broadly spending on BI is expected to go up by 10%, and this is in line with other sureys.

One opportunity for the industry is that just 4% have a BI tool on a subscription basis, but 30% would be interested in one. The success of salesforce.com suggests that if existing vendors hesitate too long then a competitor could get an advantage here (just ask Siebel).

73% of respondents reckon they are reducing the number of BI tools in their shop, with 29% hoping to get down to one. While some of this may be wishful thinking it certainly reflects the recent trend towards consolidation e.g. Hyperion buying Brio, and then Oracle buying Hyperion.

Just 18% of respondents are “evaluating” open source BI tools, presumably with considerably less having actually deployed one. This is a useful wake-up call to the open source zealots. At least in the BI sphere there seems to be little impact so far.

However I found the most revealing data point to be the satisfaction levels with existing solutions. In eight categories (ETL, data warehousing, various packaged apps) the second highest scoring category (ETL) had just 43% of people claiming to be “successful”, and this feeble rate drops to around 30% or so for analytic apps that are packaged with financial, CRM or supply chain systems. 44% of people claimed success with packaged BI reporting tools, but again this is hardly a number to be crowing over if you are a BI vendor: “we are slighty less dismally unsuccessful than packaged analytical apps” isn’t something you want to put on your advertising campaign. Of course, as with all such surveys, there is the question of how the question was phrased i.e. what does “successful” mean, but even so it hardly paints a picture of contented customers.

This level of satisfaction does not strike me as odd. Large companies have mostly not solved their basic management information problems. Many of the issues come back to data issues: poor master data and dismal data quality are rife. One large (and highly successful) company I know has been trawling through its supplier data recently: four out of five supplier records turned out to be duplicates, and just in case you assume their problem is historical, one in three of even of new suppliers set up in the last 12 months turned out to be duplicates also. With such fundamental issues of data classification and quality, you can have all the pretty reporting tools you like and yet you are still unlikely to be solving too many real management information problems. You will get numbers, but they are not good numbers

I am always surprised by how little attention that data quality gets when it clearly undermines the quality of the reports that management rely on. Maybe people just feel comfortable seeing a pretty chart: it is reassuring. Knowing that the data it is based on is junk is perhaps too uncomfortable for a lot of organisations to wish to confront.

Consolidation in the BI space continues as Oracle snaps up Hyperion for USD 3.3 billion (Hyperion had USD 486M of cash, so effectively the deal is USD 2.8 billion). Hyperion’s year end is June and to year end 2006 its revenues were 765M (which was 9% up over 2005). Hence this is a fairly healthy valuation of about 3.7 times trailing revenues.

The acquisition of Hyperion’s dominant financial consolidation software and excellent Essbase OLAP technology makese sense for Oracle, whose large and aggressive sales channel will be able to exploit Hyperion’s strong technology. What is less clear is what happens to Brio. Brio never quite made it up into the same league as Business Objects and Cognos, and given that Oracle already has various reporting software of varying quality it is unclear whether Oracle will really exploit Brio or just let it quietly shuffle off to that crowded house in the sky for acquired BI software. Certainly Brio customers need to carefully think about their options.

At least this puts an end to the rumour that Oracle was going to buy Business Objects. Or does it?

I fully agree with an article by Steve Miller:

http://www.dmreview.com/article_sub.cfm?articleId=1076651

about how the Harvard Business Review is a surprisingly useful resource for people working in business intelligence. One of the recurring themes I have noticed over the years with projects going wrong is that the root cause of problems is more often people communications than technology. Of course as technologists we are inevitably drawn to the technical issues around the latest technology - performance, how buggy the software is etc, but few pieces of commercial software are so poor that they will cause a project to fail directly due to the software (I exempt Commerce One from this generalisation; it was that bad). The useful thing about Harvard Business review is that it gives some insight into the kind of issues that are confronting senior management, or at least about the kind of issues they are reading about.

However the HBR is rather hard work. There are rarely articles about technology directly (an exception was the November 2006 “Mastering the Three Worlds of Information Technology”) but technology often crops up within other articles, as Steve Miller points out. What I would add is that HBR can be a rather ponderous read. Their articles tend to be long and in-depth rather than bright and breezy, and there is a politically correct element about HR issues which can seem quite sanctimonious. But for every painfully worded article about the joys of diversity training there are several useful ones about current management trends and hot topics.

Speaking the same language as senior management is a stepping stone on the road to better understanding and communication, and that in turn will help improve the propsects of success for a BI project.

To go with Business Objects’ excellent Q4 results, Microstrategy also reported good figures, suggesting that the BI industry is in generally good shape. Revenue was USD 92.6M, up 20% over last year. Just USD 36.6M of this was license revenue, but this was 17% up on last year.

There was very healthy USD 32M operating margin, which means an operating margin of 34%. Other measures were also healthy e.g. days sales outstanding of just 54, and cash flow from operations of USD 26M. Admittedly this is down a little as expenses have risen by 22% year over year, but all the same this is a healthy business.

