Business intelligence applications typically deal with data that is already stored, often in a depressing number of places i.e. a number greater than 1. Much BI data is of its nature not real-time e.g. looking at monthly averages or trends. However at the other end of the spectrum there are some applications that are truly real-time, and not just in the sense that a marketer puts the term in a brochure.

An interesting start-up in this area is StreamBase, which specialise in genuinely real-time applications, such as trading systems but also inventory monitoring and anti-fraud applications. StreamBase provides StreamSQL, which essentially extends SQL to a real-time environment, a run-time engine as well as a graphical developer environment that allows transformation logic to be written. For example you might have a need to compare the current stock price of an equity to a competitor, and take some action e.g.”buy” if the price hits some threshold related to the competitor. Such applications would occur in memory, but StreamSQL also provides in-memory hash tables and also an embedded database in case you want to persist data (temporarily or permanently, respectively). To continue the trading example, you might want to take an action based on the stock price relative to its average over the last month, for which you would need to store some data temporarily in order to carry out the calculation.

Set up in 2003 by database luminary Mike Stonebraker (who founded Ingres and Illustra) the company has now done two venture rounds, including a series B round led by premier league VC Accel. They have over 60 employees and 50 customers, though this includes pilot customers i.e. not all these are fully paying yet. Public customers include Goldman Sachs and Bridgewater, a leading hedge fund. The company is cagey about revenues but assures me that they are growing.

StreamBase plans to provide in its product roadmap easier integration of real-time and historical data i.e. more StreamSQL enhancements, continued performance enhancements and improved ease of programmability. Two OEM agreements are already in place.

Competition is mostly in-house coding, though there are some vertical point solutions (Progress software in trading) and there is potentially some overlap with EAI tools at some point. For example, StreamBase partner with Tibco Rendezvous but there is an offering of Tibco for event processing that could potentially compete. From a marketing viewpoint the relationship to EAI and middleware tools will need to be carefully stressed as these tools themselves develop. However the company has certainly picked an attractive niche to operate in, and its high quality VC backers and experienced management will make it a credible player.

In a surprise move HP has snapped up Knightsbridge in a move to bolster its technology services business.  Knightsbridge had carved out a strong reputation for handling large data warehouse and BI projects for US corporations, and had grown to over USD 100M in revenue.  It was up with IBM as one of the two leading data warehouse consulting organisations.  This in itself makes it clear why it was attractive to HP, who do not have anything like such a strong reputation in this area.  Knightsbridge was growing strongly in 2006, and the financial terms of the deal are not public, but one would assume HP paid a good price for such a good business.  This will no doubt provide a happy retirement for the Knightsbridge founders, but it is less clear as to how well the Knightsbridge culture, which was quite fiercely vendor-independent, will sit within a behemoth like HP, which has its own technology offerings.  It was revealing that Knightsbridge CEO Rod Walker had dismissed service company acquisitions in an interview just a year ago, and for reasons which sounded pretty sensible.   No doubt this will present an interesting spin challenge for the Knightsbridge PR staff, but perhaps they will have other things on their minds, such as dusting off resumes.

“If the cultures of the two companies are not a near-perfect match, people will leave, and services is a people business.”  I couldn’t have put it better myself Rod.

As regular readers of this blog are aware, I believe that one of the potential trends in business intelligence will be towards “on demand” offerings.  This model avoids the hassle of installation at your own site (with all the complexities of combinations of operating system, database and middleware software versions that implies).  Since it is usually is accompanied by a rental pricing model, this makes it easier to try out from the customer’s viewpoint, whilst from the vendor’s viewpoint this often avoids triggering the dreaded procurement review that bogs down so many sales cycles.  As well as new vendors entering the space, Business Objects has just made a tentative step in this direction by acquiring NSite, a small vendor essentiially providing complementary offerings to the salesforce.com offering. 

I  think that this purchase is less for the application that Nsite has than for the experience that it has in offering software as a service i.e. Business Objects is mostly buying a team of software engineers with relevant experience.  This is probably a good idea, since for all its sales and marketing clout, R&D has been a consistent weak spot for Business Objects over the years.  Judging from the press release it looks like Steve Lucas is behind the acquisition; Steve is a smart guy and understands the need for Business Objects to improve its offerings.

Informatica continues to broaden its offerings, in this case by acquisition.  Itemfield is a company selling software aimed at translating unstructured (or indeed structured) data into XML.  Its technical strength was smart algorithms that could deduce structure from samples of emails, Word documents etc.  It is fully built around SOA principles, allowing it to be embedded into other offerings fairly easily. 

