Business Intelligence (BI) software helps companies make better decisions by identifying growth areas as well as areas where costs can be minimized.
According to Gartner, the BI market has grown from around $4.6 billion in 2006 to $6.3 billion in 2008. We believe that the BI market could maintain such growth levels and reach $10 billion by the end of the Trefis forecast period.
However, if the BI market were to grow much faster to reach $15 billion by the end of Trefis forecast period, there could be an upside of 5% to $43 Trefis price estimate for SAP’s stock.
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Below we explain the reasons for the consolidation in the business intelligence market, and why we believe growth in this market will continue in the future.
BI Market Consolidation Saw SAP Gaining Market Share
The business intelligence market has consolidated with bigger players like SAP, Oracle, and IBM acquiring smaller companies in the last two to three years. SAP acquired Business Objects for $6.8 billion, IBM acquired Cognos for $5 billion and Oracle acquired Hyperion for $3.3 billion.
These acquisitions have redefined the market share positions of the leading players. SAP occupied the #1 position in the business intelligence market with around 20% share in 2008. Oracle and SAS Institute followed SAP with 15% share for each, while IBM and Microsoft had share of 11% and 8%, respectively.
BI Software Market Will Continue to Grow at Healthy Rates
We believe the BI software market will continue to grow due to the value that BI brings to large businesses both in boom times as well as in recessionary environments.
1. BI tool identifies growth opportunities for companies
BI software helps companies make critical decisions like the type of product to be launched and the timing of product launch so as to obtain maximum benefits.
2. Companies can identify cost-cutting areas with BI tools
During recessionary times, companies can use BI software to identify areas for cost-cutting and create greater cost efficiencies from their existing processes and resources. The software also helps identify and mitigate business risks for companies when the economy declines.
5% Upside To SAP’s Stock If BI Market Grows Faster
We expect the business intelligence market to grow from $6 billion in 2009 to around $10 billion by the end of the Trefis forecast period.
However, there could be a further $2 (>5%) upside to our $43 estimate for SAP’s stock if the BI market were to grow at a faster rate than we forecast and reach $15 billion by the end of the Trefis forecast period.
You can modify our forecast above to see how SAP’s stock price could be impacted as a result of greater demand for business intelligence software.
For additional analysis and forecasts, here is our complete model for SAP.