A Conversation With IDC’s Brian McDonough

b_mcdonough_m IDC is a global provider of market intelligence to IT professionals and business executives.  We recently had a conversation with IDC’s Brian McDonough, a Research Manager in IDC’s Analytics and Data Warehousing Software research service.  In this role, Brian is responsible for providing coverage of supply-side trends within the business analytics market as well as user demand for technologies related to the implementation of business analytics.

Q: As we come up to Q4, 2009, in a still tough economy, how has the Business Intelligence market growth fared for the year?

BM: The business analytics software market, comprised of performance management and analytic applications plus business intelligence and data warehouse tools, is expected to finish the year with low single digit growth. It fared better than most markets as IT project scopes shrank and organizations sought out smaller, targeted initiatives for process optimization, improved financial management and analysis and improved insight into their customer bases.

Q: What has surprised you about the Business Intelligence market this year?

BM: Business Intelligence remained a top priority for technology investment even with spending reduced across organizations.  This type of software has been widely available for decades but demand has not been met and improvements in functionality and the need to empower more decision makers continue to drive investment.  Despite the tough economy, a large number of dollars went towards Business Intelligence investments.  As new license sales decrease this year, we will see it reflected in maintenance streams in the coming year and beyond.  This will test the markets and the ability of Business Intelligence to outlast a prolonged downturn.

Q: What Business Intelligence sub-markets are poised for strong 2010’s?

BM: There are several points of intersection between markets that will provide opportunities for Business Intelligence.  These include the need to access and analyze unstructured information, analysis of business activities, events and processes, and incorporation of more collaborative capabilities to support group decision-making and knowledge capture.  Furthermore, outsourcing of processes that require analytic services be provided back to the customer, open source and software-as-a-service offerings are gaining more traction.

Q: What about the mid-market opportunity for Business Intelligence?

BM: With Business Intelligence tools becoming increasingly easier to use will we see the mid-market take off?  Who will be the mid-market buyer?  In theory, the mid-market should be adopting more Business Intelligence simply from lacking it for so long.  However, these companies often lack analytic competency or culture across the organization.  With mid-market offerings maturing, they are incorporating more services and guided analytics to provide improved context to business intelligence.  When this intelligence is relevant to the daily tasks of an employee in the mid-market and not require specialized skills, then the tools that deliver access to it will be adopted.  I think we will see departments in large organizations who have been underserved by their IT departments turn to offerings intended for the mid-market.

Q: What trend are you noticing in Business Intelligence for vertical markets? Specifically, what about Financial Services and Government Regulations?

BM: The financial services markets have been coming back.  They went into the recession first and are coming out first in terms of spending on Business Intelligence at least.  Plus they always had tremendously large IT budgets compared to other industries.  The government regulations are spurring compliance spending that trickles into Business Intelligence, especially in insurance and investment banking.  Government agencies are spending tax dollars on applications and analytics and represent a large opportunity for Business Intelligence vendors.

Q: There have been a number of acquisitions in the Business Intelligence space this year – how does that change the market?

BM: Consolidation continued and the top vendors faced increased competition among each other.  Each acquisition added competitive functionality. Advanced analytics, including predictive analytics, is a bright spot in the market and IBM recently announced its intention to acquire SPSS.  The largest vendor in this space is privately-held SAS.  This acquisition is going to make partnerships more important for the larger Business Intelligence vendors that have not developed or acquired their own advanced analytic tools.  Advanced analytics opens up tremendous opportunities for innovative solutions and without it; it will become increasingly difficult to compete in the Business Intelligence market.

Q: From an implementation point of view, in the end-users you’ve talked to, what are the most common benefits they’ve seen and most common mistakes they’ve made when implementing their Business Intelligence strategy?

BM: Data quality tends to be a top issue in every implementation.  The problems can lie in the source systems. Companies also tend to underestimate how long it takes to get consensus among stakeholders when trying to define the meaning of data and metrics.  For example, a sales department may consider a ‘sale’ to be a signed contract while marketing views it as a click on a marketing email and finance says its when the products been in the hands of the customer for 60 days.  Having a group play a prominent role in establishing data governance polices is one factor management can influence to ensure increased success when implementing a Business Intelligence solution.

There are other factors managers can influence to make sure an implementation is more successful as well.  The degree of training, not just on the tool but on the meaning of the data; design quality of the Business Intelligence solution must be strong to ensure rapid responses to change requests are met; non-executive involvement to champion the solution to colleagues is critical to improved adoption, and the presence of a performance management methodology such as Six Sigma, or even an in-house developed methodology, establishes a policy that everyone is accountable and therefore should pay attention to the KPI’s delivered through the Business Intelligence solution.

Q: What are your thoughts on Spotfire?

BM: Spotfire is a strong competitor in the Business Intelligence software market. The acquisition by TIBCO signaled the coming of Business Intelligence solutions that could analyze and optimize business processes by applying analytics to the event and activity data streaming through a business process management suite.  Business Intelligence tools have been traditionally used to analyze data coming from transactional processing software, such as ERP, but now new insights can be gained into the way organizations operate and execute strategy.

Bill Peterson
Spotfire Blogging Team