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The Economy Takes Its Toll

This past week, I learned that two BI startups—Dataupia and LucidEra—lost their funding and will soon fade from the limelight. In normal times, investors would have considered both companies good bets to achieve an IPO or major acquisition. Both had gained traction in the marketplace: Dataupia, a data warehouse appliance, had five customers and many prospects in a hot market, while LucidEra, a first mover in the BI software-as-a-service market, had a strong pipeline of customers.

These two companies brought new innovations the market, and it’s sad to see them go. I wonder how many other startups are teetering on the edge of extinction. A recent Gartner Group report claimed that big BI vendors were expanding at the expense of mid-market ones (and presumably small ones as well), suggesting that customers have been engaged in “stack-centric buying,” according to Gartner analyst Dan Sommer, as quoted in InformationWeek.

Given the current cost-cutting environment, it makes sense that customers would reduce BI expenditures by consolidating on a single platform (although this requires a significant capital outlay.) And many customers probably fear purchasing BI software from smaller vendors who may not outlast the downturn.

I’ve been asked several times in public forums about the state of innovation in the BI industry. Usually, the question stems from recent market consolidation and fears that big ERP/CRM vendors (i.e. Oracle, SAP, et. al.) will stifle BI innovation as they focus on integrating product lines and people and driving sales of newly minted mainstream software (i.e. BI tools and platforms.) Although ERP vendors may bureaucratize BI and lose talented people in the process, it appears that they may be our best chance of keeping innovation alive, until the economy makes a substantial recovery.

Posted by Wayne Eckerson on June 22, 2009


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