There is little agreement from industry watchers on how to distinguish a mid-sized business from a small one. But according to the Institute of Accountants, that dividing line is not characterised by headcount, nor even revenue: it is in fact a state of mind – specifically, the burning ambition to become a larger company.

In recognition of this, business intelligence software maker, Business Objects, has embarked on a plan to win over some of those minds, with its new mid-market business intelligence solution.

Buoyed by a successful year (revenues for BO’s fourth quarter of 2006 were $371 million, up 22% on the previous year), the company has established a new organisational division targeting medium-sized businesses, with dedicated marketing and sales teams.

The strategy is easy enough to understand – according to its own research, the BI sales in the mid-market are rising at 12.5% a year. That is faster than growth in the enterprise market. But does BO have the infrastructure to meet the demands of the mid-market?

Whichever definition of ‘mid-market’ one favours, when it comes to BI, there is one feature that is impossible to ignore: fragmentation. Almost 80% of the market is controlled by 20 separate vendors.

For Business Objects’ VP for the mid-market, Todd Rowe, such diversity offers the opportunity to become a leader. “Our biggest competitor is market awareness,” he says.

However, it is impossible to discount the competition in the mid-market. Notably Microsoft has flexed its BI muscle, adding dashboard and performance management features to its release of Office 2007.

But while Rowe tries to downplay the significance of this formidable competitor (Microsoft’s presence in the market “is a good thing” because its improves mid-sized companies’ awareness of business intelligence, he argues), Microsoft already has on-board an army of resellers, with many years of experience targetting mid-sized customers.

But Business Objects believes it can match that strength by cultivating a development ‘eco-system’ around its products, in much the same way that Salesforce.com has introduced a development platform for its customer relationship management software.

This eco-system would provide resellers with a channel, through which they could sell adapted versions of Business Objects’ software, targeted at niche vertical markets.

BO’s new strategic direction takes place against a backdrop of looming consolidation in the business intelligence market. Application suite providers are intent on building BI functionality directly into their tools, effectively removing demand for independent BI vendors. According to Gartner research, Oracle, SAP and Microsoft will benefit most from the coming years’ BI spending. 

By aggressively targeting the mid-market, and with its forays into software-as-a-service (see Information Age Jan 2007), Business Objects aims to demonstrate its ability to go it alone. However, it remains an appetising acquisition target: its share price spiked in January 2007, as rumours of an imminent approach from Oracle resurfaced.