Tradeshows and lemmings

August is a tricky time for bloggers since, at least in Europe, everything closes down for most of August: no marketing manager in their right mind would do a product release; nor are there any trade shows, hence very little news to write about. There is at least another enjoyable blog from the Cranky PM about trade shows which is good summer reading though. It raises a valid point about whether exhibits at trade shows are really worth it, at least from the point of view of lead generation. There is no doubt that trade show exhibits are expensive, and take days out of the time of pre-sales and sales staff who might be better employed elsewhere. The quandary vendors find themselves in is that if they do not exhibit then they risk appearing side-lined. Certainly shows vary, but the quality of leads from trade shows is usually pretty poor. As the Cranky PM points out, there are a depressing number of people who seem there only to collect free T shirts and pens and enter prize draws, yet clearly have no budget whatever and often scarcely even a polite interest in the product (“do you have a few more of those pens?”). I assume that such people are only there because (a) the trade show is in Florida/San Diego/Cannes (b) their company has to spend its training budget somehow.

My observation has been that the broader the scope of the show, the less useful it usually turns out to be. Vertical industry conferences may not be large in terms of numbers, but often have real customers with a project and a problem to solve. Generic IT trade shows have lots of people but finding a real qualified prospect at one of these is like finding a beer in Salt Lake City. We can fall back on the excuse that it is all really just advertising and “mindshare” and never mind the leads, but then is that the very best way of spending your marketing dollars? The other argument is that your competitors are there, and while this has a point it is the “10,000 lemmings can’t be wrong” argument (as a side note, it seems lemmings don’t really leap off cliffs, at least not without a well-timed shove). I suspect the Cranky PM is right and that a lot of it is tradition and inertia.

I had positive experiences of webcasts at my previous company, since unlike trade shows people who attend these are doing so willingly rather than because they are wandering past a booth and you catch their eye, and you get to spend 30-60 minutes with people rather than the cursory conversation that is usually possible at a trade show. Of course webcasts are not free; you have to promote them, which involves buying rights to distribution lists, but even so the costs are certainly lower than renting an exhibit booth and tramping several staff around the country for a few days. A famous quote from John Wanamaker is: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” In the case of most trade shows I suspect half is optimistic.

Demanding BI

Ken Rudin makes a compelling case for on-demand BI in DM Review. If anything, he over-eggs things by saying that users will get more engaged with on-demand versions of software, and how you don’t really need IT deployment skills, which seems less than obvious to me. However the thrust of the argument is still valid. I know having been on both the end-user side of the fence (at Shell) and as a vendor (Kalido) that a scary proportion of problems that users encounter are “environmental” i.e. some combination of software installed on the PC causes an application to break, and the software support desk has great difficulty in replicating the problem because it is next to impossible to ensure that your PC has precisely the same patch release level of operating system/database/middleware as the customer who has the problem. Indeed this is why large companies go to great lengths to try to standardise the desktop configuration across the enterprise, doing upgrades as rarely as possible. This is no mean project if you have tens of thousands of desktops in lots of countries, and tends to results in customer frustration as they find that the latest feature their children are playing with at home is not available on their locked down and fairly stable but quite out of date software they have at work.

The lack of environmental intrusion seems to me the key advantage of the on-demand model to the customer. As a side benefit, but not really a function of the model, most vendors have changed their pricing models for on-demand so that customers pay on a leasing basis rather than a big up-front license charge. This has potentially benefits to both customers and vendors, since customers get to pay only on usage, which seems to them a fairer way of paying that having to pay up-front for something they are not sure about, and for vendors it gives them a steadier revenue stream, as well as a possibility to reduce the sales cycle: USD 100 per month per user sounds a lot less than USD 100k plus 20% maintenance, though of course it may not actually be if the usage rates become high enough. For example Actuate cite this as a reason why they are bullish on their on-demand offering, as they can employ relatively cheap “inside reps” (essentially up-market telesales people) rather than costly enterprise software salesmen, who may be able to land that big deal but so often do not in practice, yet still expect a hefty salary whether they sell anything or not.

