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October 8, 2007
Business Intelligence Consultancies must adapt to survive and prosper.
The business intelligence market is changing rapidly. Three major forces driven are changing the landscape. Firstly, BI software vendors are working feverishly to bring BI to the masses making it easier for end users to fulfil much of their reporting needs. Second, in addition some vendors are taking ownership of larger client consulting projects to boost their own revenue, and finely ERP vendors and consultants are looking to extend their reach by delivering BI solutions which leverage their understanding of the ERP deployment.
With these changes in mind BI consultants needs to re-think the way that they do business. To adapt and survive consultants need change their current mode of operation where:
1. Each new client is a unique consulting opportunity, little to no
value-add is transferred from one project to the next.
2. Big is still beautiful - driving the client towards long term highly
complex projects.
Instead, to compete, BI consultancies need to develop and package up their own Intellectual Property which they can sell their clients in conjunction with the value added services that they offer.
The BI software market is undergoing a major shift. For all the talk and hype BI for the masses is starting to happen. BI solutions such as Yellowfin which deliver user friendly web based reporting are making BI easy, and analytical skill sets are increasing in organisations. Yellowfin's collaborative technology encourages report writing by the staff that own and know their data sets. Reports are easily shared with the non-expert user base. The days of consultants earning revenue by writing reports are coming to a swift end. Consultancies need to move up the food chain and add value through true business analysis, and longer term reusable BI elements such as data marts and data warehouses. This is where the IP crunch starts. By changing the focus from report building to back end development the risk is that if the entire business is built on a services model the consultancy may erode long term revenue. How this addressed will be covered later.
If easier to use tools were not enough, then the growth of traditional vendors clawing at the BI consultancies client and revenue base surely does not help either. One of the trends lately for the big boys has been to tackle their flattening software revenue is to take greater ownership of the entire customer BI project - from software to implementation. If all the consultant sells is their time then the value proposition for the client and their point of differentiation is low. However, if consultancies develop their own IP in their specialist markets they can offer their client lower cost solutions (through a reduction of deployment time and re-usable BI
components) at higher margins and thus retain their profitability.
And now the crunch - ERP Vendors and consultancies are rapidly seeing their revenue streams drying up as the ERP market matures. They are using their understanding of the ERP application and their client relationships to extend their offering to BI in an effort to boost their revenue streams.
SAP's purchase of Business Objects leaves no doubt. The mature ERP market has to extend its reach if it is to maintain revenue growth. It is here that we have competing skills - ERP consultants with an understanding of the source data versus those with an understanding of how to package and deliver it for BI. To compete with the ERP consultant the BI consultant needs to pre-package solutions for ERP applications that leverages their BI expertise and can be quickly customised for their clients.
To prosper as a BI consultancy the business model has to change. Focus less on the services revenue, instead consider margins and profitability. BI consultancies must invest in developing their own IP - such as pre-canned report product sets that are generic to industries and technology platforms.
These must enable cookie cutting and be sold as a tangible product. IP development creates tangible business differentiation that creates barriers against competitors who have not invested in product development. In addition to IP revenue clients will also procure services for customisation and so provide two streams of revenue. Now is the time for consultancies to decide whether to go the way of the dinosaurs or evolve and thrive with a hybrid services/IP business offering.
Posted by Justin Hewitt at October 8, 2007 6:45 AM
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