Founded in 2000, the company had 50 or so employees, half of which were in Israel, where the R&D was based.  The company had achieved penetration into some good accounts including GE and American Airlines.  Its revenues are not public, but I believe that they were hoping for USD 10M sales in 2007.  Interestingly, their typical deal size of about USD 225k was higher than that of Informatica itself.  Informatica, which already had a partnership with Itemfield, has paid a quite full price for the company, USD 55M of cash meaning a price/sales ratio of 5.5 on projected future 2007 earnings.  A healthy result for the founders, and further demonstration that companies will pay a premium price for sufficiently differentiated technology.

I have wondered for some time why business intelligence has been so slow to come up with software as a service solutions.  Celequest has done so, and this week sees the launch of another, called LucidEra.  This company aims to offer a ciomplete BI suite including ETL, data quality, database schema, OLAP server and reporting.  Given that enterprises are prepared to trust their customer data to third parties e.g. salesforce.com, there is no reason I can see why they would not do the same with business intelligence. 

The advantages of a service offering is seem to me twofold,  First is the easier and more reliable deployment.  Many problems in software stem from environmental incompatibilities e.g. some weird combination of releases of Oracle and Tomcat and something else that cause obscure bugs which the vendor could never have tested for, and which are hard to reproduce.  This problem goes away with hosted solutions, where the web browser is just about the only software the client can screw around with.  Secondly, though this is a commercial rather than technical issue, the leasing that software as a service typically uses means an easier point of entry.  One mid-ranking customer can sign off on a few months of leasing in a way that they could not for a multi-hundred thousand dollar software purchase, which would end up in steering committees and a formal procurement process.  

Salesforce has shown what can be done with this approach if well executed.  It will be interesting to track the progress of LucidEra, Celequest and others that emerge into this space.

Small software companies sometimes struggle to get a clear message of their value proposition into the market.  It is certainly hard when you have some revolutionary product that is not quite like anything else, but this can also happen through one part of the company not knowing what the other is doing. 

This isn’t meant to pick on a particular company, but it is illustrative.  A small, recently founded British software company called Grid-tools recently put out a reasonably smart piece of stealth marketing.  They did a press release on Newswire quoting some figures about how much time and effort data quality problems were costing.  This was a good strategy - they don’t actually talk about the survey very much, but by leading in this way it looks less like a direct product plug and hints at potential return on investment. 

Unfortunately, their marketing department (and how big can this be in a start up estabished in 2004?) doesn’t seem quite joined up, since if you find their web site (which oddly is not directly referenced in the press release) you discover that they don’t sell data quality tools at all, but software to create and manage test data, and also archiving of data (”information lifecyle management”).  All fair enough, but why go to the trouble of a press release about data quality if you don’t sell a data quality product?

I have recently been looking at a number of start-up companies and have observed that they often have interesting technology but rarely manage to coherently describe what their value proposition is.  This seems particularly a British disease - software execs in the UK seem almost proud of their lack of marketing prowess, disdaining this as all a bit “American”.  While it is certainly good to have an emphasis on product engineering, you also need to be able to sell software, and that is hard if people don’t understand what you do or indeed if they have no really way of finding out that you exist.   

This is one area where  British software firms have a lot to learn from the Americans.  I recall looking at a software company once which had produced a beautifully written and quite convincing whitepaper about a “new” approach to business intelligence (essentially EII).  Although it was not really that new, the paper was well written, slightly controversial and seemed thorough - just the kind of thing that would make you want to find out more.  It was only after some digging that I discovered that they did not have one single live customer for this revolutionary approach (this was not a British company, in case you haven’t guessed).  I’m not suggesting that British software companies adopt any dubious marketing practices, but sometimes we need to stop hiding our light under a bushel.  Or at least manage to illuminate the right bushel. 

After a poor Q2 Microstrategy followed Business Objects in achieving a good Q3 set of results.  The critical measure of software revenue was up 8% this quarter though 1% down year over year, while overall revenue at just under USD 78M was up 18% year over year.  The company still has USD 52 million in cash, and its operations generated free cash flow of about USD 18M. 

Investors have responded well, as can be seen from the share price chart below.

This is further evidence of a quite good market sentiment particularly in the US.  However it must be remembered that software sales are actually down year over year, and the company has added 30% headcount since a year ago.  For a software company, you really want to see increases in software licence revenue, not just services. This seems to be increasingly a struggle for BI vendors, and not just Microstrategy.

Business Objects posted a strong quarter, rebounding from a weak Q2.  The key metric of software license revenue of USD 132M was up 10%, and 9% year over year.  There were nine deals over USD 1 million.  Operating margin is a healthy 17%.  Overall revenue was USD 311 million. 

