By Cassandra Balentine
Business Intelligence (BI) and analytics tools are increasingly in demand across all industries. Independent software vendors (ISVs) embed these tools to provide more insight into operations and customer behaviors.
According to a recent report by the Aberdeen Group, Embedded Analytics for the ISV: Supercharging Applications with BI, the top objectives by ISVs to embed analytics is to differentiate products and develop a competitive advantage, followed by the desire to improve end user experience and protect the install base. Additional reasons include the creation of new revenue streams as well as increasing customer value.
“Turning the data generated by an ISV’s application into additional value for customers is now expected functionality on behalf of application users,” says Brian Gentile, SVP/GM, TIBCO Analytics. This means ISVs must make it a priority to deliver useful, customizable reports and data visualizations that provide end users with the ability to leverage application data directly in context to the use of the application. Gentile says cases of this could include resolving a case for a client, identifying a new product to sell, or eliminating a costly step in a process.
Freivald questions why the decision even comes up. “Developers use toolkits for graphics, database access, and even simple forms. Good analytics require all of that and a lot more, and provide very high value to the end user, yet for some reason, developers think they should be able to build it themselves.”
Third-party providers can make BI and analytics simpler to build and easier to maintain. Jake Freivald, VP of corporate marketing, Information Builders, says this leads to better resource allocation and competitive differentiation.
A Case for Third Party BI
The decision to embed analytics also poses a critical question, build versus buy. While a propriety route may provide many advantages, several vendors offer tools specifically designed to include analytics into ISV offerings.
“It’s a classic build or buy decision that ISVs continually make in product development planning,” says Mark Flaherty, CMO, InetSoft. “As requirements for more sophisticated analytics of information presentation evolve, do they want to increase their own development offers or leverage the work of another ISV who specializes in the technology?” he asks.
In the build versus buy conundrum, Christof Majer, VP, global partner sales, Qlik, says ISVs gain a significant competitive advantage by leveraging proven BI functionality to provide their customers. “Plus, they gain a faster time-to-market and keep costs manageable since building and maintaining a full BI solution is an expensive undertaking.”
Flaherty adds that if an ISV goes the build route, they may never get to the point where they offer state-of-the-art BI capabilities. “They have to judge whether their competitive environment or customer demands dictate that they offer the most modern-looking reporting and charting, a high degree of interactivity and data exploration, or maximum self service.”
He suggests that these are the areas where a third-party BI provider adds the most value to an ISV solution.
Gentile adds that building professional reporting and analysis capabilities is not typically done effectively by the ISV as a side job because customer expectations for data analysis and customizable reporting are high. “Therefore, licensing a BI tool designed to be embedded while also providing the appropriate end-user functionality can result in a more competitive product and higher use satisfaction, while allowing the developers of the ISV application to focus on the core features of the application.”
Demands also change rampantly. Take the case of mobility. Freivald points out that in just a few years it has changed dramatically and continues to do so. “Embedded BI providers put mobile capabilities directly into their product offerings, so ISVs who embedded third-party BI analytics got that immediately and at relatively low cost. ISVs who rolled out their own BI suddenly had to learn about the differences between native and HTML5, Android and Apple iOS, and so on, instead of building out core functionality and competitive differentiation,” he explains.
Challenges to Consider
Although third-party offerings may remove some of the functional challenges, implementation can present issues. From determining functionality and customization, to compatibility and security, there are many challenges to consider when searching for a BI partner.
Managing expectations is critical throughout the process of partnering and implementing a third-party BI solution. “It is easy to underestimate the needs and requirements expected of a multi-tenant reporting tool,” says Jeff Morris, VP, product marketing, GoodData.
Simply forming an understanding of which requirements the BI solution will offer is the first challenge. “Most ISVs are not BI experts, so they misunderstand the right functionality to address these requirements and mis-deliver by building a foundation that is hard to scale or maintain,” says Gentile.
“Users range from highly skilled business analysts to completely non-technical operation workers, but they all need to make decisions,” points out Freivald. BI tools must serve the entire range. “Many ISVs make the mistake of doing either static reports or highly interactive roll-your-own analysis, but not both,” he adds.
Customizing a solution to offer the appropriate benefits is a primary concern. Qlik’s Majer says designing the tool to fit the ISV’s specific purpose and the speed of integration into the application are common challenges. He also notes a limited published API set may present challenges that impede ease of integration.
