The Impact of Microsoft on the Enterprise Business Intelligence Market

By Colin White - Colin is the founder and president of BI Research.

Although Excel is still the No. 1 business intelligence (BI) tool preferred by business users, Microsoft is not always viewed as a leading business intelligence player in enterprise computing. This perception enables Microsoft’s competitors to quickly dismiss its business intelligence products as only suitable for small and medium businesses (SMBs) and departmental computing. The new release of SQL Server, its ongoing working relationship with SAP, and products like the recently announced Maestro analytics tool could, however, change this perspective.

Although the Windows platform is still Microsoft’s bread and butter, the company has a wide range of products for both business intelligence and business integration. It’s an interesting exercise to piece these various products together to get a feel for what Microsoft has to offer, and this is the objective of this month’s newsletter.

The pieces of the IT software technology stack we are interested in can be broken down into three main components: application development and integration, business intelligence and data warehousing, and knowledge management.

The cornerstone of Microsoft’s application development and integration platform is of course the Windows operating system. Key developments here are support for 64-bit processors (which will boost performance), and the new version of the operating system known as Longhorn. The press has been closely tracking Longhorn for some time, and so I will not go into details here. Suffice to say, like many new Window’s releases, Longhorn’s ship date keeps moving out. The need to improve Window’s security seems to be a major factor in the delay.

Visual Studio is Microsoft’s centerpiece for application development, and as you will see when I talk about SQL Server 2005, it is now also the main development tool for both database and business intelligence application development. For business integration, the key product is Microsoft BizTalk server, which was upgraded last year. This product can be integrated with SQL Server to track BizTalk applications and processes, and produce business performance management dashboards. These dashboards are developed using Analysis Services and Excel.

In the business integration area, it is important to note Microsoft’s work with SAP on the Mendocino project. The product will, to quote the press release, enable “information workers to utilize extended application menus and select process options and information in the SAP-specific smart panel, synchronize information between Microsoft Exchange Server and SAP, retrieve SAP information in Microsoft Excel and submit data via Microsoft Office InfoPath forms.” This project, coupled with the joint Microsoft/SAP Maestro business intelligence project, which I will discuss in a moment, clearly shows that SAP and Microsoft are working together to provide solutions that can compete effectively against vendors such as Oracle.

For data warehousing and business intelligence, the product we need to look at is SQL Server. It’s amazing to think it’s been five years since Microsoft released a new version of SQL Server, and its competitors have been quick to point this out. It is only fair to note, however, that some important features have been added to the product during this period; two important ones being Notification Services and Reporting Services.

SQL Server 2005 was due to be shipped mid-year, but this has now been delayed until the end of 2005. If Microsoft doesn’t meet this date, then I guess the product will have to be renamed SQL Server 2006! The company will deliver a third beta release of SQL Server 2005 during the summer. One important feature in this beta will be an interactive report builder. This feature is based on technology acquired from ActiveViews. The report builder is designed for business users, and offers a much easier interface than Reporting Services, which uses a Visual Studio paradigm for report development.

The Microsoft website contains extensive information about SQL Server 2005 and I won’t go into a detailed discussion about its new capabilities here. In summary, besides database technology enhancements (like database mirroring, on-line restore, fast recovery, on-line indexing and snapshot isolation) that make the product more competitive against IBM DB2 and Oracle, the important new features to note are:

- An integrated tool for database administration (SQL Server Management Studio) and development—supports SQL, XML, MDX and XML/A.
- Native XML data and XQuery support.
- Notification Services—enables notifications (about database or webpage changes, for example) to be sent SMS, e-mail, instant messaging and .NET subscribers.
- SQL Service Broker for sending/receiving messages from a database queue.
- A completely rewritten ETL tool. The old DTS name has gone, and this feature is now called Integration Services.
- An integrated tool for business intelligent development (Business Intelligence Studio)—supports Integration Services, Analysis Services and Reporting Services
- Analysis Services improvements—new data mining algorithms, MDX stored procedures, served-based analytics and calculations, KPI builder, parallel processing, unified data model for multi-dimensional design, right-time business intelligence, proactive caching, etc.
- Improved integration with Microsoft Office and SharePoint

The large number of features coupled with their tight integration into the overall Microsoft environment demonstrates why this new release has taken so long to come to the market.

