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Vendor Rating: Crystal Decisions Makes Clear Progress
27 January 2003
Bill Hostmann

Document Type:  Research Note
Note Number:  VDR-19-1314
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Crystal Decisions has executed on its focused product and partnership strategies and grown its revenue in a challenging market. Although it needs to prove itself as more than a reporting vendor, we rate it "positive" overall.


Crystal Decisions Overall Rating: Positive

What You Need to Know

During the last few years, Crystal Decisions has focused on leveraging its flagship product, brand name and high-profile distribution partnerships to attract more big corporate customers. To keep its growth story going, however, it must continue to round out its product line and develop its marketing channels to be competitive globally with Cognos and Business Objects. Enterprises can be confident in the viability and outlook of Crystal Decisions and should include the vendor in their consideration of leaders in the business intelligence market.

Crystal Decisions
Headquarters: Palo Alto, California
Web Location: www.crystaldecisions.com

Analyst Comments

Given a finely honed capability for forging blockbuster partnerships, as well as solid market understanding and product decisions, Crystal Decisions has emerged as a significant competitor among business intelligence vendors.

Detailed Rating

Initiative Rating
Corporate Viability  
     Strategy Positive
     Financial Positive
     Marketing Promising
     Organization Promising
Product/Services/
Technologies
 
     Product/Service Positive
     Technology Positive
     Pricing Caution
Customer Service/
Product Support
 
     Sales/Distribution Promising
     Support Services Promising

Corporate Viability

Crystal Decisions was founded in 1984 in Vancouver, Canada. Early in its history, the company built a large user base when its reporting software became part of Microsoft's popular Visual Basic application development suite. The strategic partnership with Microsoft continues today and has helped make large numbers of developers familiar with the product. In 1994, Crystal Decisions was acquired by storage vendor Seagate Technology. In June 1999, it was spun off from Seagate as part of a complex buyout engineered by Silver Lake Partners, Texas Pacific Group and Seagate's executive management. Today, Crystal Decisions is a majority-owned subsidiary of Seagate Software Holdings, a Cayman Islands limited corporation.

Strategy: Although many business intelligence (BI) vendors have adopted a growth strategy that expands their product portfolio through acquisitions or entries into new markets (for example, analytic applications), Crystal Decisions is taking a more-focused growth strategy to build its business through:

Crystal Decisions' emphasis on its core product line and expanding and leveraging the sales channel and partnerships should fuel the company's growth and increase the value of its product offerings. Therefore, we rate Crystal Decisions' strategy as a "positive."

Financials: Revenue has continued to grow since Crystal Decisions was spun off from Seagate in June 1999 (Crystal Decisions' 2000 fiscal year). Net income and cash have also improved (see Figure 1 and Figure 2). Two significant events were accounted for as "unusual" expenses in 1999 and 2000, resulting in large net losses for those years. For 1999, Crystal Decisions incurred an $87 million charge for the sale of a product line to Veritas Software that resulted in a net loss of $96 million. For 2000, Crystal Decisions incurred a $243 million reorganization expense that resulted in a net loss of $221 million. For the quarter ending September 2002, revenue was $65 million (64 percent of which was license revenue and 36 percent of which was service revenue). This is an increase in total revenue of 35 percent over the same period in 2001. Net income for the same period was $7.1 million — a 190 percent increase over the same period in 2001. Few other vendors in the enterprise software market have been able to show this healthy level of revenue growth.

Figure 1

Crystal Decisions' Fiscal-Year Revenue and Net Income

Figure 1

Source: Crystal Decisions

Figure 2

Crystal Decisions' Fiscal-Year Cash and Cash Equivalents

Figure 2

Source: Crystal Decisions

Marketing: Establishing itself as a leader in the EBIS market will require a new marketing approach for Crystal Decisions. To date, it has not shown the level of marketing sophistication of its competitors. Although the traditional marketing focus has been on the developer community and indirect reseller channels, Crystal Decisions has recently begun to emphasize its marketing to enterprises more. As it expands its capabilities, Crystal Decisions will need to expand its marketing presence and messages to appeal to enterprise buyers worldwide. Not being able to extend beyond the United States to reach these buyers will hamper Crystal Decisions' overall success.