Alvin Wong, product marketing manager, Logi Analytics, suggests that many of the challenges associated with embedding a third-party tool stem from the fact that most BI applications are designed as standalone applications. He explains that many times, integration between the core application and the BI application is difficult and may seem like a work around.
For instance, compatibility between the BI tool and the vendor’s own software could prove challenging. Morris says for example, the process of mixing Java and Windows and cloud and non-cloud data is highly complex.
Security is another consideration. Wong says standalone BI applications have built-in user profiles and security, “which unfortunately means that changes in the role-based permissions in the main application need to be manually changed or require a synching process with the BI application. Developers should look at platforms that implement more elegant solutions, such as adopting the user access rights from the main application via a server-side handshake and handling multi-tenancy requirements through parameterization so you can develop all at once to serve the needs of all customers.”
Additionally, Morris points out the larger business challenge of defining a go-to-market plan for the solution. “When the vendor is able to leverage experience, companies develop data products, find creative ways to monetize their data, and scale quickly,” he suggests.
Cost is a primary consideration for any purchase. Since embedded BI sits within an ISV’s offering, its cost and return on investment (ROI) is an essential aspect of the relationship.
Gentile says from an accounting perspective, there is no way around the fact that the embedded BI tool becomes a cost of goods sold to the ISV. “Therefore, the pricing and licensing model—from the BI vendor to the ISV—ideally allows the ISV to start simply and affordably and grow in both sophistication and cost as the end customer success warrants—thus the cost of goods grows only as customer growth warrants.”
Generally speaking, Freivald suggests that there is a base cost for getting a project off of the ground. “Both sides have skin in the game and the BI provider will get additional revenue as the ISV gets additional revenue.”
He suggests that if the technology is core to the ISV’s product offering, a royalty could increase as the ISV’s product revenue increases, usually by seat or server. “Sometimes the BI vendor’s product is an add-on, and there’s a royalty incurred only when the BI solution is sold,” Freivald explains.
He suggests pricing varies based on whether the ISV’s product is sold in the cloud or on premises.
Flaherty says cost structures are quite customizable. “Ideally, the BI provider adapts to the business model of the ISV. An on-premises application provider might create a royalty arrangement, with a certain percentage of sales, or they could pay a fixed-cost per seat or per CPU core. A cloud-based provider might prefer an annual subscription model based on users or CPU cores.”
“Of course, no vendor wants to pay another software vendor royalties,” comments Morris. “Licensing models are popular but vary from BI vendor to BI vendor,” he adds.
Packaging and pricing software features depend on many factors, including competition, customer expectations, and value offered. “All of these considerations apply to how software and Software as a Service (SaaS) providers carry costs of BI functionality into their offerings. What we have found in our surveys of software companies at large, is that for as many companies that package analytics as an add-on option for breakup functionality into their tiered offerings, almost as many take an all-inclusive approach where every customer has access to all capabilities. Of the companies that charged for analytic capabilities, they charge on average 22.6 percent on top of their core offering,” stated Wong.
When it comes to ROI, Majer suggests the business value of embedding a BI tool can be measured in a number of ways. “A few examples include creation of new revenue streams, expansion into new markets, upselling of an existing product, as well as customer satisfaction and retention.”
Gentile says best practices implementation of embedded BI by an ISV allows for the ability to charge more for certain reporting and analysis features or capabilities. “In this case, additional revenue is generated by the inclusion of these analytic capabilities and positive ROI can emerge. Additionally, reduced customer churn is also ROI justification.”
Wong says to build a complete picture of ROI, one should analyze benefits and costs in a quantitative manner, over a period of three to five years. “The benefits part of the equation includes time-to-market, which greatly increases the chance of seeing a positive return; revenue, either as direct sales increase or increase in customer acquisition and retention; sales efficiency, making the product easier to sell; and visibility into the product roadmap by employing a BI provider with a broad range of functionality.”
On the cost side, when compared to build approaches, some costs increase while others decrease in terms of ROI on third-party BI implementation. “Software licensing costs will go up, and you may invest in training and professional services, though this will depend on your specific situation. Development costs should go down and sometimes this will be reflected in employing development staff who are less technical. Finally, the opportunity costs and project risk will decrease as you can have your developer resources focused on your core product,” explains Wong.
