SAP vs. Oracle in the BI Space: the Line of Business Advantage

IDC  just released its latest compilation of rankings in the rancorous business intelligence market, and while the taxonomy is a little confusing, and broad enough for both Oracle and SAP to claim market dominance, there is one hand’s down winner whose mark on the industry can be seen across the breadth of the IDC data: the line of business buyer. And with the LOB buyer in irrefutable ascendency, it’s a lot easier to see behind the data to the trends that will define the BI market of the next five years.

Overall, the IDC report gives the total market share prize to Oracle, which sits on top of an end-to-end solution set that spans the gamut from data warehouse to performance management and tools. This is a space that  Oracle has dominated for the full three years of data in the IDC report, and, arguably for a number of years prior as well. While SAP’s growth in overall BI has been a point faster in the last two years than Oracle, this growth hasn’t been enough to make a significant dent in Oracle’s top billing.

But if you move to the next level in IDC’s report, focusing specifically on business analytics, SAP suddenly takes the lead, and not because of its Business Objects acquisition (which mostly impacted the BI tool arena, to use IDC’s taxonomy.) Rather, through a combination of internal growth and some smaller acquisitions like Outlooksoft and Pilot, SAP has managed to keep its analytics business growing faster than the market and faster than rival Oracle, thus maintaining its #1 position above Oracle for the three years of data in the IDC report.

Independent of the rivalry between these two vendors is a trend that speaks to the growth rates in analytics that both companies have seen (and that has apparently favored SAP more) and their relevance for the future of this fast-growing market segment. The bottom line with business analytics is that they typically appeal to the line of business user, and this LOB user is also their primary advocate and buyer. This is a significant departure from both the BI tools and data warehouse side of the market, which have always been more the purview of the IT department, which then parceled out data and reports to the line of business in a now infamous cycle characterized by delays on the part of IT and frustration on the part of the line of business.

Importantly, while the IT side has been relatively devastated by the recession — big ticket items like data warehouses are a lot harder to justify in the current economic climate — the line of business has been gobbling up analytics at a rate that is faster than overall IT growth as reported by IDC and others. (Whatever overall IT growth rates really mean.)

This gives us some important insight into the BI front in the SAP vs. Oracle war. Oracle, which has made one-stop-shopping its M&A mantra, has shown that the strategy works in the aggregate very well: by selling one of everything that IDC categorizes under the business intelligence rubric, Oracle has the overall market share leadership to justify its overall strategy.

Meanwhile, SAP has the data to prove that its overall strategy of focusing on the LOB user, also known as the business user in SAP’s parlance, is paying off, in this case with slightly faster growth rates than its one-of-everything rival and market dominance in the category most directly affected by LOB buying.

Where do these two strategies lead their respective vendors in the coming months? It’s important to remember that the IDC data is about a complicated year, which started out as one of the best sales opportunities for both Oracle and SAP in recent memory and ended in the worst economic downturn in recent memory. Which makes these 2008 data a little skewed towards the positive aspects of 2008, and skewed away from the crisis that the industry found itself up against as the year wound down.

That means that, looking forward into the rest of this year and on to the next, the big question is whether the one-of-everything strategy or the business user strategy will carry their respective proponents into next year’s #1 spot in the IDC sweepstakes. I think, as things stand now, the big-ticket sales that Oracle needs in order to make its 2009 look like 2008 are going to hard to come by: big deals, driven by IT, that acquire the breadth of technology that Oracle has to offer, are hard to close and will continue to be hard to close for some time. This will make it hard for Oracle to keep that lead, and while a couple big deals can really swing the pendulum, the overall spot in BI will be harder to maintain, and I would expect overall growth for all vendors in that category to decline.

For SAP, the focus on the business user will continue to provide the kind of growth that it has enjoyed in that segment as these buyers continue to obtain budgetary approval for highly focused, well-verticalized analytics that can have a quick, measurable ROI. Because these are much smaller deals, SAP will need to keep the pipeline very active, and will have to make volume, not size, the measure of success. Oracle can play here too, and its Siebel analytics can and do take on SAP in certain market segments. But more important than product breadth is sales focus, and Oracle will need to move its field away from one-of-everything and emphasize LOB sales in order to combat SAP’s success in this regard.

This battleground for customer spend — big ticket, IT focused vs. smaller volume sales to the LOB — will continue to be a major metric of success as we (hopefully) dig through the recession. Right now, when it comes to BI, I think SAP has the lead in product to sell to the LOB, and Oracle in product to sell to IT, and the IDC numbers show the results. Oracle could definitely catch up: there’s still a lot of LOB analytics companies to buy, and it wouldn’t take more than a handful to push Oracle’s numbers back over the top. Similarly, SAP is starting to push its data warehouse killer, based on an in-memory database, and will one day soon make this a strategic threat to Oracle’s one-of-everything strategy.

With both of these strategic next steps very much a possibility between now and next year’s IDC report, it’s safe to say that the current report is hardly the last word on Oracle vs. SAP in the BI space. Far from it.

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Industry Analyst, Consultant and author, former programmer, systems analyst with 25 years experience. Spent three years in Europe as an industry analyst and as Correspondent for Information Week and other industry publications. Regularly consults with leading public and private enterprise software, database, and infrastructure companies. An award-winning columnist for leading IT and business magazines, Josh is widely quoted in the trade and business press and he blogs at Enterprise Matters.