Gartner: Safeguard your BI contracts

Enterprise IT buyers should implement strong service level agreements and contingency plans when purchasing business intelligence or analytics software from smaller vendors, analysts have warned, predicting a spate of M&A activity.

Gartner Research managing vice-president Matthew Boon told iTnews he expected the number of vendors selling the desirable software to consolidate in the coming year as the big four - Oracle, HP, IBM and Dell - look to grow the capability of their offerings.

All four companies have made significant acquisitions over the past several years, with HP notably purchasing both Autonomy and Vertica during 2011 while under the care of former chief, SAP alumnus Leo Apotheker.

The analyst firm has forecast the local market to grow by almost 12 percent this year to $406.4 million in value, and up to $12.5 billion globally according to December statistics.

The market would “remain one of the fastest growing software markets, despite sluggish economic growth in some regions, as organisations continue to turn to BI as a vital tool for smarter, more agile and efficient business”, a Gartner report predicts.

But Boon warned IT managers and chief information officers to lock down any potential contracts with smaller BI and analytics vendors through appropriate safeguards to ensure vendor obligations did not dissipate in the event of an acquisition.

“It’s a general rule of thumb that when you see acquisitions happening, those are the pitfalls you have to be ready for,” he said.

“Typically when you buy something from somebody, you’re not thinking ‘what happens if they get bought’.”

He pointed to similar situations with Sun Microsystems clients, many of whom were caught off-guard by Oracle’s acquisition in 2009.

Similarly, the consolidation of storage software vendors by the likes of Dell and EMC several years ago had caused licensing, support and contractual pains for those unable to ensure their experience under the initial vendor remained the same when swallowed whole by a larger company.

“If you’re an organisation sourcing products from them, you want to make sure that when an acquisition happens, that your deal is still secured, the relationship is still in place and that you’re going to get the support you expected,” Boon said.

“It’s really prudent for organisations to make sure they do have very clear expectations and contractual boundaries in event of an acquisition.

“If you have those things in black-and-white, you’re still going to be covered in the event of an acquisition.”

Despite the warnings, he suggested dealing with the smaller vendors first would provide an opportunity for businesses to more easily negotiate their sale terms which, if contracted carefully, would carry across to the larger vendor if and when the time comes.

“[Smaller companies] tend to be a bit more hungry for business so you can tend to get what you want more on contractual terms... but obviously if you’re dealing with an Oracle or IBM it’s going to be somewhat more difficult,” he said.

“Sure, they want your business, but it’s on their terms.”