Companies get SaaS-y with business intelligence

Written on:January 25, 2012
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In what is probably not a shocker, new research shows that more companies are turning to SaaS-based business intelligence over traditional on-premises BI.

Business intelligence, or analytics software from such companies as BusinessObjects, MicroStrategy or Oracle  (which bought Hyperion for this purpose)  helps companies make sense of their data — to visualize what’s happening with sales or marketing pushes, for example, and to make sales forecasts. But now those legacy players, which are all adding their own software-as-a-service (SaaS) capabilities, face new SaaS-oriented rivals like Birst,  Jaspersoft and Cloud9Analytics. And, Google has gotten into the act with Google Analytics.

One third of 1,364 IT managers surveyed by Gartner last quarter, said they plan to use some SaaS-based BI soon. Specifically, 27 percent of respondents said they already use or plan to use cloud- or SaaS-based BI options in addition to their existing core in-house BI applications for some workloads in the next year. Another 17 percent said they had already replaced or plan to replace their current BI solutions with SaaS.

That means a lot of potential upside for the aforementioned new-look SaaS providers (although it should be noted that Birst went from a SaaS-only model to offering both SaaS and on-premises options.) Still, the momentum for SaaS is strong. Valuations of SaaS-oriented software companies are off the charts compared to their traditionalist rivals more rooted in the on-premise software world.

Gartner said customers see too much value in the SaaS model to resist. In a statement, Gartner Research Director James Richardson said:

Business users are often frustrated by the deployment cycles, costs, complicated upgrade processes and IT infrastructures demanded by on-premises BI solutions. SaaS- and cloud-based BI is perceived as offering a quicker, potentially lower-cost and easier-to-deploy alternative, though this has yet to be proven.

He also injected a note of caution, however, saying the market “remains confused about what cloud/SaaS BI and analytics are and what they can deliver.”

It’s interesting that Gartner did not sign onto the usual operating expense versus capital expense rationale as a SaaS motivator. The usual spiel used to justify a SaaS move is that software subscriptions can be expensed and do not need to go on the capital expenditure (capex) budget whereas big capex purchases need approval from a high-ranking executive.

“Buyers often think that SaaS is cheaper, but the reality is that this is unproven,” Gartner said.  Its cost models rather show that SaaS can be cheaper over the first five years but not thereafter. Instead, long-term savings from SaaS lie in reduced IT support costs and other factors, Gartner said.

Still, as long as there are savings from SaaS, even if they come from reduced personnel costs, it’s likely corporate IT dollars will continue to flow to this model.

Cloud photo courtesy of Flickr user karindalziel

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