Just as I was completing this article, Microsoft and SAP jointly announced a new business intelligence product code named Maestro. Information about this product is sketchy, but it appears to be a much-improved version of Microsoft’s Business Scorecard Solutions Accelerator, which currently is free. Maestro is a server-based business performance management scorecard application. It helps organizations build, manage and use scorecards and key performance indicators (KPIs). It combines this functionality with reports, charting, graphs and analysis tools as access to unstructured data. One key aspect of the product is its ability to monitor the business performance of back-end systems using ODBC, web services or an SAP .NET connector. The product provides APIs that enable their capabilities to be accessed and enhanced by ISVs and system integrators. Panaroma Software has already announced its intent to support Maestro. This product is yet another example of the blossoming relationship between Microsoft and SAP.

The last piece in the product puzzle is knowledge management. One of the main Microsoft offerings here is the SharePoint Portal. This portal comes in two flavors: Windows SharePoint Services (WSS) and the SharePoint Server (SPS). WSS is integrated and shipped with Windows Server 2003 and Office. It is intended as a collaboration and information sharing tool for workgroups and project teams. SPS, on the other hand, is used for managing multiple WSS workgroups, and adds features like personalization, search, content management and application integration. In its first release, SPS had limited scalability, but the new release shipped last year moved the architecture onto a SQL Server footing, and this has improved scalability.

There is no question that SharePoint is gaining market share, and this can only accelerate as more firms move to Windows Server 2003, start using WSS, and find they need SPS to manage the environment. At the recent DCI portal conference in Phoenix, over two-thirds of the several hundred organizations in the audience indicated they were using, or intended to use, SharePoint. One reason was cost, but another key factor was the penetration of Microsoft Office in their organizations. The use of SharePoint technology in Microsoft’s Commerce Server and in its Axapta, Great Plains and Navision business solutions offerings will add to the momentum of SharePoint.

Many companies have added support for Microsoft SharePoint to their product solutions. One interesting company here is Captaris, whose Teamplate and Workflow products provide SharePoint users with the ability to build, deploy and trigger workflows from within the SharePoint environment.

One issue for Microsoft with SharePoint is they have a separate product (Content Management Server, or CMS) for web content management. Although there is some level of integration between CMS and SharePoint, the existence of the two overlapping products confuses the marketplace. There are indications from Microsoft that they intend to combine these two products.

So what does all this mean? The brief overview above clearly shows that with the shipment of SQL Server 2005, products like Maestro, and SQL Server’s tight integration into the overall Windows platform that Microsoft has a compelling offering, and is very eager to compete in the business intelligence space. There is no question that this integrated product set will be very attractive to the SMB marketplace. However, it is also of benefit to the enterprise marketplace, not only because of the importance of Office and Excel in these organizations, but also because companies are spending currently millions of dollars on business intelligence software that their IT staff find complex to install and integrate, and their LOB users find too difficult to use. The tight integration and price of Microsoft’s products are, therefore, attractive to these enterprises.

So far, the response from business intelligence vendors to Microsoft’s new offerings and announcements has either been muted or dismissive. The only vendors to react are database vendors like IBM and Oracle who have modified their pricing. For a server-based pricing model, for example, Oracle is now offering Oracle Standard Edition One for $4,995 per processor, while IBM is offering DB2 UDB Express for $3,899 per processor. The equivalent SQL Server 2005 Workgroup Edition is $3,899 per processor. (Note that these companies also offer per user pricing models.)

For business intelligence users, however, this server price comparison is not very useful, since these low-end product editions have limited or no business intelligence or data warehousing capabilities. When you take business intelligence into account the picture changes.

If I look at published list prices for a server-based pricing model, the cost of SQL Server 2005 Standard Edition is $6,000 per processor, while Enterprise Edition is $25,000 per processor. The Standard Edition comes with a certain amount of support for ETL, OLAP and reporting, while the Enterprise Edition has full BI/DW capabilities. If we compare this with the Oracle price list on their website, the cost per processor of adding Oracle business intelligence is $20,000, adding OLAP is $20,000 and adding data mining is $20,000. This combination also requires Oracle Enterprise Edition at $40,000 per processor. The total is $100,000 per processor, compared with $25,000 for SQL Server. Now of course, pricing models are complex and there are other ways of pricing these options, and you should check things out for yourself. Total cost of ownership and product functionality are also major factors. However, even given this rough comparison, you can see the cost benefits Microsoft has to offer.

It remains to be seen if the new Microsoft products can live up to expectations and whether they can increase their penetration into large enterprises. If not, SMBs represent 80 percent of the US GNP, and IDC estimates that these firms will spend $360 billion in IT in 2005. This is a large market potential for Microsoft, whose sales and marketing model fits very well into this space. Because of its potential, companies like IBM, Oracle and SAP are putting more focus on the SMB marketplace, but Microsoft will be difficult to dislodge. The challenge for Microsoft at present is not the competition, but getting products out of the door.