About the only party pooper to be found in the figures is if you dig in to see that the licence revenue growth is mainly in enterprise performance management and enterprise information management, which are heavily influenced by acquisitions. The core business intelligence licences (the bulk of the business) actually shrank by 1% year over year. 

The Americas was the star area, up 27%, with Europe up 9% (just 3% if you strip out currency effects) and Asia Pacific 19%.  Someone I spoke to at Business Objects in the US this week said that the mood on the ground was very positive, with lots of hiring going on.

Business Objects has also been known for its strong sales and marketing, and this engine seems to be purring along well at preent.

Informatica is about the last pure play ETL/integration player left standing now that Ascential is part of IBM and even little Sunopsis has disappeared into Oracle’s maw.  Hence it is interesting to see their progress as they essentially try to buck the trend that says that data integration technology should best reside in the database.  Informatica has of course moved beyond just ETL into more general integration, and has real time capabilities now that bump it up against EAI vendors like Tibco and WebMethods as well as against other ETL offerings.

This quarter’s results were fairly healthy, with profits in particular doing very well at a net margin of 16%.  This was based on some cost cutting and good renewal rates since license revenues of USD 33.6 million was less than Wall Street expected, though this was still a healthy 19% increase over last year.  Maintenance revenue rose 25%.  The generally difficult market for enterprise software is revealed in the fact that just four deals of over USD 1 million took place compared to nine last quarter, and 27 deals were over USD 300k in size (compared to 33 last quarter). 

Still, overall Informatica can be pleased with these results, especially now that it seems to have got into the habit of making a profit, something it has historically struggled with (its five year average is a negative 11%). 

Kalido has now announced revised positioning targeted at selling solutions to business problems (and will soon announce a new major product release). The key elements are as follows. The existing enterprise data warehouse and master data management product offerings remain, but have been packaged with some new elements into solutions which are effectively different pricing/functionality mechanisms on the same core code base.

The main positioning change is the introduction of pre-built business models on top of the core technology to provide “solutions” in the areas of profitability management, specifically “customer profitability” and “product profitability”. This move is, in many ways, long overdue, as Kalido was frequently deployed in such applications but previously made no attempt to provide a pre-configured data model. Given that Kalido is very strong at version management, it is about the one data warehouse technology that can plausibly offer this without falling into the “analytic app” trap whereby a pre-built data model, once tailored, quickly becomes out of synch with new releases (as Informatica can testify after their ignominious withdrawal from this market a few years ago). In Kalido’s case its version management allows for endless tinkering with the data model while still being able to recreate previous model versions.

Kalido also announced two new packaging offerings targeted at performance management/business intelligence, one for data mart consolidation and one for a repository for corporate performance management (the latter will be particularly aimed at Cognos customers, with whom Kalido recently announced a partnership). Interestingly, these two offerings are available on a subscription basis as an alternative to traditional licensing. This is a good idea, since the industry in general is moving towards such pricing models, as evidenced by salesforce.com in particular. In these days of carefully scrutinised procurement of large software purchases, having something the customers can try and out rent rather than buy should ease sales cycles.

The recent positioning change doesn’t, however, ignore the IT audience – with solution sets geared toward “Enterprise Data Management” and “Master Data Management.” The enterprise data management category contains solutions that those familiar with Kalido will recognize as typical use cases – departmental solutions, enterprise data warehouse and networked data warehouse. The key product advance here is in scalability. Kalido was always able to handle large volumes of transaction data (one single customer instance had over a billion transactions) but there was an Achilles heel if there was a single very large master data dimension of many million of records. In B2B situations this doesn’t happen (how many products do you sell, or how many stores do you have – tens or hundreds of thousands only) but in B2C situations e.g. retail banking and Telco, it could be a problem given that you could well have 50 million customers. Kalido was comfortable up to about 10 million master data items or so in a single dimension, but struggled much beyond that, leaving a federated (now “networked”) approach as the only way forward. However in the new release some major re-engineering underneath the covers allows very large master data dimension in the 100 million range. This effectively removes the only real limitation on Kalido scalability; now you can just throw hardware at very large single instances, while Kalido’s unique ability to support a network of linked data warehouses continues to provide an effective way of deploying global data warehouses.

Technologically, Kalido’s master data management (MDM) product/solution is effectively unaffected by these announcements since it is a different code base, and a major release of this is due in January.

This new positioning targets Kalido more clearly as a business application, rather than a piece of infrastructure. This greater clarity is a result of its new CEO (Bill Hewitt), who has a strong marketing background, and should improve the market understanding of what Kalido is all about. Kalido always had differentiated technology and strong customer references (a 97% customer renewal rate testifies to that) but suffered from market positioning that switched too often and was fuzzy about the customer value proposition. This is an encouraging step in the right direction.