Impact Of Changing Trends In Business Analytics Industry On Tableau

-15.20%
Downside
170
Market
144
Trefis
DATA: Tableau Software logo
DATA
Tableau Software

Data discovery has been an emerging trend as the business analytics sector shifts its focus from enterprise requirements to innovative thinking. Tableau Software (NYSE:DATA) is an innovative Business Intelligence (BI) software company, which provides its clients with tools and interactive dashboards to search, query, analyze and visualize sets of data to generate useful business insights. Tableau is considered a leader in the field of data discovery and the company is poised to benefit as trends such as data discovery and convergence catch on.

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Emergence Of Data Discovery

Most traditional business intelligence platforms only help people answer predetermined questions. They are report-centric and focus on enterprise IT requirements. This mindset is changing, and data discovery is gaining strong traction in the market. Data discovery involves exploring data freely, discovering insights from a set of data and analyzing and presenting those insights in an interactive and visual format. Data discovery makes it easy for business users without any technical skills to run queries and analysis. The users can learn at each step of the process and can come up with the next steps on their own. Tableau has been a leader in  data discovery with its business discovery platform and has been featured as a leader in Gartner’s Magic Quadrant for Business Intelligence and Analytics Platforms for the last three years. [1] [2] Tableau’s in-memory computing (IMC) technology is complementary to data discovery. It reduces the number of data transactions required while analyzing data by storing the entire database in random access memory (RAM) which is more accessible to the processor. The IMC engine calculates aggregations rapidly and maintains associations in the data which makes the analysis faster and more real-time. According to Markets and Markets, the n-memory technology market will increase from $2.2 billion in 2013 to $13.2 billion by 2018 due to decline in the cost of semiconductor technologies and rising need for real-time data analysis and managing voluminous databases.

Convergence With Enterprise-Level Business Analytics

The greater emphasis on the ease of use and visualization when it comes to business intelligence software has fueled growth for Tableau. However, that does not mean that enterprise requirements can be ignored. According to IDC, the worldwide business analytics market generated $37.7 billion in 2013 and is expected to grow to around $59.2 billion in 2018. [3] This translates to a 9.4% compounded annual growth rate for the forecast period. Gartner introduced the concept of governed data discovery and it refers to platforms that can address enterprise-level IT requirements as well as assist business users (non-IT) in data discovery. No vendor has addressed both these aspects so far but there is an indication that this convergence will happen. Governed data discovery strives to find the right balance between allowing creativity so that end users can experiment with the data and maintaining just enough centralized control so that the enterprise tasks can run smoothly. In keeping with this concept, Tableau is introducing more enterprise related features related to visual analytics, performance, scalability and data preparation with its new product Tableau 9.0. [4] Tableau has also been more aggressive than its competitors such as Qlik in terms of R&D spending and, as a result, has been able to roll out multiple upgrades. The company has also launched a cloud based platform which reduces the complexities of infrastructure and the need for local storage capacity.

Effect On Average Revenue Per Customer

Including new features that enable the product to handle a vast range of functions will allow Tableau to increase its pricing. We currently forecast that Tableau’s average revenue per customer will grow from current levels of $11,700 and eventually cross $17,000 by 2021. There could be a 10% upside to our price estimate if revenue per customer grows at a faster pace than predicted and crosses $19,000 by the end of our forecast period. Conversely, if these additions do not contribute significantly in raising the price of service and average revenue per customer only reaches $15,000 in the next six to seven years, there could be a 10% downside to the Trefis price estimate. This scenario is possible as the business intelligence market is becoming increasingly overcrowded. Tableau faces intense competition from traditional vendors such as SAP, IBM, Microsoft, etc., as well as emerging players, including Qlik, Datameer, Sisense etc. These vendors are aggressively investing in their data discovery capabilities which could dilute Tableau’s pricing power.

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Notes:
  1. Magic Quadrant for Business Intelligence and Analytics Platforms, 23 February 2015, Gartner []
  2. A Leader. Again., Tableau Press Release []
  3. IDC Worldwide Business Analytics Software 2014–2018 Forecast and 2013 Vendor Shares, IDC []
  4. Tableau Software (DATA) Christian Chabot on Q1 2015 Results – Earnings Call Transcript, May 8, 2015, Seeking Alpha []