From Computer Business Review, a sister publication.
Barring the industry rush to exploit the Internet, for many technology analysts, the hottest computer market on the planet is data warehousing. Large corporate organizations have become sold on the idea that a mix of powerful servers, relational databases, multidimensional data analysis engines and front-end query tools can help them quarry marketing gold from their historical customer data. Seeking a slice of what the Gartner Group estimated to be a $1.5 billion market in 1995 growing to $7 billion by the century’s end, large vendors such as Oracle, Informix and Seagate Software have all been buying into the data warehousing software sector. But the hottest property in the market is a group of still relatively small companies – such as Arbor Software and Business Objects – with annual revenues of between $24 million and $60 million and whose 100% annual sales growth and a fast global ramp up is giving them a sexy profile on Wall Street. Planning Sciences, the latest to make a serious bid for prominence in this market, holds many of the same cards. Having listed on the US NASDAQ stock exchange in April, the UK-headquartered company is expected to report sales growth of 46% to $24 million in 1996 on the back of Gentia, an On-Line Analytical Processing (OLAP) multidimensional database system used in decision support. Alex Brown & Co, the investment bank which helped underwrite Planning Sciences public offering, believes the whole warehousing market will soar at a compound annual growth rate of 50% over the next four years. Rising even faster, the multidimensional database segment in which Planning Sciences plays, is set to grow at between 60% and 70%. Confidence in the robustness of this sector is shared by Wall Street, which marked Planning Sciences’ stock up from an initial offer price of $16 to $32 during the first few days of trading. Flush with $30 million from that listing, Paul Rolph, the 52-year old head of Planning Sciences, plans to ramp up the company’s push into the US and Europe, aiming to create a $200 million operation by the end of 1999. To get up there, Planning Sciences is going to come up against some of the software industry’s more potent forces.
Tough competition
Last summer, Oracle spent $100m buying IRI Software’s Express OLAP technology, making it the instant market leader on OLAP tools. Shortly afterwards, Informix joined the OLAP club with the acquisition of Stanford Technology Group. And last month’s announcement that privately-held and fellow British OLAP vendor Holistic Systems had been acquired by Seagate for $84 million is another sign that Planning Sciences must complete its breakneck rush to gain the kind of a critical mass that will prevent it from being swallowed by a larger fish. Rolph shrugs off suggestions that the company’s day in the sun could be all too brief. If we were made the right offer and it meant we could achieve our goals quicker, we would think about a deal, he says. But a poison pill arrangement to deter an unfriendly takeover was set up as part of the flotation, and Rolph says he walked away from what now seems a derisory bid of $15 million two years ago from an unnamed competitor. Planning Sciences’ currently favourable position is, ironically, due to a serious mishap. Founded 13 years ago by Alan Wallman, who relinquished the running of the company to Rolph five years ago, the firm originally sold an executive information system package on MSDOS called Epic. Epic did reasonable well in the UK, but an attempt to port the software to Windows in the early 1990s was a costly failure. Instead, Rolph decided to invest in a completely new product, called Gentium for the first two years until Intel’s lawyers objected that it was too close to its processor-naming convention. Renamed Gentia, the multidimensional OLAP product is a true native Windows product, built using NeXT’s NeXTStep object oriented development environment, and based on an intuitive object metaphor. (Elements of the software are thought of as ‘pages’, which link to ‘chapters’ and eventually ‘books’). Since its launch in October 1993, Gentia has won over 1,500 corporate clients worldwide. More than half of these are now in the US, an international push that will only be helped by the increased visibility that its NASDAQ listing will bring. Prior to the stock offering, US sales had gone from zero in 1993 to nearly 50% of revenue last year, boosted by large individual sales such as a $1.5 million purchase from Texas Instruments.
Price pressure
With the success of the flotation behind him, Rolph is busy forestalling rivals like Oracle, Business Objects and Seagate Software which are preaching a message of ‘OLAP for the masses’, dropping the price of the client PC component of their software. Rolph maintains that Oracle is giving away copies of Express to build market share in the fragmented, immature market. That could make it tough for Planning Sciences whose typical sale price point is north of $100,000 and which still lacks the size and profile to guarantee that it will reap the huge opportunities available in data warehousing.
