For Subscribers

Get the complete article now!

Eight experts, three analysts and top management from thirty-eight sector firms examine the e-Business sector in this special 190-page e-Business issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info468.htm.

TWST: Are the revenue models changing for these companies?

Mr. Ekoniak: The overall revenue model has not changed. The prevailing revenue model is a perpetual software license model under which the customer pays one fee and owns the software for life. They have the option of paying an annual maintenance fee, which provides support and upgrade rights. The pricing per user model has changed. When an organization bought client/server software, there were typically a limited number of users within an organization — more of a power user. So, for example, within the ERP world, maybe 8%-10% of an organization’s employees might actually touch that ERP application. This was because the cost of implementing and maintaining the software on each employee’s desktop became prohibitively expensive. Today, with Web-based products, all employees within an organization have the ability to access an application. The application sits on a server so the implementation and maintenance costs are drastically reduced. As a result, organizations may deploy the software to a much larger user base. Therefore the pricing model has changed from a per-user pricing model to a per-server pricing model.

TWST: How do those thoughts apply to the business intelligence/analytics area specifically?

Mr. Ekoniak: We really like the business intelligence/analytics space. Looking at growth rates over the last three quarters — year-over-year growth rates for various sectors within software — the business intelligence/analytics sector has actually held up the best. We compared the business intelligence/analytics space to the CRM, supply chain and ERP areas. In Q3 we actually saw a 1% year-over-year growth rate in the analytic sector, whereas CRM saw a decline of 27%, supply chain was down 18%, and ERP was down 27%. The business intelligence/analytics sector has held up the best but, more importantly, we believe it will continue to outperform the other sectors. We believe it will likely show a recovery up to two quarters faster than the other sectors. We based our conclusions on several factors: the sector offers quick implementation times, low average sales prices, and the ability to leverage existing software investment. Additionally, this is a greenfield area that has the opportunity for rapid growth over the next several years. Very few companies have deployed analytical applications at this time. In contrast, we are seeing some market saturation, at least for the near term, in both CRM and supply chain. There appears to be some indigestion in the market from companies that have aggressively purchased CRM and supply chain systems over the last couple of years. The pace of buying was frantic. But before companies consider coming back to their vendors and buying more software, they want to get their existing products up and running and providing a meaningful ROI.

TWST: Which companies are the ones to watch in this area?

Mr. Ekoniak: In the business intelligence space the leaders that we like are Business Objects (Nasdaq:BOBJ) and Informatica (Nasdaq:INFA). There is also a very large private company, SAS Institute, that has over 1 billion in revenue that is worth watching.

TWST: What are the inflection points or goals for Business Objects and Informatica over the next six to 12 months?

Mr. Ekoniak: The attractiveness of the Informatica story is in its application product line. The strongest piece of Business Objects’ business is their extranet business. The extranet product line allows customers, partners and suppliers to generate queries and reports from a company’s system. Essentially, the extranet product leverages the power of the Internet and enables a broader piece of the supply chain to actually have more relevant, more current information.

1) The Future of e-Business - In an in-depth (2,200 words) Expert Interview, Mick Calder, Analyst at Line56, examines the outlook for the sector.

2) B2B Supply Chain Strategy - In an in-depth (3,000 words) Expert Interview, Rick Andrade, Senior Manager at Cap Gemini Ernst & Young, examines the outlook for the sector.

3) e-Business Management Strategies - In an in-depth (2,300 words) Expert Interview, Cathy Spencer, Research Director at Gartner Inc., examines the outlook for the sector.

4) Outlook for CRM and PRM Suppliers - In an in-depth (1,200 words) Expert Interview, Karen E. Smith, Senior Analyst at Aberdeen Group, examines the outlook for the sector.

5) The Continuing Evolution of B2B - In an in-depth (2,900 words) Expert Interview, Thomas M. Koulopoulos, President at The Delphi Group, examines the outlook for the sector.

6) Supply Chain Management Services - In an in-depth (3,400 words) Expert Interview, Jay Holata, Associate Partner of Accenture, examines the outlook for the sector.

7) Investing in e-Business Stocks - In an in-depth (3,100 words) Expert Interview, Robert McCullough, Director for Hurwitz Group, examines the outlook for the sector.

8) Supply Chain Strategies - In an in-depth (3,900 words) Expert Interview, John Fontanella, Service Director at AMR Research, examines the outlook for the sector.

9) E-Commerce Software - In an in-depth (3,500 words) Analyst Interview, Jon Ekoniak, Vice President at U.S. Bancorp Piper Jaffray Inc., examines the outlook for the sector and shares specific stock recommendations.

10) Outlook for e-Business - In an in-depth (2,400 words) Analyst Interview, William Chappell, Senior Analyst in Equity Research at SunTrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

11) Enterprise Solutions in B2B - In an in-depth (1,800 words) Analyst Interview, Robert B. Austrian, Managing Director at Banc of America Securities, examines the outlook for the sector and shares specific stock recommendations.

12) CEO interviews (average 2,500 words). Top management of thirty-eight sector firms examine the outlook for their firm and the sector.