Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Happy Trails for Data Wranglers

By Zaineb Bokhari How does a company best utilize its own business data? Increasingly, corporate IT departments are turning to business-intelligence (BI) software to help them. The market for these offerings is growing at a solid pace. Standard & Poor's expects 2005 corporate spending on BI software to outpace the low- to mid-single-digit growth that we see for enterprise software overall.

We see BI software vendors with broad product sets like Business Objects (BOBJ

; S&P investment recommendation 3 STARS, hold; recent price, $28), Cognos (COGN

; 5 STARS, strong buy; $45) and Hyperion Solutions (HYSL

; 4 STARS, buy; $50) as the primary beneficiaries of this anticipated above-average spending growth. We also see niche BI vendors such as Ascential Software (ASCL

; 3 STARS; $16) and Informatica (INFA

; 3 STARS; $8) benefiting -- but to a lesser extent, given their narrower product focus.

Business-intelligence software is designed to enable companies to efficiently and effectively use their own business data. In a typical organization, this data is stored on a variety of systems and databases from several vendors. In its simplest form, BI software includes utilities designed to aggregate and warehouse data from these disparate sources and systems into a single store of information.

PROLIFERATING DISPARITY. More sophisticated products include analytical and performance-measurement features that convert this aggregated data into a coherent view of business information. This can be done through reports or visual presentations, such as performance scorecards and dashboards. Presented in these ways, managers can make more informed business decisions and continuously measure corporate performance against corporate strategy.

Ironically, the current need for BI software is largely the result of enormous corporate spending over the past two decades on large-scale deployments of complex software products that were intended to automate business functions -- and thus, help companies reduce overheads. Examples include customer relationship management (CRM), enterprise resource planning (ERP), and supply-chain management (SCM) software.

Another contributing factor to increased demand for BI offerings, in our view, has been the rapid growth of distributed systems based on the client-server model over the mainframe. While designed to be a cheaper alternative to mainframes, the proliferation of distributed systems and networks resulted in the creation of disparate stores and sources of data and, as a result, a fragmented view of business conditions.

ON THE FRONT BURNER. Our favorable outlook for BI software is supported by our view that vendors whose technology is designed to extract value from existing IT investments will benefit disproportionately during the current period of moderate economic growth and still-cautious, albeit increasingly optimistic, spending levels. More recently, we believe regulatory changes like Sarbanes-Oxley section 404, which requires stricter internal controls over financial reporting, have also spurred demand.

While the initial deadlines have passed, we think that SOX 404 will provide an ongoing tailwind for BI software providers. In particular, we believe the SOX 404 requirement that senior executives certify their financial results has helped raise the profile of BI software. This was evident in a CIO survey, conducted by Gartner (IT) (and cited in a January, 2005, white paper from Knightsbridge Solutions), which indicated that in 2004, the combination of BI and data warehousing was a top-10 priority for CIOs for the first time.

We think BI software's move to tech users' front burner was evident in the strong December-quarter results posted by key industry players. The size and number of larger deals continued to grow, and double-digit year-to-year revenue growth and margin improvements were widely seen.

PURE-PLAY ADVANTAGE. Our 5 STARS opinion on Cognos is partly based on our expectation that the outfit will report strong results for its February fiscal fourth quarter. We also see Cognos making significant progress in signing enterprise-standardization deals on the strength of its ReportNet Web-based enterprise reporting product and its newly released Cognos Enterprise Planning series for planning and budgeting.

While we see solid growth for the BI vendors that we cover, we also believe that attractive revenue growth and margins will increasingly draw competition from providers of CRM, database, and ERP software such as Siebel Systems (SEBL

; 3 STARS; $9), Oracle (ORCL

; 4 STARS; $13), and SAP (SAP

; 4 STARS; $41), as well as Microsoft (MSFT; 5 STARS; $25). Since we believe the need for BI offerings resulted from the proliferation of these large transaction-based software products, it's natural that large vendors like these will continue to build or possibly buy add-on BI features for their own products. In this way, they may retain a larger share of their customers' IT wallets and lower their products' cost of ownership.

Despite the potential for competition to heat up, we believe that the pure-play BI vendors will be able to compete on the merits of their own products, which have been enhanced through internal development and supplemented by acquisitions. We also believe that the pure-play vendors have an advantage because their products are designed to be vendor-agnostic, rather than specifically designed to work with, say, an Oracle database. We think this approach is more in keeping with the needs of corporations today.

PUSH TO ACQUIRE. Finally, we think the current trend towards enterprise standardization (i.e., the use of a single vendor's products throughout the organization) will make competitive replacements more difficult over time. This trend is encouraged by the vendors as it means increasingly larger-size deals and favored by customers because it ensures an integrated view of information across an enterprise, thus increasing the efficacy of business decisions.

Presently, we see the BI software industry as fairly overcrowded and overcapitalized. We would expect the market leaders, particularly Cognos and Hyperion Solutions, to continue acquiring smaller vendors to fill out their product lines as customers' needs evolve. We also expect the large enterprise software vendors to try to gain rapid entry into the segment through acquisitions. Of the companies we cover, we believe niche providers of data-integration software, such as Informatica and Ascential Software, are the most likely targets for future acquisitions.

Note: Zaineb Bokhari has no stock ownership or financial interest in any of the companies in his coverage area. All of the views expressed accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed. Price charts and required disclosures for all STARS-ranked companies can be found at

Required Disclosures

5-STARS (Strong Buy): Total return is expected to outperform the total return of the S&P 500 Index by a wide margin, with shares rising in price on an absolute basis.

4-STARS (Buy): Total return is expected to outperform the total return of the S&P 500 Index, with shares rising in price on an absolute basis.

3-STARS (Hold): Total return is expected to closely approximate the total return of the S&P 500 Index, with shares generally rising in price on an absolute basis.

2-STARS (Sell): Total return is expected to underperform the total return of the S&P 500 Index and share price is not anticipated to show a gain.

1-STARS (Strong Sell): Total return is expected to underperform the total return of the S&P 500 Index by a wide margin, with shares falling in price on an absolute basis.

As of December 31, 2004, SPIAS and their U.S. research analysts have recommended 26.5% of issuers with buy recommendations, 61.3% with hold recommendations and 12.2% with sell recommendations.

All of the views expressed in this research report accurately reflect the research analysts' personal views regarding any and all of the subject securities or issuers. No part of the analysts' compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

Additional information is available upon request to Standard & Poor's, 55 Water Street, New York, NY 10041.

Other Disclosures

This research report was prepared by Standard & Poor's Investment Advisory Services LLC ("SPIAS"), and may have been provided to you either by: (i) Standard & Poor's under a license agreement with The McGraw-Hill Companies, Inc., which holds the copyright to this report; or (ii) a Standard & Poor's client who is granted a sub-license by Standard & Poor's. This equity research report and recommendations are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's equity research analysts have no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade in its own account. SPIAS is affiliated with various entities, which may perform services for companies covered by the recommendations in this report. Each such affiliate is operationally independent from SPIAS.


This material is based upon information that we consider to be reliable, but neither SPIAS nor its affiliates warrant its completeness or accuracy, and it should not be relied upon as such. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale so any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Analyst Bokhari follows stocks of application software companies for Standard & Poor's Equity Research Services

blog comments powered by Disqus