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Business analytics SaaS expands

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This article appears in the issue January 2008, [Vol 17, Issue 1]
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Business analytics software as a service (SaaS) is gaining attention and traction in the market. Successful on-demand software vendors have been instrumental in educating the marketplace on the benefits of accessing software functionality through such a model. More and more business analytics software providers are moving to address increasing market demand for software that is updated frequently, hosted off-site and purchased on a subscription basis. Several factors will spur growth for business analytics software offered as a service:

  • Budget constraints and corporate capital expenditure policies faced by many departments make it time-consuming and costly to pursue large software purchases. SaaS offerings can help reduce that bottleneck by enabling departments
    to subscribe to software services using operational budgets.
  • IT department resources are constrained and may not have time to build or evaluate and buy specific solutions for every business problem. SaaS offerings put control over technology decisions into the hands of the business user.
  • Mature software functionality built on newer technology platforms is suitable for SaaS delivery because years of functionality definition and development have established widely accepted best practices that can be configured, rather than customized, through a flexible platform to suit most business needs.

The business analytics SaaS market, which encompasses query, reporting, analysis, data mining tools, packaged analytic applications and data warehouse platform software, is expected to expand as a segment of the overall market for business analytics. It will contribute new revenue as well as replace some traditional, on-premises licensed software purchases that will result in a slight revenue expansion of the total market in the next five years. Significant numbers of users will access analytics functionality through a SaaS model during that time period, which will result in compelling case studies that further educate prospects and drive interest in business analytics SaaS.

Business analytics SaaS will be influenced by the following factors:

  • The business analytics market
    is expanding in two ways. One involves organizations new to business analytics solutions that don’t have the necessary internal IT or analytics expertise. The other involves expansion of business analytics solutions within organizations that have expert staff, but lack enough resources due to rapid growth in user demand for new analytic functionality and content. Shortage of appropriately skilled, internal resources is expected to continue and even become more pronounced. Although some of the skills shortage will be addressed by IT services firms that are also aggressively hiring consultants who can implement business analytics solutions, SaaS offerings will play an important part in addressing the users’ demand.
  • Budgetary constraints may prevent large acquisitions of traditional business analytics software. The economy is largely expected to shrink in 2008, and that will also delay some business analytics projects. Business analytics SaaS offerings will enable companies to spread costs over a greater time period to reduce impact on profits.
  • An increased number of companies will seek to focus on core competencies and rely on service providers for more and more support for non-core operating processes. The outsourcing market is rapidly growing, and the business analytics SaaS market will benefit from that trend.
  • Continued adoption of services-oriented architectures (SOA) as the primary methodology for software deployment will make it easier to integrate on-premises applications among themselves as well as with hosted applications. Thus, broader adoption of SOA will contribute to the growth of business analytics SaaS.
  • Recent market consolidation—including Oracle’s acquisition of Hyperion, as well as pending acquisitions of Business Objects by SAP and of Cognos by IBM—is reshaping the ranking of leading business analytics vendors and is likely to spur growth in business analytics SaaS as the resources of the larger acquirers are applied to the newly acquired business analytics software.
  • Business analytics SaaS does not in itself merit a rapid shift of deployment methodologies in the market. Unlike client-server computing with graphical interfaces, there is not a proliferation of perceived significant benefits that would drive the entire market to SaaS within a few years. There will be room for both SaaS and traditional, on-premises, licensed software.

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