New research from analyst firm Gartner shows the domestic market for BI applications will grow to be worth $184 million this year and reach $251.5 million by 2011. Enthusiasm is being fuelled by the fact that many CIOs realise they need a BI strategy if they are to improve customer service and keep senior management happy.

While this sounds like great news for BI vendors, Gartner’s longer term outlook for the sector is not so rosy. It predicts global growth will slow to single digits by 2011 with a five-year compound annual growth rate of 8.6 per cent.

“The days of strong double-digit growth in the global business intelligence market are over, as the industry enters a state of flux following vendor consolidation, increasing maturity and price erosion,” says Gartner senior research analyst Bhavish Sood.

“However, BI remains critical for businesses as it turns information into an asset for insight and decision making, especially in high-growth markets in Asia.”

The BI market has experienced some major consolidation during the past 12 months with large software companies snapping up smaller specialist firms. Oracle has purchased Hyperion, SAP is working on buying Business Objects and IBM is close to securing Cognos.

According to Gartner’s figures, more than two-thirds of the BI space is now controlled by large software firms. This is expected to make life increasingly difficult for smaller, niche players.

Another challenging factor is the rapid growth in hosted BI systems delivered via a software-as-a-service model. As well as changing the traditional licensing model, this approach can make it easier for users to switch between rival offerings as their needs change.