Products/Services/Technologies

Crystal Decisions' product portfolio includes Crystal Reports, Crystal Analysis and Crystal Enterprise. Crystal Enterprise provides an integrated, Web-based solution for reporting, analysis and delivery. It includes Crystal Reports and Crystal Analysis. Crystal Reports 9 provides query, report design, application development and Web report publishing functions against relational and multidimensional data sources. The release of Crystal Reports 9 added report templates and component reuse to make it easier to reuse and leverage previous report development efforts. Crystal Reports 9 extends support for all the major development platforms and comes with Java, .NET, and Component Object Model software development kits. Crystal Analysis combines user ad hoc queries, analytic reporting and interactive online analytical processing (OLAP) against multidimensional data sources.

The release of Crystal Enterprise 8.5 expanded the breadth of platforms and developers with the additional support for Unix. The new Crystal Enterprise 9.0 release is better integrated with Crystal Reports 9.0 and provides the back-end power to support real-time and scheduled reports with a clustered, multiserver architecture that can span Windows, Linux, and Unix platforms (Sun Solaris and IBM AIX). However, core system services for Crystal Enterprise 9 must run on Windows 2000/NT. Crystal Enterprise 9 will also provide significantly enhanced support for viewing data from OLAP servers. These product releases have continued to make the product line more mission critical in terms of reliability and scalability, increased the cross-platform support, made products more open for application developers, and provided better integration of reporting and analysis functionality. These product releases show a good understanding of the market and the ability to execute on user requirements today and in the future.

In addition to its core products, Crystal Decisions offers other BI products. These include Crystal Applications and Crystal Analysis Holos Analytic Server, which is an OLAP server-based platform for developing BI applications. Although Holos product development continues, it is not mainstream technology and is peripheral at best in terms of marketing. Crystal Applications are pre-built customizable templates that provide a starting point for developing BI applications and are packaged with consulting services. The templates include Budgeting & Forecasting, Customer Profiling, Balanced Scorecard (the most popular one) and Telecom Analysis. Although Crystal Decisions' applications depend on Holos as a platform today, Crystal Decisions states that it will become more open in time and will be built on top of Crystal Enterprise.

Unlike Cognos and Business Objects, Crystal Decisions has chosen not to focus on analytic applications and extraction, transformation and loading tools, but rather to provide an underlying framework and work with the appropriate partner when a customer needs those capabilities. This approach provides an attractive alternative to the single-vendor "full stack" approach being offered by many competitors.

Crystal Decisions has its own Crystal Services Professional Services Organization. However, it also partners with leading systems integrators and domain-specific application specialists for implementation services. Working with these large systems integrators will bring added credibility, potentially larger deals and a shortened sales cycle for Crystal Decisions. Although a partner services strategy may not optimize service revenue opportunities, these partnerships will further strengthen Crystal Decisions' presence in the enterprise marketplace.

We rate Crystal Decisions pricing as a “caution.” This is due to fairly complex licensing terms that are a part of the SAP reseller agreement, and the additional fees required for report distribution and broadcast to large sets of Crystal Reports users. Enterprises should look closely at the licensing and pricing terms to ensure that they understand the scope and limitations.

Customer Service/Product Support

Although Crystal Decisions' North American direct sales organization has grown since 2001 to focus on enterprise accounts and has contributed significantly to Crystal Decisions' overall revenue growth, the sales presence in many European countries is still relatively weak or even absent. Gartner clients indicate general satisfaction with the support they are receiving from Crystal Decisions.

Related Research and Ratings

"BI Magic Quadrants: Excitement in a Flat Market"

"Microsoft Pursues BI: Opportunity Is Clear, But Vision Is Not"

Rating Definition

Strong Positive Solid provider of strategic products, services or solutions.
• Customers: Continue investments.
• Potential customers: Consider this vendor a strong strategic choice.
Positive Demonstrates strength in specific areas, but is largely opportunistic.
• Customers: Continue incremental investments.
• Potential customers: Put this vendor on a short list of tactical alternatives.
Promising Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured.
• Customers: Watch for a change in status and consider scenarios for short- and long-term impact.
• Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor.
Caution Faces challenges in one or more areas.
• Customers: Understand challenges in relevant areas; assess short and long term benefit/risk to determine if contingency plans are needed.
• Potential customers: Note the vendor's challenges as part of due diligence.
Strong Negative Difficulty responding to problems in multiple areas.
• Customers: Exit immediately.
• Potential customers: Consider this vendor only if there are no alternatives.


Acronym Key

BI Business intelligence
EBIS Enterprise business intelligence suite
OLAP Online analytical processing

This research is part of a set of related research pieces. See AV-19-2672 for an overview.