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Tue 3 Jun 2008 04:00 AM

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Intelligent channel

Business intelligence software has emerged as a hot area of the region's applications market.

Business intelligence software has emerged as a hot area of the applications market and one where vendors need an assured network of partners. But the channel strategies that vendors are now employing to address the Middle East market vary dramatically.

Business intelligence (BI) is a smart move. Simply put, BI software analyses the hard facts of your business.

It can tell you, among reams of others statistics and analytics, how your employees are devoting their time, what volume of sales they are bringing in, where product orders are coming from and how much stock is needed in the future.

You will find that partners are competing against each other. It’s not healthy because you want the partner to invest and they won’t if they feel they are going to have to fight with one another.

BI software takes a great deal of the pain out of making those impossible corporate calculations. But marvel as we may at the bountiful possibilities the BI concept presents, no amount of state-of-the-art software could have predicted the seismic shift in the BI landscape during the past year.

Large software vendors, not previously engaged in BI but attracted by the impressive prospects and high growth rates globally, launched an incursion into the market with high-level purchases of BI providers.

Oracle purchased Hyperion Solutions, Cognos bought Applix prior to its takeover by IBM, while SAP acquired Pilot Software, OutlookSoft and Business Objects, which itself snapped up Cartesis.

This wave of change was brought about as the large enterprise software developers realised that growth in ERP was likely to wane and BI would be a great opportunity to offset that fear.

The tumultuous recent history of BI has, it seems, not done too much to dent its march in the Middle East. Gartner revealed earlier this year that whilst globally-speaking the BI flames have been somewhat doused, they still resemble something of a wildfire in the rapidly-expanding Middle East market.

Worldwide growth rates in BI will be less than single digits by 2011, with a predicted five-year compound annual growth rate of 8.6%.

North America, Western Europe and Japan represent the most significant stomping grounds for BI solutions peddlers, but in line with the general consensus of the region's BI channel, "greenfield" opportunities thanks to fast economic and structural developments will drive double-digit growth in the Middle East.

"Consolidation activities by SAP, Oracle, IBM and Microsoft should help accelerate the value derived from BI," commented Gartner's senior research analyst Dan Sommer.

"Large vendors will drive increased usage, while new BI vendors will emerge introducing innovative technology and products to demonstrate differentiation and fill the gaps in mega-vendors' product lines," he added.

Now that the post-consolidation dust has settled, this positive outlook from Gartner is echoed in the Middle East by the systems integrators that serve it.

Guy Ricketts, managing director at Cognos-aligned systems integrator Performance Systems, is certain of the benefits that will be realised from its vendor partner's merger with IBM.

"One of Cognos' strengths even before the merger with IBM was its application and data source independence. Now there's the combination of Cognos and IBM.

On its own, prior to the merger, IBM was very strong at data integration and data warehousing. It can only be positive with IBM's large client base in the region," he added.

Egypt-based Globisoft is just as effusive about the perks of the big shift that has taken place. "It has affected the market in a positive way because IBM, for example, is a very big name and has a large portfolio," asserted Ayman El-Sayed, managing director at Globisoft.

"IBM now has all of the applications that are needed and will acquire a lot more in the future, so it can stand in front of the other big vendors that also have full portfolios."It's perhaps unsurprising that resellers largely see the upside of the consolidations; they are after all bound to the vendors that have emerged on top of the pile. However, there are those who strike a cautionary note.

"I am sure that the first impression is that there will be conflict," suggested Danny Rowark, regional sales manager at data integration software specialist Informatica.

"You can imagine that there will be partners selling Business Objects as well as SAP and I am not sure how that would be resolved, but I would think there would have to be consolidation in the partner network.

What is starting to happen is standardisation. A lot of BI has grown up in departmental systems and customers now are standardising single solutions, having a single set of skills.

If I were running an organisation that had just merged I would look at the partner base and see who was generating the most revenue and I would streamline the partner network."

Although it is difficult to ascertain from vendors whether the mergers and acquisitions have changed the partner landscape in the Middle East some indicated that they would be looking to make alterations.