It is indeed rather curious, then, as to why on-demand has not really taken off more in the BI sector. There are some toe-in-the-water efforts from some vendors, but I suspect that most are nervous that such sales cannibalise their conventional channels. To me it seems there are opportunities here for start-up companies who don’t have entrenched ways of doing business to take advantage of this situation, though since the VC community is out frantically hunting for the next Myspace and Facebook it is scarcely funding anything so untrendy as enterprise software, so there is actually little activity here either. At some point the pendulum will surely swing back, and at this point companies who have embraced on-demand delivery seem to me to be well-placed to take advantage of a rare but genuine shift in delivery model.

I’d be interested in any BI vendors or end-users with experience of on-demand BI who’d like to share their experiences, good or bad.

The murky world of market sizing

Defining a software segment’s market size is a tricky thing, partly because is all about what you include and what you exclude. Take MDM as an example. A much quoted IDC figure reckoned the MDM market would be USD 10 billion in 2009, implying a USD 5 billion market size in 2005 given compound growth of 14%. Such figures are regularly bandied about by the computer press, but mean little unless you qualify such statements by explaining what is included or excluded. For example this figure includes an estimate for services business associated with MDM. This is itself hard to pin down, but in my experience an MDM project where the software costs X will spend about 3X on services to implement it. Hence that USD 5 billion market size actually only has about USD 1.6 billion of software sales. Then MDM itself is a broad church, including CDI and PIM as well as a generalist MDM solutions such as those from Orchestra Networks and Kalido. I was still puzzled as to why even this USD 1.6 billion figure number was so large, but by deduction I think that the IDC figure was including data quality within the picture also. Fair enough, but it needs to be explicitly stated to make sense of the market, and as we will see still does not explain the gap.

Let’s come at this another way. A Gartner figure just released reckoned the CDI market was worth USD 310 million in 2006. This appears to be an estimate for software rather than services. Getting a figure for the product information management market is murkier, but I believe it will be broadly at a similar level. The generalist MDM vendors are these days mostly from smaller companies (products like Razza having been swallowed and digested by Oracle, and Stratature by Microsoft for example) and I doubt would add USD 100 million in software sales to this picture. Hence, adding PIM + CDI + specialist MDM (but excluding data quality) you get a software market of maybe USD 700M (probably a bit less), which is a far cry from the apparent IDC figure of USD 5 billion, or even the likely USD 1.6 billion of software revenues only. I still struggle to bridge the gap here, as the data quality market is not that large. Again you have to be careful about what is in and what is out, but other than leader Trillium data quality vendors are mostly very small (e.g. Exeros, Datanomic, etc) or are now buried within larger companies through acquisition (e.g. Informatica, Business Objects). However though I have seen estimates like USD 500M for the data quality market, again I wonder how much of this is services; personally I am unconvinced that the software sales of the data quality market would be much beyond USD 100M or so (companies like FirstLogic were not that large prior to their acquisition). So if we take the USD 700M figure and throw in USD 150M for data quality software sales (let’s be generous) this is still a far cry from the USD 1.6 billion estimate we arrived at earlier. Of all the analyst firms I respect the market size figures from IDC best, as they do actually check with the vendors what their revenues really are (they used to do this every year when I was running Kalido) but as you can see their MDM market size figure is still a mystery to me. If someone from IDC is reading this and can shed some light on it I would be interested to hear from them.

MDM is certainly growing quickly: each analyst firm agrees on this, and is clear enough from the number of companies entering the market or (more commonly) re-labelling existing products as MDM. However it can be seen that you can take a figure like the IDC 5 billion number, and also produce a valid market estimate of under USD 850 million, just based on what you include or exclude, for seemingly the same market. Quite a range. I guess it is hoping too much to expect the IT press to actually mention pesky caveats like what a number includes, since it is more headline inducing to say “MDM market worth $5 billion”, but if you are to actually use these figures to help with a decision then you would be well advised to dig deeper, below the headline numbers.