Here's a story about a retailer making the cultural and mindset shift from using mainframes to looking outside their walls for Software-as-a-Service (SaaS) BI to handle their planning and reporting needs. Not only is that a serious shift for any organization and IT department, the retailer, Casual Male, "needed a better way to plan inventory" and "understand customer buying behaviour". And they did what most companies do and "looked at traditional BI software but balked at the price."
Where have we heard this before.
As I'm reading the article from Search Data Management and preparing to rant about the high price for license fees and on-going maintenance contracts (another 10% - 15% annually), I made it to the bottom of the article.
What I found interesting was a mention of the big BI vendors seeing the benefits of SaaS BI. Initially I thought SaaS BI was more of a competitor, however Cognos and BO have acquired smaller SaaS BI companies Celequest, NSite, and Applix. While SAS built in five on-demand BI modules last year.
So what does this do to the traditional software licensing vendors business model, you may ask? Won't offering a pay for service solution cut into their high margin license sales?
And the answer looks like yes... on the surface. So why are they doing it? In my mind, because they are expanding their business to include small to mid-sized customers. The traditional licensing costs are out of reach for these customers (Casual Male sited the same concern over price). By having a BI solution that is now affordable, the big BI vendors now have another revenue stream offering SaaS BI as the service. By having two-tiers for BI solutions, they can reach a more complete range of customers from large to small.
If this is their strategy, they will need to keep the two-tiers separate in the minds of customers. When customers perceive cost and functionality overlapping on both tiers, confusion will build in the minds of customers. They will wonder, "What is the difference between your two products?"
That would be not be a great market strategy.
So you then push the tiers even further apart. Now does that mean increase license fees and provide additional functionality for traditional software? What about reducing the functionality for those low-end customers who cannot afford the expensive tools?
The various ways the big BI vendors may approach this will be interesting. Expect more direct competition between Cognos and BO. And expect an offering to come from the other major players.
And I almost forgot. Those traditional software vendors getting into SaaS BI will need to dive into the hosting business, which brings with it a different business model and mindset for sales and infrastructure. Software-as-a-Service was touted as the traditional software killer back in the day. Now the traditional software pure-plays are becoming hybrids.