Monday, July 23, 2007

BI Software as a Service

Like many others, I went to the July meeting of the SDForum Business Intelligence SIG expecting to hear about and its new AppExchange. In practice we heard about a lot more. The speaker, Darren Cunningham, had just left and joined LucidEra, a new start up that specializes in Business Intelligence as Software as a Service (SaaS). Darren also brought along Ken Rudin, the CEO of LucidEra who had some interesting things of his own to say. There are several write ups of the meeting on the web that capture the big picture. I want to note a couple of the smaller moments from the meeting.

Firstly, both Ken and Darren described building your own business intelligence system as being similar to a business building and running its own Nuclear Reactor. What they mean is that while a full blown data warehouse can be very powerful, it also requires a lot of maintenance and attention to detail to keep it running. In practice many businesses do not have the resources and energy to keep their business intelligence system running in the kind of peak condition that is required to get value from it.

Secondly, someone asked about LucidEra's pricing and business model. Darren explained that they are taking the same approach as That is, start with an offering for small and medium businesses and then build up to the larger businesses. After 8 years in business is just now starting to sign up large businesses like major brokerage houses.

Ken had some interesting things to say about pricing. Unlike sales, a typical business has a few business analysts who would be the major users of their system, so pricing on a per seat model is difficult. Also they do not want a tax on reports, so the pricing model should allow a business to run as many reports as they want. Therefore LudcidEra uses a flat rate per application per customer. Currently they are using a single flat rate of $2900 for their starter application.

In my opinion, a flat rate encourages the customer to use as much of the service as they can which is a good thing, however it is optimal for a particular size of business. Smaller customers are shut out by a cost that is too high for them. Large customers could overwhelm the service without fully covering their costs. One way to expand the model is to provide tiered pricing based on the size of the customer. Tiers could be based on either customer total revenue or number of employees.

At the moment LucidEra is just starting to build their portfolio of customers and applications. They will have to suffer growing pains before their pricing model is put to its full test.

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