For Cognos the name of the game is partner expansion.

"We have a mature channel that understands the market and adds value," said Cognos' regional general manager Derek Morrison.

"So as we go to market we are looking at increasing the number of partners that we have today. We are considering the Levant countries, we are looking at Saudi Arabia and the UAE.

The partners that we want have to add value. They need to ask themselves, what database skills do I have? What consulting skills do I have?

And they have to actually take those skills and build them onto Cognos' offering and deliver a rounded solution," he explained.

This desire to expand is largely down to the opportunities that merging with a corporation such as IBM presents. As a larger organisation it will need a partner base to answer wider breadth.

David Brierley, general manager at rival Business Objects, says its potential customer base has multiplied dramatically as a result of its tie-up with SAP.

"Our addressable market in the Middle East has gone up by at least 50% solely because of the acquisition and because some of the larger clients are so loyal to their existing ERP vendor," he said.

However, Brierley insists that enlarging Business Objects' channel is not the path he plans to take. "We have been reducing a lot of our partners because just less than two years ago Business Objects had quite a few partners.

The problem with that is it cannibalises the market because typically in the Middle East the end-user will invite people in to do an evaluation and then send out a request for a proposal to all of the competitors."

He continued: "You will find that partners are competing against each other. It's not healthy because you want the partner to invest and they won't if they feel they are going to have to fight with another partner.

So we have retained only about six partners who we want to invest more, which means that they can support the customer better," he added.

Mass mergers aside, the short-term future of BI in the Middle East is practically guaranteed.

Developed markets such as the UAE and Saudi Arabia have been displaying solid demand for BI solutions thanks to rapid infrastructure developments and a hunger to embrace advanced IT software.

But even BI players in the smaller markets are claiming a slice of the performance management pie.Egypt is an intriguing country to chart the development of BI software as a large and important market, although it's not as developed as some of its other regional siblings. According to Globisoft's El-Sayed, BI remains a juvenile market, but one that is certainly taking hold.

"The market is growing and more companies are building their infrastructure, which means they need applications programmes and are now ready to look at BI usage," he explained.

For El-Sayed, the major stumbling block that has had to be breached in the Egyptian market prior to BI software gaining mainstream recognition is the sophistication of end-users' existing internal software infrastructure - the system that would be called upon to generate the data needed for BI analysis.

For every dollar that is available from licensing you’re probably looking at between US$2 and US$5 available for implementation. The margin on software is the tip of the iceberg.

"Many companies have now replaced their inadequate ERP systems and done that during the last three years. They are now talking to us and paying more attention to the infrastructure and the operational systems, and making sure they have enough data to apply business intelligence," said El-Sayed.

Yousef Al Omary, BI director for MENA at Jordanian systems integrator Connectivity, claims that BI has enjoyed a great reception since its relatively recent entry into Jordan. "Five years ago if you asked the business owners about BI, nobody knew what it was," he confessed.

"We were the first company to hold a BI conference in Jordan four years ago.

Before that, people just knew about analysis, but they did not know how to predict and forecast. After that, we started seeing a lot of decision-makers and businessmen to give them the knowledge about BI," said Al Omary.

For Business Objects' Brierley the tier-one market is fully developed, but other sectors still have someway to go before they blossom. "The big enterprise market, is exactly on par with the West," he commented.

"The reason for that is that many of these large organisations deal globally so a lot of their executives have outside exposure.

I would say the midmarket is lagging behind markets like the UK because organisations are Middle East-focused and don't have outside exposure, and a lot of companies have had contracts for years," continued Brierley.

"There's no monopoly, but based on the way business is done in some parts of the Middle East there's no compelling event to invest in BI. We are slowly seeing that change and that is where the channel can really help."

IBM insists that the maturity of the market is reflected in some of the trends that it is exhibiting. "What is starting to happen out here is standardisation," claimed Graham Walter, IBM's VP for the UK, Middle East and South Africa.

