August 19, 2019

Business Intelligence Market Consolidation

Andrew Brust

1. Overview: A Spring for the Ages

There are some times in the usually predictable and stable life of the Business Intelligence (BI) world where you need to stop, catch your breath, and marvel at what just transpired in the industry. This is one such time, as we are in the aftermath of a 10-week period of mergers and acquisitions that has transformed the BI vendor landscape. We now need to take stock of, and analyze, what transpired, tease out historical parallels, and attempt to elucidate what this all means for the market going forward.

What took place from April through June, 2019 was the most significant BI market consolidation in more than a decade. Sure, market events like the emergence of Tableau and self-service BI in general were significant on their own. But these were nonetheless gradual and discrete developments, part of an evolving ecosystem that welcomes new vendors and new offerings from existing vendors, over periods of years. The recent consolidation contrasts markedly with such typical calm and orderly progression. With a slew of deals in a period of just 10 weeks, the market calculus has been transformed. To understand this better, we need to examine the deals.

- The race is on, in the white-hot areas of cloud, analytics, and AI. The recent BI market consolidation demonstrates this and it’s the reason even more mergers are likely to come.
- The bigger mergers beg questions around the parties’ compatibility, in terms of corporate culture, messaging, cloud orientation, and, of course, technology. Existing customers beware.
- The BI consolidation of 2007-2008 sucked oxygen out of the then-acquired platforms and created opportunities for new ones to emerge. That M&A round provides lessons for vendors and cautions for customers this time around
- The fierce loyalty of Tableau customers, based in no small part on the company’s independence and personality, is at risk, as those customers watch their hero company’s vaunted brand subjugated to a new parent.
- Microsoft stands to gain from the churn and uncertainty, as the company’s stability offers sanctuary from the market upheaval.
- Disruption-averse customers may wish to re-platform, migrating to vendors whose stability is more assured.
- AI is the next frontier, both for innovation and M&A activity. And BI platforms are in position to bring AI to the mainstream.

2. So, What Exactly Happened?

A massive wave of consolidation
Taken individually, each of the mergers has been significant for specific segments of the BI market. Taken as a whole, however, they have created new powerhouse vendors; new centers of gravity; hope and confusion among customers; and have made the entire tech industry, and the business world at large, sit up and take notice. Let’s recap what transpired, in chronological order.

April 4: Alteryx acquires ClearStory Data
In early April, Alteryx, a provider of a widely-used data pipeline and AI platform, acquired ClearStory Data, a provider of BI and analytics solutions for large, complex data on Apache Spark and other high-volume data platforms, for $20M. Alteryx is planning to use the acquired technology to enhance its data catalog’s smart data relationship matching, and its core platform’s data visualization, connectivity to Big Data and prowess with Apache Spark. The acquisition also gives Alteryx a physical presence in the Bay Area.

May 14: Sisense merges with Periscope Data
In mid-May, Sisense, a provider of a business user-oriented, end-to-end analytics platform, merged with Periscope Data, a provider of a business user-friendly and data scientist-focused predictive modeling and advanced analytics platform. Terms of the deal were not disclosed. The combined company is planning to merge the Periscope Data technology into the overall Sisense platform while also continuing to evolve and offer the Periscope platform as a standalone product.

June 6: Google announces intention to acquire Looker
In early June, Google, Alphabet’s widely known search, advertising, and cloud unit, announced an agreement to acquire Looker for $2.6B. Looker, which already had a fruitful partnership with Google Cloud, provides a platform for data modeling and BI, with a cloud-native bent, both in terms of its own platform and the data sources it connects to. The extent of Google’s own business analytics/BI offering had been the Google Data Studio product, a light dashboarding tool. Now it will now join Microsoft in the league of hyperscale cloud providers with strong BI capabilities.

June 10: Logi Analytics acquires ZoomData
Just a few days later in June, Logi Analytics, an embedded analytics and BI platform, announced it had acquired ZoomData, a data visualization and analytics platform geared towards fast analysis of vast quantities of data from streaming and Big Data sources. Terms of the deal were not disclosed. Logi Analytics, which focuses on selling to application development teams, is expected to leverage ZoomData’s connectivity to modern data sources, which leaves the data in-place rather than caching it. It will also take advantage of ZoomData’s partner network to extend its reach.