These results are all the more significant because Microstrategy has been in rather a flat phase for some time, with licence growth almost flat since early 2005. This perky set of results will be all the more welcome for its staff and shareholders given this background.

Business Objects delivered a very solid Q4, with revenue of USD 371M up 22% from a year previously. The good news is that the increase was mainly due to license revenue, at USD 180M up 16%. The operating margin of 23.6% was the best the company has ever achieved.

The only small cloud on the horizon was that the core BI business was actually in decline in license terms. The EIM revenue was USD 23M (well done to the First Logic boys and girls), USD 30M in enterprise perfromance management, and USD 127M (down 4% year over year) in the core BI products. This apparently paradoxical result is in line with my long-standing thesis about the saturation of the BI tools market in enterprises.

There were 13 deals in excess of USD 1M (up from nine last quarter), and overall in 2006 there were 35 deals of this size, which is actually down form 46 last year. Overall growth in Q4 was geographically well spread, with Europe up 25%, Asia Pacific 26% and the Americas 19%. The results reflect some wise acqusitions, since without the EIM/First Logic revenue, and the EPM revenue (based around the acquired SRC software and to a lesser exent the ALG acqusition) things would not look so rosy. Still, this vindicates the strategy of trying to move up the food chain in BI beyond core reporting, so credit where credit is due.

FAST is the latest enterprise search company to dip its toe in the water of business intelligence, following Autonomy’s recent announcements. In the case of FAST, which is arguably the leader in enterprise search (and must surely be the leading Norwegian software company), they have done so through acquisition. They bought Corporate Radar, a small BI vendor who had some quite clever reporting technology (based around the Microsoft platform) that was quite flexible, and browser-based. On one project that I encountered at Kalido in the US, it was particularly good at building specialist financial reports e.g. gross margin “waterfall” analysis.

What is less clear to me is how “FAST Radar” as it is now known, really integrates with the FAST search engine. Superficially it is appealing to have “search” applied to BI, after all, if Google can scan the whole internet in seconds, why can I never find my monthly sales figures? However the problem in dealing with structured data is the ambiguity of metadata within corporate organisations (”which sales figures do you mean, exactly”), a problem that search technologies, clever though they are, barely scratch the surface of. Putting a very efficient index on a keyword is great for text searching, but it is less obvious to me how useful this would be in resolving ambiguous or inconsistent metadata. Hence I wonder whether the “integration” of these technologies goes much more than skin deep.

If anyone out there has practical experience of a project that uses one of these search engines combined with a BI tool or data warehouse, then please make a comment on this blog, as I am sure that your experiences will be of considerable interest to others.

HP continues with its plans for the business intelligence space with an announcement of in-house data warehouse technology:

http://www.computerworld.com:80/action/article.do?command=viewArticleBasic&articleId=9008218&intsrc=news_ts_head

with a new business unit. The offering with be based around HP’s attempt at a “data warehouse appliance”, called Neoview. This is a competitor to Teradata and Netezza, but at this stage it is hard to tell how functional this is, since it is unclear that there are any deployed customers other than HP itself.

The timing of this announcement is curious given HP’s acquisition of data warehouse consultancy Knightsbridge. Certainly data warehousing is a big market and Teradata is a tempting target - after all, most of the really big data warehouse deployments in retail, telco and retail banking use Teradata. There are lots and lots of juicy services to be provided in implementing an “appliance”, which in fact is no such thing. An appliance implies something that you just plug in, whereas data warehouse appliances are just a fast piece of hardware and a proprietary database, still requiring all the usual integration efforts, but with the added twist of non-standard database technology. Certainly plenty of business for consultants there.

However HP’s home-grown offering will not sit well with its newly acquired Knightsbridge consulting services, who made their reputation through a quite fiercely vendor-independent culture which always prided itself in choosing the best solution for the customer. People trust independent consultants to give them objective advice, since they are not (or at least they hope they are not) tied to particular vendor offerings. Presumably HP’s consultants will be pushing HP’s data warehouse solution in preference to alternatives, and so can hardly be trusted as impartial observers of the market. An analogy would be with IBM consultants, who while they may work with non-IBM software are clearly going to push IBM’s offerings given half a chance.

If you were a truly independent consultant how would you react to a brand new data warehouse appliance with a track record only of one deployment, and that in the vendor itself? Would you immediately be pushing that as your preferred solution, or would you be counseling caution, urging customers to wait and see how the new tool settles down in the market and how early customers get on with it? If you are a Knightsbridge consultant now working for HP, what would your advice be? Would it be any different to the advice you’d have offered in December 2006 before you became part of HP?

This kind of conflict of interest is what makes thing difficult for customers when choosing consultants. It is hard to find ones who are truly independent. Of course consultants always have their own agenda, but usually this is about maximising billable hours. If they are tied to a particular solution then that is fine if you are already committed to that solution, but you will need to look elsewhere for objective advice about it.