IBM, Business Objects Team Up

The companies strike an alliance to market business-intelligence software.
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IBM

(IBM) - Get Report

and

Business Objects

(BOBJ)

are teaming up in an effort to sell more business-intelligence software into the largely untapped small- and middle-business market.

The two companies will develop and sell new products using IBM hardware,middleware and services. In addition, they'll announce a new center designedto improve the efficiency of the joint-services practice. Business Objects will contribute its business-intelligence software and tools.

The initiative comes as

Microsoft

(MSFT) - Get Report

has become a serious competitor in the business-intelligence (BI) market and flies in the face of sentiment that smaller companies will never embrace complex BI software.

The companies said the initiative includes enhanced joint investment in marketing, promotion, technical and sales training, sales support, and lead generation.

Although BI is a hot sector, there is some disagreement about the size of the opportunity in the middle market. Rob Tholemeier, an independent investor and former sell-side analyst, says the fact that BI has barely penetrated the midmarket does not indicate that there is pent-up demand for the software.

"It's like looking at sales of Jack Daniels in Saudi Arabia and concluding there is demand for whiskey," he says.

BI software is really about integrating data from multiple applications and data stores -- a problem not relevant to smaller business, Tholemeier said during an interview.

But other analysts are bullish on opportunities in the mid-market. Gartner analyst Colleen Graham estimates that sales of BI software to smaller companies will total about $600 million to $900 million by 2010, or 10% to 15% of the total market at the time.

Graham, adds however, that the company to watch in this space is Microsoft, whose new version of SQL Server contains enhanced business-intelligence capabilities.

Graham expects the software giant to increase its market share in BI, particularly with sales to smaller companies needing less-sophisticated products than those offered by pure plays, such as Business Objects or rival

Cognos

(COGN)

.

Tara Pottebaum, an analyst with Yankee Group, also believes there is a sizable opportunity for BI vendors in the middle market, but suggests that a traditional big-company approach, featuring elaborate software installations at the client's office, won't work.

Small software developers, like privately held

Oco

of Waltham, Mass., are selling business intelligence as a service hosted in their data centers with some success, she says.

Business Objects offers a Web-based application called crystalreports.com that lets employees create Crystal Reports documents, upload them to the Web and create a list of authorized employees, customers and partners who can access them.