Strategic Analysis of Business Objects Versus Cognos Incorporated, Providers of Business Intelligence Software
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STRATEGIC ANALYSIS OF BUSINESS OBJECTS VERSUS COGNOS INCORPORATED, PROVIDERS OF BUSINESS INTELLIGENCE SOFTWARE Pendennis Clark PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION In the Faculty of Business Administration Executive Master of Business Administration O Pendennis Clark 2005 SIMON FRASER UNIVERSITY Summer 2005 All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. APPROVAL Name: Pen Clark Degree: Master of Business Administration Title of Project: Strategic Analysis of Business Objects versus Cognos Incorporated, Providers of Business Intelligence Software Supervisory Committee: Senior Supervisor Neil Abramson, Associate Profcssor Second Reader Mark Sclman, Adjunct Professor Date Approved: SIMON FRASER UNIVERSITY Partial Copyright Licence The author, whose copyright is declared on the title page of this work, has granted to Simon Fraser University the right to lend this thesis, project or extended essay to users of the Simon Fraser University Library, and to make partial or single copies only for such users or in response to a request from the library of any other university, or other educational institution, on its own behalf or for one of its users. The author has further granted permission to Simon Fraser University to keep or make a digital copy for use in its circulating collection. The author has further agreed that permission for multiple copying of this work for scholarly purposes may be granted by either the author or the Dean of Graduate Studies. It is understood that copying or publication of this work for financial gain shall not be allowed without the author's written permission. Permission for public performance, or limited permission for private scholarly use, of any multimedia materials forming part of this work, may have been granted by the author. This information may be found on the separately catalogued multimedia material and in the signed Partial Copyright Licence. The original Partial Copyright Licence attesting to these terms, and signed by this author, may be found in the original bound copy of this work, retained in the Simon Fraser University Archive. W. A. C. Bennett Library Simon Fraser University Burnaby, BC, Canada ABSTRACT Business Objects is the current market leader in the Business Intelligence software industry, which provides query, analysis and reporting tools to organizations needing to access data stored in disparate sources. In 2003 Business Objects acquired Crystal Decisions the # 3 firm at the time, resulting in the current organization. During the period of acquisition Cognos Inc. released a new product, ReportNet that was extremely well - received, becoming their leading revenue product in a 12 month period. Based on this success, Cognos is in a position to overtake Business Objects as the #I provider in the space within a 2 - 3 year period. This paper proposes a marketing strategy and new product introduction to reduce the capability of Cognos to threaten Business Objects as the #I vendor. This marketing and product strategy is consistent with management preferences and produces a positive NPV. DEDICATION I would like to dedicate this effort to my son Noel. His happiness and energy made getting through the program possible. ACKNOWLEDGEMENTS I would like to thank all the employees at Business Objects who have helped me in my career and supported my educational efforts. Special thanks to Terry Duncan for going above and beyond the call many times in helping me grow. Also I would like to thank Heather Watts for her patience, confidence and inspiration during the last 6 years. TABLE OF CONTENTS .. Approval .......................................................................................................................................... 11 ... Abstract ......................................................................................................................................... m Dedication ...................................................................................................................................... iv Acknowledgements......................................................................................................................... v Table of Contents ..........................................................................................................................vi ... List of Figures ........................................................................................................................... VIII ... List of Tables ..............................................................................................................................vlu Glossary ..........................................................................................................................................ix 1 INTRODUCTION ..................................................................................................................1 1.1 Business Objects 1990 .2005 .........................................................................................1 1.2 Current Strategy .............................................................................................................. 2 1.2.1 Product Strategy - Innovative (9) .............................................................................. 4 1.2.2 R&D Expenses - Moderate to High (8) .....................................................................5 1.2.3 Structure - Decentralized (7) ..................................................................................... 5 1.2.4 Decision Making - Moderately Autonomous (5) ...................................................... 7 1.2.5 Manufacturing - Flexible, Economies of Scope (8) .................................................. 7 1.2.6 Labour - Skilled and Flexible (9) .............................................................................. 9 1.2.7 Marketing - High Cost'Pull (8).................................................................................. 9 1.2.8 Risk ProfileICapital Structure - High Risk, Conservative (9) ................................. 10 1.3 The Problems Facing Business Objects ........................................................................11 External Analysis of the Business Intelligence Industry ....................................................17 2.1 Five Force Industry Analysis ....................................................................................... 17 2.1.1 Bargaining Power of Suppliers - Moderate ............................................................17 2.1.2 Threat of Entry - High ............................................................................................. 20 2.1.3 Bargaining Power of Customers - Low, Increasing ................................................ 24 2.1.4 Threat of Substitute ProductsIServices .Low .......................................................... 28 2.1.5 Rivalry amongst competitors - Moderate ................................................................ 29 2.2 Value Chain Analysis ................................................................................................. 3 5 2.2.1 Product Research and Development ........................................................................35 2.2.2 Manufacturing .......................................................................................................... 37 2.2.3 Marketing ..............................................................................................................38 2.2.4 Presales ..................................................................................................................... 40 2.2.5 Direct Sales .............................................................................................................. 41 2.2.6 Retail & Distribution ................................................................................................42 2.2.7 Services and Support ................................................................................................43 2.3 Summary of Key Success Factors ................................................................................. 44 2.4 Analysis of Business Objects vs . Key Competitors ...................................................... 48 2.4.1 Cognos ..................................................................................................................... 51 2.4.2 Microstrategy ........................................................................................................... 55 2.4.3 Microsoft ..............................................................................................................57 2.4.4 Competitor Capability Comparison on Key Success Factors .................................. 58 2.5 Opportunities and Threats ............................................................................................. 65 2.6 Strategic Alternative ...................................................................................................... 66 3 Analysis of Internal Environment and Capabilities ...........................................................70 3.1 Analysis of Management Preferences ........................................................................... 70 3.1.1 Existing Management Preferences Comparison ......................................................70 3.1.2 Management Preference Gap Analysis ...................................................................