Microsoft aims to cut cost of business intelligence software

By Reuters and Simon Aughton

Posted on 10 May 2007 at 08:44

Microsoft looked at possible acquisitions to gain a foothold in the market for so-called business intelligence software, but decided to build its own business and compete on price against industry leaders, the company's business division president said on Wednesday.

Instead of an acquisition, Microsoft is banking on the popularity of its SQL Server database management software and its Office suite of applications to win over customers looking for software to help companies track business performance.

'I've never been opposed to the idea of looking at players in the industry. We've looked, to be quite honest,' Jeff Raikes, president of Microsoft's business division, said in an interview. 'We just thought organic development would get us to the real solution faster.'

Microsoft's business software competitors, Oracle and SAP, have recently announced acquisitions within the industry.

SAP said on Tuesday it would buy privately held OutlookSoft, a company that helps chief financial officers budget and forecast. A source familiar with the acquisition said SAP paid about $500 million.

In March, Oracle said it would pay $3.3 billion to buy Hyperion Solutions, which competes with Business Objects and Cognos in the market for software that helps companies sift through data to detect trends and other information.

Microsoft's vision is for SQL Server software to help companies sort through databases while Office applications like Excel spreadsheets or SharePoint collaboration software would help workers find trends in data.

Microsoft is testing a new product called PerformancePoint Server 2007, which adds programs like budgeting, forecasting, performance management to Office applications.

The product is expected to be ready for launch in the second half of 2007. Microsoft said it would also unveil a new version of SQL Server software in 2008.

Raikes said Microsoft business intelligence products would cost much less than competing software, meaning companies could afford to let more people get access to the software.

'The cost of our solutions will be a quarter of the traditional solutions,' said Raikes, who delivered a speech at the company's first business intelligence conference. 'The economics are going to get transformed.'

Microsoft said it sees sales for the entire business intelligence marketing shrinking even as more people use the software, because its products will be so discounted compared to existing offerings.

But having dismissed the possibility of acquisitions in this sector, Microsoft remains on the look out for technologies that could fill gaps in its product portfolio or help it to enter new markets.

CEO Steve Ballmer told the Software 2007 conference in Silicon Valley that he was not prepared to rule out any possible acquisition, whatever the size, a remark that followed a question about reports that Microsoft may be about to make an offer for Yahoo!.

'Anything is conceivable,' Ballmer said, before adding that, 'Typically we do not do large [deals] relative to our overall size.'

But he declined to comment on whether he was interested in deals worth in excess of the $40 million that Yahoo! would cost.

'I don't think you should expect that most of our growth should come from buying large companies and taking costs out,' he said, noting that this approach is not useful in the software business.