June 10: Salesforce announces acquisition of Tableau
Finally, on the same day in June, Salesforce, the CRM Software as a Service pioneer, announced its intention to acquire Tableau, arguably the most well-regarded and best-known vendor in the self-service analytics market segment, for a deal valued at $15.7B. Salesforce is expected to use the acquisition to further enable digital transformation initiatives for its customers, while also allowing Tableau to continue to operate as an independent entity.

3. And What Does This All Mean?

There is, of course, much more that we could say about each transaction, but the above provides a good thumbnail sketch of the M&A activity, and already provides a lot to digest regarding the consequences and significance of the deals. We analyze these ramifications across several dimensions below.

User reactions
For the smaller acquisitions, sentiment seems to be positive overall, with customers of acquired companies agreeing that the deals will provide organic growth through the combination of complementary technologies. Concerns around these smaller deals focus mostly on speed of execution and acceleration of technology investments in the combined platforms.

But the Google/Looker and Salesforce/Tableau deals involve acquisitions by two of the largest software companies of BI vendors that were quite significant in their own right. These deals have made many users of the acquired products anxious. While both Google and Salesforce are respected by their acquisition targets’ communities, we are seeing common concerns emerge.

Certainly, Salesforce itself stands to gain. The company has sought credibility in the BI arena for some time now with Einstein Analytics, including both its organic components and those gained through the BeyondCore acquisition. Adding Tableau’s technology to the platform will be a huge shot in the arm. Marketing technology (MarTech) is super-important to Salesforce and it is all about analytics. No excuses; Salesforce needs an A-list self-service BI platform, which is why they bought one, and paid handsomely.

But beyond the CRM/MarTech context, will Tableau maintain its market position and will Salesforce inherit its halo effect?  Before the Salesforce/Tableau deal was announced, many saw self-service paring down to a two-horse race, between Tableau and Microsoft. The deal doesn’t necessarily change the participants, but it does change the momentum.

Tableau may now lose ground as some uncertainty will arise around the company’s much vaunted independence. It’s not as if Power BI is thought of as coming from a small vendor, of course, but that fact was already baked in. Power BI customers were comfortable using a product from a mega-vendor. But Tableau customers may well feel uncomfortable coming under the Salesforce umbrella.

For Google, acquiring a BI player was more of a defensive move than it was for Salesforce. While Google shares some of the MarTech priorities Salesforce had and – who knows? – may have even bid for Tableau itself, its concern is more about a well-rounded cloud platform. Looker’s cloud orientation was a good cultural fit, and the company is young enough where Google can mold it to fit its brand, identity and platform.

Impact on acquiring and acquired companies
As history has shown us, integrating the culture of two distinct companies is always a challenge. In this particular case, big questions remain. While having Tableau on its platform gives Salesforce an immediate and sizeable win, in the longer term, the Google/Looker deal may have more efficacy. Looker as a product is still developing and can easily integrate with, and enhance, Google data/analytics products. Tableau has arguably reached a plateau, in terms of age, stage, and evolving capabilities. Conforming it to Salesforce’s platform – and to the cloud – requires overcoming much more inertia than conforming Looker to Google’s.

The smaller deals, meanwhile, have a relatively straightforward path to integration, given smaller companies with fewer customers, complementary technologies and lack of entrenched enterprise cultures posing potential roadblocks along the way.

The complexity in integrating Tableau into Salesforce’s cloud and stack, combined with Tableau customers’ discomfort at the very prospect of that integration, leaves a vacuum of sorts in the self-service BI market, and it’s one that Microsoft may fill. Microsoft customers already have very positive feelings around Power BI. Add in Tableau customers’ potential negative feelings and Power BI could really come into a lead position for hearts and minds.

Impact on remaining BI vendors – more consolidation on the way?
Perhaps even more interesting than the integration culture question is what this spate of acquisitions and mergers means for the remaining vendors in the BI marketplace.

