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Crystal Clear Strategy For The Mid-Market?

Business Objects has a new objective: to generate at least half of its sales in the mid-market, defined as companies with under $1 billion in annual revenues.

The company, which makes software that helps customers analyze and improve decision-making internally and with trading partners, counts about 80 percent of its customers among the Fortune 500. But it lusts after a mid-market sector where it sees potential for much higher growth and fatter margins. Today, it is launching a new line of business intelligence (BI) products and a channel strategy to support that drive.

The first product in the suite, Business Objects Crystal Decisions, Standard Edition, is available today, and includes basic BI features such as ad hoc query tools, analysis and dashboards.

Later this year, it will introduce the Professional edition, which will include data cleansing and data quality functions for companies who have to combine data from a variety of sources, and the Premier edition, which includes performance management tools allowing companies to use data more pro-actively.

Todd Rowe, vice president of worldwide mid-market business at Business Objects, said BO will establish a migration path so companies will only have to pay for the additional functionality if they chose to move up the ladder.

The goal is to make the applications easier and less expensive for smaller companies to implement.

However, Rowe said that unlike many other offerings for the mid-market, the new product suite "is not a dumbed-down version of an enterprise application."

It will include pre-built report templates that are specific to industry verticals.

To support its mid-market focus, the company is offering its channel partners, many of which were inherited from Crystal Decisions, extra incentives to sell its applications. For example, value-added resellers (VARs) will get to keep 100 percent of the revenues they generate through maintenance, support and training contracts as well as all of the industry-specific

Business Objects competes with Cognos , Microstrategy and Hyperion . With its latest mid-market push, it will find itself going head-to-head with Microsoft as the Redmond, Wash.-based vendor starts cranking up the marketing engine for Office 2007 and related products in the mid-market sector.

There's a good reason for this intense activity among vendors. "The mid-market is growing phenomenally," said John Haggerty, an analyst with AMR Research. In 2006, companies spent over $23 billion on BI applications, he said. Business intelligence is "one of the largest areas that people are spending money on, and that spending is accelerating over time."

Haggerty believes that Business Objects has hit on the right strategy for attacking this market, particularly with the incentives for VARs, which he said are unique in the industry.

In contrast to other vendors attempting to address the mid-market, Business Objects has established strong channel relationships. "They have the channel and now they're trying to build out the product. Others have the product but not the channel," he said.

For the time being, Business Objects, Cognos, Microstrategy and Hyperion can fight for share among themselves, said Haggerty. Then they all face a much larger rivel, he added. "Microsoft will eventually take a more prominent position; and that position will only accelerate over time."