ROI can be difficult to determine, as the role of BI differs with every implementation. “BI is sometimes strategic to an application vendor’s ability to gain market share or increase deal size, but it’s extremely difficult to show the percentage by which BI was the determining factor,” says Freivald.
Freivald adds that similarly, while it is often possible to gain an understating of the amount of development hours that would have been necessary to develop core BI requirements in house, it’s nearly impossible to get a firm metric on the cost-benefit ratio of the extensions that the BI vendor has as a matter of course and that the ISV wouldn’t have to build.
“That isn’t the answer anyone wants to hear, but generally speaking, ISVs recognize when BI is strategic to them, and they act accordingly,” he adds.
When it comes to calculating ROI, Morris says the most common outcome is that a vendor creates a go-to-market model where they are able to sell or generate revenue from their analytic products. “The ROI calculation for these data products is simple, revenue minus royalties and cost of software and implementation.”
Flaherty suggests the build or buy analysis can create the base ROI. “Does the cost of staff devoted to these capabilities exceed the licensing costs over a three-year planning window? From there, you could layer on estimates of sales gained or not lost due to the competitive landscape or customer demand.”
BI continues to play an increasingly important—and perhaps expected—role to almost every vertical. Here are highlights of embedded offers by those mentioned in this article.
GoodData offers its PoweredBy GoodData solution scalable embedded BI tool. “Our Agile Data Warehousing Service enables customers to quickly scale, even with terabytes of data,” says Morris.
InetSoft provides three product choices that share common data access and permissions layers, Style Intelligence, an all-inclusive BI application; Style Scope, a sub-product that includes visual analytics and dashboard capabilities; and Style Report, a sub-product that includes a page-oriented reporting engine.
Logi Analytics offers its Logi Info platform for software and SaaS providers to embed dashboards, reports, and self-service capabilities into software applications.
Wong says the company recognizes the best way to license its product is to align itself as closely as it can to the way software and SaaS providers deliver value to customers. “The Logi team proposes the best fit model for its partners today and accounts for future growth. Unlike traditional BI vendors, we do not license on a per-use basis. Not only is this an unnecessary operational headache, but we do not believe that our licensing model should be the limiting factor to increasing user adoption by our customers’ customers.”
Information Builders offers its WebFOCUS platform, which can be used for embedded BI. The platform includes data discovery and visualization through WebFOCUS InfoDiscovery; InfoApp development through WebFOCUS AppStudio; predictive analytics through WebFOCUS RStat; enterprise BI search through WebFOCUS Magnify; Active Technologies that allow for emailable and disconnected analytics, as well as a variety of analytical, reporting, and geographic capabilities.
Qlik provides ISV partners with a choice of products and the flexibility to select the offering that best aligns to its requirements for embedded analytics. It can embed Qlik Sense for self-service data visualization or QlikView for guided analytics.
Qlik Sense is a next-generation self-service data visualization application. The company says it is best suited for users who want flexible, interactive visualizations. It does not require a build-and-publish-approach since every user can drag-and-drop to build visual analysis.
QlikView is a data discovery platform for guided analytics. It enables analysts with minimal development expertise to build and publish powerful analytical applications for exploration and discovery.
TIBCO features its Jaspersoft embedded analytics solution, which enables channel partners to embed data analytics and reporting features into customer applications. Joint customers are able to take advantage of a range of data access strategies, including native real-time reporting and analysis, data blending of NoSQL and relational sources using an innovative data virtualization layer, and batch analysis using data integration. Customers choose one or more access techniques to combine with a variety of visualizations to present the right insight to the right user.
BI is integral to the future of business communication both internally and externally. While some ISVs invest in BI as a core part of a solution, others offer it as an optional add-on for those that demand the functionality.
“To remain competitive, every ISV must have a plan for building more sophisticated analysis of data into their software or application system. The best practice approach enables the ISV to offer BI functionality in layers or modules, so that some functionality is delivered for free—as part of the software of application, and more advanced functionality is priced as an add-on—thus driving more revenue,” concludes Gentile.
The BI landscape continues to evolve, and third-party, embedded BI providers offer solutions to enable ISVs to deliver state-of-the-art metric capabilities while remaining focused on core product development. SW