By Eydie Cubarrubia

The nascent business intelligence software sector is poised for a round of rapid consolidation in the wake of Oracle’s $3.3 billion acquisition of Hyperion Solutions on Thursday, said industry insiders and analysts.

Oracle’s purchase highlighted growing interest and investment in software that can help companies gather, store, access and analyze large amounts of data about how their businesses are performing. Trident Capital in mid-February invested $3.5 million in SeaTab Software, while Highfields Capital in January led a whopping $14.5 million third round for OCO.

“By the end of this year, the BI landscape will look very different,” said Cliff Longman, CTO of Kalido, which makes software that “cleans up” data before it’s processed by BI software. He theorized that many business intelligence software groups will be snapped up amid high demand.


The growing interest in BI software stems from several factors: market maturity, the increased number of companies in the space, and greater awareness of how the software can help companies manage their data.

Dan Vesset, research director of business analytics for researcher IDC, said business intelligence software has become one of the top priorities for company CIOs. IDC estimates the worldwide BI software market grew from $16.5 billion in 2005 to $18.5 billion in 2006. He added that the Hyperion sale could spark not just a buying spree among big companies, but also possible consolidation between small or specialized BI outfits.

Many companies are poised for a merger or acquisition, since those that were founded early this decade have gotten second or third rounds of funding and have had time to develop products. For example, Ampersand Ventures led an $8 million second round of funding for firstRain in 2003.

Ampersand general partner Marc Dulude said that firstRain is unique since it appeals to the financial service industry; its software gathers not just numbers but things like positive news reports about a company. Mr. Dulude was coy about sales talks regarding firstRain. “Has anyone put a number on the table? No,” he said, though he believes financial information providers like Bloomberg and Thomson Financial would be interested in purchasing the company.

Others potential targets include Cognos, which observers suggest would be a good fit for IBM. Mychelle Mollot, vice president of market strategy for Cognos, declined to comment on the possibility but noted that that companies that use numerous data systems would want something not tied to a particular system.

Ms. Mollot wasn’t alone. Trevor Walker, vice president of marketing for Cartesis—one of Hyperion’s biggest competitors—said sales of more startups to big companies “will give [customers] less choice in the end.”