There is one sector of the IT industry that adapts itself well to changing environments. That chameleon is data query, analysis and reporting software.
Over the years, these core business technologies have been billed, among other things, as executive information systems, decision support systems and business intelligence systems. The secret is to apply the technology to the burning business issues of the day.
Currently, those issues centre round business optimisation and accountability, and the sector has taken on a new label to reflect that environment: corporate performance management.
It is a move that has met with considerable success. While the software industry has been stuck in the doldrums, the data analysis sector has remained robust, if not upbeat – something that is apparent in the latest set of company results. One of the market leaders, Business Objects, reported revenues up 8% to $126.2 million in its closing quarter of 2002, with profits at $12.8 million, a sound 10% net margin.
Behind that growth were two factors: analytical applications and the cycle of customer maintenance contract renewal.
Although relatively small, licence sales in analytic applications (packages tailored specifically for areas such as customer, supply chain and operations analysis) rose to $9.1 million, up 287% from the fourth quarter of last year. While that only represents 14% of total revenues, sales to companies such as AT&T, Ford and Vivendi pulled through additional revenue in data integration and business intelligence tools.
Digging deeper into the top line numbers, though, there were some less positive signs. The company’s overall licence revenue actually declined 9% compared with the year-ago period, although it was up 23% on the third quarter of 2002. Offsetting that decline was a 36% jump in services, reflecting a strong maintenance renewal cycle.
The annual revenue numbers (up 9% to $454.8 million) confirm Paris and Silicon Valley-based Business Object’s position as Europe’s fifth largest software company (behind SAP, Misys, Sage and Dassault). Around 50% of the company’s revenue comes from Europe, compared to 44% from North America.
One of Business Objects’ main rivals, especially in reporting software, turned in an even stronger performance over the same three months. Reporting and analysis software company Crystal Decisions reported a revenue rise of 38% to $71.2 million in its second quarter to 31 December. That was driven by a huge leap in licence sales, quarter-on-quarter, of 43%. The privately held company does not break out profit figures, but confirmed that its net income and profit margins rose, both sequentially and over the same period a year ago.
That growth was spurred by customer demand for software that can deliver dynamic reports to tens of thousands of users, but also by a new multi-year agreement with IBM focused on meeting the needs of small and medium businesses.
Related to that was the fact that the company appointed a new CEO at the beginning of the quarter: Jon Judge, former general manager of IBM’s Personal Computing Division, who left IBM after 24 years to head up the Canadian-rooted and Palo Alto, California-based company.
One of its neighbours in Silicon Valley, analytic applications and online analytical processing (OLAP) software vendor Hyperion Solutions, is another clear beneficiary of the need for increased corporate governance and tighter financial management.
The company has redefined all of its products under the business performance management tag, focusing on planning, budgeting, forecasting, financial-consolidation and reporting applications. It also sells business intelligence tools centred round its Essbase OLAP database.
Revenues in the company’s second quarter to the end of December rose 6% to $126.0 million. More encouragingly, licence revenues jumped 11% over the same period a year ago to $51.1 million. That produced solid net profits of $7.6 million.
Those margins have been improved by the build-up of business handled by third parties. Licence revenue booked through the company’s indirect channel grew to 27% of total licence revenues. A year ago that figure was 24%.
CEO Jeff Rodek says that the upbeat numbers stem from the fact that major companies around the globe need to obtain much greater insight into their financial and operational performance. As a result, the company’s revenues are now almost equally split between its financial management applications and its OLAP platform. Just 18 months ago OLAP products accounted for 60% of sales.
Another company collecting a dividend from the need to gain greater insight into corporate, as well as customer, behaviour is NCR. The company’s overall revenues were down 1% to $1.58 billion in the fourth quarter, but revenue from its Teradata data warehousing unit rose 8% to $341 million. At an operating level, the division also increased its profits 160% to $34 million.
That positive picture can be largely attributed to Lars Nyberg. When he took over as NCR’s CEO in 1995, he saw the true potential of what had become a minor and much-neglected part of the company. Sweden-born Nyberg is now handing that over, having resigned from the CEO’s position in February for family reasons. In the hot seat: Mark Hurd, COO and the former head of Teradata.