Open Source Business Intelligence In an Economic Down-Turn
Could the current economic climate affect the balance of power between the entrenched proprietary vendors and the new open source competitors? It seems logical…
Business Intelligence is interesting in that it provides different value both boom-times and down-turns. In boom-times companies are looking to maximize sales and growth by analyzing the results of marketing campaigns, weblogs, and demographics etc. In economic down-turns companies are looking to analyze things such as costs, margins, and profitability of channels in order to maintain profitability while sales decline.
BI therefore has differing values during various economic scenarios. The BI tools and technologies remain the same in all these scenarios, but there are differences. During booms the budgets can be considerable-to-extrordinary. During down-turns the budgets become severly constrained.
In previous economic cycles budgets have not been major differentiating factor amongst the BI vendors because the vendors have had, generally, similar pricing and business models. That is to say the entrenched BI vendors have presented the same pricing in all economic scenarios despite the economic differences. However these old-school (or `historically-comfortable` if you want a politically correct term) business models are as prone, if not more so, to economic down-turns as the markets that they serve. This is because it costs more to sell BI tools than it does to produce the technology. You can look at the quarterly reports of Cognos and Business Objects just before they were consumed and see that income from new licences was 35-40% of all income, that sales and marketing expenses was 35-40% of expenditure, whereas investment in product development was 15-25% of expenditure. These figures show that almost all the money a customer spends on BI products is spent by the vendor on marketing to, and selling to, the next round of customers.
What is different about today’s economic situation is that for many segments of the software market (for BI and also for CRM, ERP etc.) this is the first economic down-turn where substantial and viable open source and commercial open source offerings have been available.
Will the current economic climate provide a boost to these new offerings? We only have to wait…