We strongly believe the industry remains ripe for further consolidation and we would not be surprised to hear of more acquisitions or mergers this year. Major cloud players whose analytics platforms have underperformed – due to underinvestment, late start or lack of mindshare – should be looking aggressively at the remaining independent companies to up their game. Conversely, smaller independent vendors must identify potential suitors that can bolster their technology, market share, user base and mindshare in the face of this spring’s consolidation deluge. These players should act quickly; the field of dance partners is dwindling.

Two companies spring to mind almost immediately as interesting candidates for a marketplace move this year. On the potential acquiring side, we believe that Amazon Web Services is ripe for making an acquisition move and bolstering its fledgling QuickSight service. While Microsoft was the major cloud provider BI concern for AWS previously, Google and Salesforce are making their investments, and suddenly Amazon is the only major cloud provider without a strong BI play.

On the sell side, we believe ThoughtSpot to be a prime candidate for absorption into a bigger entity. Such a transaction would allow this company with such a strong technology core to avail itself of a larger company’s presence, salesforce and user base.

While the above provides just two examples, we believe that all companies in the BI marketplace today should be reevaluating their strategy, platforms and go-to-market plans in light of the consolidation and formidable competition from the major cloud providers. Even veteran enterprise BI vendors such as SAP, SAS, IBM, Oracle, MicroStrategy and Information Builders could benefit from simplification, rebranding and a well-placed acquisition or two.

Smaller independent companies in the marketplace, including Pyramid Analytics – or even companies that were part of this current wave of consolidation, like Alteryx or Sisense – may be planning to grow further through additional acquisitions or be acquired themselves in the next year or two.

Cloud vs. on-premises future
While it is clear that the Google/Looker and Salesforce/Tableau acquisitions are extremely focused on growing the cloud use case, the acquired companies have strong on-premises support and technology. Regardless, it’s unclear whether the acquiring companies will continue to invest in these scenarios.

But given the increased demand for hybrid solutions, and the acquired companies’ valuable expertise in on-prem implementations, it would suit the new parent companies to develop a convincing story on the subject and communicate it clearly to the market. In fact, the addition of on-premises DNA may have been important drivers in both deals.

While Looker is a very cloud-facing platform, its ability to run on-premises gives the company – and now Google – an appreciation for, and expertise in, the hybrid on-prem/public cloud reality that many enterprise customers are in.

There’s potential similar benefit for Salesforce, whose legendary branding with a circle and slash over the word “software” has made it a cloud-only company, as well. Given Tableau’s on-premises legacy and culture, Salesforce is acquiring on-prem BI bona fides, along with Tableau itself. Whether the two cultures and approaches can be blended, or if they’ll separate like oil and water, remains to be seen, however.

If Salesforce can effect an elegant mélange of its own platform with Tableau, then it might find itself in a stronger position against SAP and Oracle, which also focus on a combination of enterprise applications and analytics.

ML / AI vendors – the next frontier?
Given the significant emphasis of many current BI platforms on bolstering their Machine Learning & Artificial Intelligence capabilities, we anticipate the ML/AI space to be fertile ground for a next wave of acquisitions, mergers and partnerships.

As the space evolves, and platforms mature, we could see a set of small to medium company acquisitions by the big players. This would allow the bigger companies to further unify their platforms and provide one-stop shopping for companies’ machine learning needs.

Yes, the hyperscale cloud providers each offers Apache Spark platforms, proprietary platforms for training and deploying machine learning models, and callable Web services based on pre-trained models. But these services are rather disjoint, and aimed either at data scientists or at application developers, rather than both. More integration and higher-level interfaces are needed.

Automated machine learning (AutoML) can help here, as it draws together the model training/deployment platforms and the callable cloud Web services and can integrate into mainstream developer tools. See Gigaom’s market landscape report “AI Within Reach: AutoML Platforms for the Enterprise” for details. BI platforms, be they self-service products or enterprise BI stacks, meanwhile, can bring business analysts into the AI fold. See Gigaom’s Market Landscape reports “Self-Service BI Platforms: Zero to Insight, ASAP” and “Enterprise Business Intelligence: Industrial Strength Meets Modern Innovation” for deeper dives.

Although mergers could accelerate the cloud providers better integrate their ML platforms, each one has deep pride of ownership around its own AI/ML platform. This could be a blocker to potential deals, with the cloud providers feeling their ability to build outweighs the allure of doing a buy. That would leave continued opportunity for the AI pure plays, or companies like Cloudera, which is integrating AI, analytics, data warehousing and professional services, across private cloud and each of the major public ones.

