Back on June 19th LucidEra closed its doors and went belly up.  Is this the beginning of the end for SaaS BI?  Not in my opinion.  This will not have a major impact on other SaaS BI and Performance Management vendors.  LucidEra needed more funding and couldn't find it.  This is a sign of the times more than a vote of no confidence for the future of SaaS BI.  There is less money available, more competition for available funds and less patience in the investment community for results.  I think 3 years ago LucidEra would have been able to conjure up another round of funding and kept on truckin'.  But this isn't three years ago.

What is surprising to me is that no other vendor was willing to acquire LucidEra or at least acquire its assets.  It is rare for a BI or PM vendor to just close its doors.  I guess that is the downside of the SaaS model from an acquisition perspective.  The  "pay-as-you-go" licensing model and the fact that many SaaS BI vendors have small client bases (LucidEra only had 40+ clients) limits the value of acquiring struggling vendors. 


Why SaaS BI and PM will Survive (and grow)

1. BI is not one-size fits all - Everyone is trying to reduce the number of BI vendors they deal with but getting down to one is very unlikely.  A SaaS option as a supplement to on-premise will become a more common scenario.
2. It costs less, can be implemented faster with less IT support than on premise - This will make SaaS attractive to the mid-market and start-ups (yes there are still some of those).
3. IT is starting to realize that the on-premise enterprise BI standard is not always the best fit for a specific departmental or functional requirement - They are realizing with the proliferation of data and expanding user communities, SaaS can help reduce the burden on IT to support the expanding environment.
4. SaaS BI is becoming more palatable to a larger percentage of the market - according to the 2008 BI/PM Spending Report by my friend and former colleague at AMR Research, John Hagerty, well over 60% of surveyed companies are willing to consider SaaS BI as a deployment option.  This has grown year over year and I expect to see further growth when AMR publishing its 2009 BI/PM spending report later this year.
5. Security concerns are being addressed more effectively - The wider acceptance of SaaS BI by IT and the overall BI market has increased demands for security and governance.  To meet this increased demand, many SaaS vendors now provide prospects with a SAS 70 audit report of their internal controls.  Look for SaaS BI vendors to establish partnerships to meet these governance and security demands.  Partnerships with cloud behemoths like Google and Amazon as well as security specialists like Protegrity can help allay the security and governance concerns of IT.
6. Coopetition - Forgive me for the blatant use of marketing jargon but it actually applies here.  SaaS BI vendors know that their individual survival depends on the SaaS market successfully competiting against on-premise BI.  So while these vendors will compete against each other the common enemy is on-premise BI.  Pivotlink and other SaaS BI vendors have offered attractive migration packages to LucidEra clients to prevent them from going back to the "dark side" of on-premise BI.  It will be interesting to see how successful the SaaS vendors are at keeping the LucidEra clients in the SaaS BI camp and how quickly and effectively these migrations occur.