Frost: Defining Value Proposition Key to Enterprise Analytics Market

June 28, 2006

The growing enterprise-wide adoption of analytics as a valuable decision-making tool to assess business performance and map future growth is compelling vendors to redefine their position in a highly competitive market. According to Frost & Sullivan, "verticalization," compliance requirements and developing a more comprehensive portfolio of solutions are key dynamics in the analytics market.

Recent analysis from Frost & Sullivan found that the North America enterprise analytics markets earned revenues of $2.22B in 2005, with estimates to reach $4.54B by 2012, growing at a compound annual growth rate (CAGR) of 10.8% during 2006-2012.

"Enterprise analytics must empower decision-makers in organizations with mission-critical, real-time information to tap into emerging growth opportunities," said Frost & Sullivan industry analyst Arun Ranganath. "This would allow vendors to provide their installed base of customers with value-added performance management functionality and identify opportunities for future revenue growth."

The creation of solutions for the extended value chains in organizations that include channel partners and suppliers expands the value proposition to the existing installed base and enables improved and well-informed decision-making across the enterprise.

Analysts said vendors are increasingly inclined to target their solutions toward those organizations that are required to adhere to compliance and regulatory norms such as the Sarbanes-Oxley Act, Basel-II and others. Targeted marketing in niche customer segments and the right fit of solutions into specific customer needs, especially in the small and medium-sized businesses (SMBs), are important for incremental revenue growth.

Although analytics are increasingly meriting their place as core software investments in different organizations, analytics vendors are likely to find that poor data quality and bottlenecks of integration affect the overall value from these solutions. "The complexity in IT (information technology) infrastructure and disconnect among various enterprise systems stretches the integration process and ultimately results in delayed realization of return on investment from analytics deployments," said Ranganath.

According to Frost & Sullivan, vendors should offer solutions tailored to the needs of specific verticals in order to enable faster deployment and seamless integration. This will also present vendors with opportunities for market penetration in niche customer segments across verticals. Such initiatives are also likely to be pronounced in growing firms, as IT initiatives can be mapped to the growth patterns of the enterprise in the initial phases itself.

"For vendors who do not have individual expertise to scale up their analytics portfolio with offerings for specific verticals, the option of entering into strategic associations with established industry partners or system integrators would be immensely beneficial," said Ranganath.

Source: Frost & Sullivan.