by Frank Sparacino

Optimism for the year ahead is waning with the stock market pushing for a record fourth straight year of declines and since early March, a number of important and frankly, discouraging, data points for software companies. First, there are a handful of major software companies (including Lawson, Oracle, and Tibco) with non-calendar fiscal years and quarters (all of the above have a fiscal quarter ended February) that often provide a reasonable proxy for the broader software market ahead of the traditional calendar quarter (in this case, the March quarter).

While none of these three vendors is entirely focused on the business intelligence market, 1) significant shortfalls at Lawson and Tibco in the February quarter, 2) future guidance from all three that indicates essentially flat sequential revenue growth in the May quarter, historically a sequentially higher revenue quarter, and 3) and comments from all three indicating a significant drop-off in business during the crucial last weeks/days of the quarter because of geopolitical issues are hard to ignore.

Second, with the exception of financial management applications (Hyperion being the primary beneficiary) and in particular, budgeting/planning/forecasting, which is seasonally strong in the first half of the calendar year, feedback from our industry contacts indicates a challenging start to 2003 with fewer and reduced-in-size data warehousing and business intelligence projects underway. The most important and relevant data point for our universe will occur on April 2nd when Cognos releases fiscal fourth quarter and fiscal year (February) results. Another relevant data point for the business intelligence sector in early March were indications from privately-held SAS Institute, the largest business intelligence software vendor, that it grew 4% in 2002 and more importantly, 2003 was off to a good start with year to date sales at the end of February up 11% versus 2002.

Despite external market events, companies continue to innovate and given the significant R&D development efforts across our universe, we thought we would focus on a number of new product initiatives at Informatica and MicroStrategy.

Informatica

We recently met with Adam Wilson, head of Informatica PowerAnalyzer, and received an update on the next major release, PowerAnalyzer 4, available in early May. The product is a key growth driver for the company and serves as both the front-end to Informatica's suite of analytic applications as well as a standalone business intelligence platform. With respect to the latter, PowerAnalyzer's positioning (i.e. a single platform to address the various aspects of business intelligence) and capabilities (i.e. relational OLAP, aggregate aware, multi-pass SQL, etc…) resemble MicroStrategy.

Important enhancement with version 4 include 1) support for open source initiatives such as JBoss and Linux, 2) a significant increase in the number of languages supported, 3) open schema support (previously restricted to star and snowflake schema) due to customer demand to directly access operational data stores and transaction systems, 4) improved integration with Excel with live refresh capabilities from PowerAnalyzer into Excel and 5) real-time support leveraging its PowerCenterRT product (real-time integration), Java Messaging Services (JMS) feeds, and its relationship with application integration vendors such as webMethods.

We estimate PowerAnalyzer has between 50 and 100 customers with a number of large (>1K users) deployments including Motorola and several notable head-to-head wins versus the major and often incumbent query and reporting vendors at companies such as eBay (a Business Objects customer). Informatica cites several reasons for its early success in a highly competitive market including 1) frustration among existing business intelligence customers of having to manage multiple products from different vendors, including disparate technologies from a single vendor, 2) guided workflow analysis through its patent-pending Analytic Workflow technology, and 3) a pure Java-based Internet architecture with support for multiple platforms, Web services, and flexibility to be easily customized.

MicroStrategy

We attended the 2003 MicroStrategy Worldwide User Conference in early February in which the main theme was the "5 styles of business intelligence", defined as: 1) ad-hoc query and reporting, 2) statistical analysis and data mining, 3) information delivery and alerting, 4) cube analysis or multidimensional OLAP (MOLAP), and 5) enterprise reporting. This message is important because MicroStrategy, with the release of a new reporting engine ("Project Gutenberg") in the second half of 2003, will arguably be the only vendor to support the full spectrum of BI functionality. In addition, in contrast with its primary competitors (Business Objects and Cognos), MicroStrategy's delivers this technology via a single, internally developed common foundation (i.e. common metadata, security, administration, etc…) that was first delivered in 2001 with MicroStrategy 7.

Major recent releases include MicroStrategy 7i (version 7.2) with 1) OLAP Services, MOLAP or cube style analysis that competes directly with Cognos, and 2) Web Professional, a more powerful version of its Web Analyst product with full report design capabilities via a zero-footprint Web interface. In addition, Web Universal (version 7.3), which was released in November, provides the ability to run MicroStrategy on any processor, operating system, application server, and web server. MicroStrategy has historically been Microsoft-centric.

About the Author

Frank Sparacino (fs@fana.com) specializes in research and investment at First Analysis, an integrated, research-driven investment firm. His area of expertise is infrastructure software with a focus on business intelligence.