How to Reduce Your BI Platform Costs

Which is the most cost-effective business intelligence (BI) platform of them all?

Gartner Inc. proposed to answer that question in the 2011 edition of its “BI Platform Users Survey,” in which it asked just over 1,200 customers to assess the cost of ownership of their business intelligence investments.

It’s an intriguing project, and it serves up several provocative conclusions.

The Gartner study confirms what many industry-watchers have long suspected: shops are increasingly opting for lower-cost “good-enough” tools in place of pricier or more complex best-of-breed or suite offerings. The chief beneficiaries of this trend include not just free and/or open source software (FOSS) vendors, but lower-cost, closed-source, software-as-a-service (SaaS) players and even commercial, off-the-shelf giants like Microsoft Corp., too.

The trend is to tap “low license price alternatives” to “augment or replace highly-priced and often incumbent platforms,” writes analyst Rita Sallam in Gartner’s “BI Platforms Survey 2011: Customers Rate Their BI Platform Vendor Cost of Ownership.” On the other hand, Sallam continues, license costs comprise just a fraction of BI cost of ownership; so, for that matter, do implementation fees.

Shops tend to earmark considerably more for administrative costs, which account for almost three-quarters of overall BI cost of ownership.

For this reason, Sallam argues, chipping away at license costs doesn’t “always translate into equally low BI platform ownership costs.” If you want to take a big chunk out of your overall BI program costs, she counsels, “look beyond license[s] to implementation and in particular to administration costs for efficiencies.”

(What do Sallam and Gartner mean by “administration costs”? As it happens, they’re talking about a synthetic value: i.e., the sum of customer-reported head-count totals multiplied by a Gartner-determined average annual salary.)

Chipping Away

This isn’t to say that shops should give up on reducing licensing costs.

According to Gartner’s data, in fact, there’s significant variation in license prices from vendor to vendor. Not so for implementation costs, which are surprisingly uniform regardless of vendor, at least among the big BI suite players -- i.e., IBM Corp., MicroStrategy Inc., Oracle Corp., SAP AG, and SAS Institute Inc.

Some customers will have more wiggle room than others.

Consider SAP BusinessObjects, which Gartner lists as the costliest overall BI platform. This is mostly thanks to its higher-than-average administrative costs, which outstrip those of IBM, MicroStrategy, Oracle, SAP, and SAS. Its license prices, on the other hand, are significantly less costly than are those of most of its competitors -- with the exception of Oracle, which (in point of fact) boasts the lowest admin costs and license prices of any of the big players. Because SAP already undercuts its competitors on a license-price basis, it has less incentive – or less flexibility – to respond to hard software bargaining.

This isn’t the case for every vendor, however.

For example, the combined IT and business administration costs of the second costliest BI offering -- viz., IBM Cognos 8 -- are slightly higher than are those of Gartner’s No. 3 costliest offering (SAS Institute Inc.), which are in turn slightly higher than those of the No. 5 costliest solution, SAP NetWeaver BW.

Considered as a percentage of overall administration costs, these variations are miniscule, however. On the other hand, there’s considerably more variation in license prices: Cognos 8, MicroStrategy, and SAS license prices, for example, cost almost $100,000 more than Oracle or SAP BusinessObjects licenses, according to Gartner’s data. To put it into perspective, that’s a premium of close to 25 percent. In the cases of Cognos 8, MicroStrategy, and SAS BI, it makes more sense for a customer -- given the out-sized licensing costs of both products -- to continue to push for more favorable licensing terms.

This isn’t to downplay the importance of trimming administrative costs, which -- as Sallam stresses -- account for the overwhelming majority of BI spending. This is particularly the case for Microsoft BI, which Gartner lists as the costliest platform to administer. A Microsoft BI shop’s single best cost-cutting strategy is to chip away at its IT and business administration expenses -- chiefly because Microsoft’s license prices and implementation costs are already extremely low.

At the same time, shops shouldn’t overlook the necessity of hard-bargaining and savvy negotiating, either.