Lessons from acquisitions past
No analysis of the 2019 acquisition wave would be complete without briefly considering the last BI consolidation “big bang,” back in the 2007-2008 timeframe. In that M&A wave, three major independent BI platforms in Hyperion, BusinessObjects and Cognos were absorbed into the BI stacks of Oracle, SAP and IBM, respectively. In addition, a smaller, but nonetheless important, deal the year before involved the acquisition of Boise, ID-based ProClarity by Microsoft. This deal put Redmond on a long, meandering – but ultimately successful – journey of building a self-service BI application layer atop its core enterprise BI platform.

One could persuasively argue that user perception of these acquisitions and the resulting slowdown in innovation was responsible for the emergence and flourishing of the self-service BI field and companies such as Tableau and Looker. The story has of course come full-circle, with these companies now being acquired themselves. Nevertheless, it would behoove the current class of acquiring companies to consider how these earlier moves were perceived by the market. These companies have only one chance to get the integration of cultures, salesforces and user communities right, and the lessons of the last decade’s deals should be heeded, not squandered.

What should customers do?
The acquired vendors’ customers have some tough strategic decisions to make in the next year regarding expanding or continuing use of their BI platforms. Once all of the acquisitions have closed, customers should look carefully at their erstwhile BI vendor’s degree of autonomy, rate of innovation, and for any encroachment on pricing and customer relationships by the new parent companies. If these are not preserved, migration to other platforms should be explored, and strict standardization should be reconsidered.

Customers who were already evaluating new analytics products may view this as an opportunity to make a switch they were already contemplating. That’s especially true for those working on the broader data platform of vendors – like Microsoft – whose BI product may already be under consideration.

BI platform-agnostic buyers who are fans of Google data services such as BigQuery should evaluate Looker to see if it can meet their needs. The potential for it to take full advantage of the capabilities of Google’s services is strong.

In general, now is a critical time to evaluate and assess whether the acquiring companies will be good stewards of the technologies and organizations they’re buying or whether it is time to do a strategic reset and look for alternative vendors. The various sections of this report provide guidance on the dimensions companies should consider as they try to absorb these changes and plan ahead for the next several years.

4. Conclusion

2019 has been a monumental year in the BI marketplace, with consolidation at a level we had not seen for over a decade. And there’s more to come as vendors in the BI space will be thinking hard about how to best position themselves for the AI and Cloud “arms race.” Making AI more accessible and more actionable – leaving behind the paradigm of it being merely experimental – will be a competitive advantage for any vendor that can truly do it and not just mention it in their marketing talking points.

Microsoft could do well here, and its AutoML efforts have already brought it – and Power BI – some momentum in that regard. But Redmond still has a long way to go. Google could do well too, and Looker may be a good vehicle. That’s especially the case given the collaboration between the two to make Google’s BigQuery ML accessible from Looker itself. Other vendors have some catching up to do but, with clean slates, have the potential to “leapfrog” the cloud giants.

Customers need to take a hard look at their BI vendor strategy. Is your vendor in a leadership position or is it a potential acquisition target/candidate for a merger?  If you’re relatively early in your analytics initiative, then shifts can be exciting, and your best bet is to stay flexible, see what change may be coming to your platform and take advantage of it. That flexibility includes the ability to use a product opportunistically, without forming hard dependencies on it, especially for products from smaller vendors whose platforms may be acquired and sunsetted, or who may exit the market altogether.

But what if you’re further along the maturity model, with mission-critical BI processes and outputs, and your vendor/platform is a candidate for disruption? If that’s the case for you and your organization, now may be an excellent time to reassess and possibly shift to a platform whose stability looks more assured. Power BI seems most anchored on the self-service side of the vendor landscape. Meanwhile, the enterprise platforms, while perhaps a bit staid and unexciting, also seem like sanctuaries from the M&A churn.

Ultimately, you have to weigh the relative merits of offense and defense in your analytics strategy. Right now, with so much consolidation going on, defense may have to win out.

Original Post

Latest News

More News