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Analysis: Microsoft’s Business Intelligence Power Grab

Analysts say PerformancePoint is a direct strike against the BI Powers-That-Be. The Powers-That-Be, on the other hand, aren’t sweating it. Or so they say.

• By Stephen Swoyer
• June 14, 2006

Unless you’ve been off siesta-ing in a data warehouse appliance, you probably know that Microsoft Corp. last week dropped a bombshell on the business intelligence (BI) industry. Redmond outlined an Office-focused BI and performance management (PM) strategy that—for the first time—catapults it squarely into competition with the big BI pure-play vendors.

Analysts say Microsoft’s BI powerplay is a Very Big Deal. Microsoft’s competitors agree—albeit obliquely. Office PerformancePoint 2007 Server has the potential to be disruptive, they concede—when it appears. But the BI Powers-That-Be say there’s still plenty of gas left in their cars—to paraphrase the boys from Steely Dan—and argue that PerformancePoint could be as much of a market opportunity as it is a competitive threat.

TDWI research and services director Wayne Eckerson says PerformancePoint might be Microsoft’s most ambitious BI deliverable to date. “This is a direct strike against Cognos, Hyperion, and Business Objects, who have been trying to move up the BI stack into analytic applications, the most promising of which are performance management and financial applications,” he comments. “Microsoft is applying the classic commodity business model to BI, forcing established players to offer more complex, premium products and services. But Microsoft is following them up the stack as quickly as they can stake out new ground.”

Mike Schiff, a principal with data warehousing consultancy MAS Strategies and a member of TDWI’s extended research collaborative, agrees. “[PerformancePoint is] certainly good for the user community, but it’s not clear it’s great for the BI specialists. It is clear that it will put pricing pressure [on the BI vendors], but the key question is, will it put functional pressure on them, too?”

The verdict is still out on that question, Schiff says, but if Microsoft delivers a PerformancePoint product that is both comparatively inexpensive and largely functional—with an essential reduplication of features for which Business Objects SA, Cognos Inc., and others charge a premium—the BI status quo will have been irrevocably altered.

That’s the big “If.” And it’s likely to remain a hugely hypothetical “If” for at least the next 12 months. In the interim, says TDWI’s Eckerson, it’s important not to write off the BI pure-plays. After all, providing enterprise-class software and services hasn’t traditionally been Microsoft’s forte, so “there is still some breathing room for the BI specialists,” Eckerson argues.

It’s a ball the BI Powers-That-Be are anxious to run with. For this reason, Leah MacMillan, vice-president of product marketing at Cognos, agrees that PerformancePoint might be potentially disruptive—at least in the SMB market—but argues that enterprise customers demand more from their ISVs than just inexpensive software.

“Customers really need to realize [that] it’s not the price of software that really adds to the total cost of ownership of a solution. There’s a lot of things that go into making software successful in a deployment, [such as] really good tools, a sound architecture, the ability to leverage existing investments that you have in place, and the ability to support all of the platforms [i.e., operating environments and databases] that you have in place,” comments MacMillan. “The cost of the software is just really one very small part of it … new customers, especially in the small and medium.”

That’s a point echoed by Phil Wilmington, CEO of performance management specialist OutlookSoft Corp. OutlookSoft has five years of experience catering to large enterprise customers, Wilmington points out, and the company’s clients include Global 2000 giants such as Cingular, Bank of America, and British Petroleum. Wilmington argues that Microsoft lacks the necessary domain expertise to enable sophisticated performance management—especially PM that also encompasses process management.

James Thomas, a veteran of the former Crystal Decisions Inc. who now heads up product marketing for Business Objects, says Microsoft’s PM push—much like its infamous Internet Explorer powerplay in the mid-1990s—isn’t an entirely selfless gambit. Fact is, Thomas argues, Microsoft has yoked PerformancePoint to a supporting stack of technologies—the 2007 Office System, SharePoint, SQL Server, and Windows Server, among others—that collectively comprise a highly homogeneous, and distinctly pricey, proposition.

“The difference between us and Microsoft is we want to sell you the software you use, whereas they have a hidden agenda. They want to sell you more Office and more SQL Server and more Windows,” comments Thomas. “In order to use something like PerformancePoint, you’re going to need SharePoint, SQL Server, Office 2007—all of those things put a pretty big burden on IT to support, and obviously you’re going to need services, too, because BI doesn’t just [work] out of the box.”

Business Objects, more than most other BI vendors, has something of a special relationship with Microsoft. The company’s Crystal Reports tool is still bundled with Visual Studio and SQL Server—even though Microsoft now markets its own largely competitive reporting solution, SQL Server Reporting Services. The upshot (in the past, anyway), was that Microsoft and Business Objects both tended to demur on the question of competition, and to some extent, that’s still the case. Speaking last month, for example, Alex Payne—senior product manager in Microsoft’s Office business applications group—stressed that Redmond has ongoing partnerships with Business Objects on several fronts.

“We’ve announced a few things with Business Objects over the past couple of years, including one [partnership] over [Crystal Reports in] Visual Studio. And Business Objects works with SharePoint quite well, too,” Payne pointed out.

Business Objects’ Thomas says there’s a kind of mutualism between his company and Microsoft: Redmond relies on Crystal to help drive sales of Visual Studio and SQL Server, even as Business Objects benefits from these bundling arrangements, too. “Our relationship with Microsoft remains largely unchanged. We continue to work very well with the Visual Studio team, specifically, and we have recently done some go to market activities with other groups and continue to get supported in other parts of the organization,” he indicates. “In general things like Office still have their own mandates, and our company still drives Office and SQL Server revenues in other areas.”

This doesn’t mean all is hunky-dory betwixt Microsoft and Business Objects—much less between Microsoft and any BI vendor, for that matter. Redmond has clearly set its sights on BI dominance. And it’s no longer shy about saying as much. “What I want to do is make sure the MS product offering is the strongest and most complete and integrated it can be,” Payne said. “[In the past] if there was this hole that people perceived Microsoft [as] having, they'd say to us, 'Yeah, you don’t have this, therefore I need to go look at Business Objects or Cognos.' I don’t want them to have that conversation.”