"Where a lot of business intelligence has grown up is departmental systems and we see customers now who are standardising single solutions and therefore having a single set of skills and a more manageable relationship with the vendor and the channel," he commented.

Oracle believes that the BI channel is benefiting from a renewed vigour that is only threatened by a shortage of resources afflicting many of the enterprise-focused markets throughout the region.

"In the Middle East, there is a fresh eagerness to implement and this provides huge potential for systems integrators, consultants and vendors," claimed Nick Whitehead, senior director of business development at Oracle EMEA Business Intelligence Solutions.

"There is a colossal scarcity of skilled man-power in this area and as time goes by this increased focus will surely make a difference."

Connectivity's Al Omary says that despite the success of BI adoption in the region there are still hurdles facing systems integrators, such as managing expectations.The main thing in the Middle East when you start talking about BI with any user or business is they start to think that BI will do everything, without any limitations or any input," he said.

"We also face the challenge of carrying out knowledge transfer to the end-user during the implementation and it has to be perfect because this is the main thing that keeps the project running smoothly," added Al Omary.

If these obstacles can be overcome, the channel stands to make very significant margins from BI implementations and, as market experts explain, this is not just restricted to licence sales.

"For every dollar that is available from licensing you are probably looking at between US$2 and US$5 available for implementation," revealed IBM's Walter. "The margin that partners are going to get on software, whilst important, is the tip of the iceberg.

They can play a role in the support for that licence and for any further implementation."

The channel also echoes the importance of value added services and ongoing support as the lifeblood of the BI sector. Connectivity includes client training among one of the most profitable aspects of a BI implementation.

"From the implementation we can say that a project might earn US$200,000. On the training and consultation side of the project we can say it could be worth US$500,000.

The implementation takes between a maximum of 20 to 30 days, but the training and the consultation side takes between six months and a year," said Al Omary.

Just as the best margins in a business intelligence implementation come from offering intricate services and support, the knowledge and skills that the channel exhibit must be equally intimate.

Vendors insist that one of the most important assets they look for in a BI partner is the ability to know the end-user's business inside out.

"Increasingly customers are looking for solutions. That is where the main expertise of the partner, who is an expert perhaps in a particular vertical industry or a particular application like HR, comes in. They can bring an understanding of what BI can do for them," asserted IBM's Walter.

In fact, the system integrator's knowledge must be so specialised that it looks like the channel will have to increasingly chisel out a niche to occupy - especially if the market ever starts exhibiting signs of saturation visible in other global arenas.

Some partners in the smaller regional markets have even suggested that their local knowledge routinely stands out as the key differentiating factor when it comes to working with global behemoths like IBM, SAP and Oracle.

Regardless of the fact that a call for specialisation might slowly creep into the Middle East market, the overwhelming vocalisation of opinion at all levels of the business intelligence and performance management channel is that the future could not be more promising.

"Potentially in the Middle East there is a lot of revenue that can be generated both from a systems integrator and vendor perspective," proclaimed Informatica's Rowark.

"The market is relatively new, but people are understanding the concepts of business intelligence, data integration and data warehousing. The opportunity is unlimited, not just for the vendor or the systems integrator, but also the local partners as well."

Smelling of BIA global economic slowdown, fears of saturation in the more developed markets and a turbulent shakeout of BI vendors have all led to experts projecting concerns that BI could be seeing a downturn on the global stage. But systems integrators who might bear the brunt of such eventualities can breathe easy; they're not talking about the Middle East.

"Despite business intelligence being a top priority for 2009 and beyond, we expect a downward-sloping growth projection because of product and vendor consolidation, which will be offset somewhat by larger sales forces behind some of the products," predicted senior research analyst Dan Sommer at Gartner Dataquest. "Commoditisation of BI across the board, but in particular for query, online analytical processing and reporting, will drive price points down," he added.

Growth in the BI market last year was partially inflated by the EMEA region, in which the strong euro provided a boost for global growth rates in dollar terms. "EMEA and Asia-Pacific displayed stronger growth rates than North Africa and they are expected to do so again in 2008," concluded Sommer.

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