In June, when SaaS business intelligence vendor LucidEra had to shut its doors, several spectators called it an omen for all SaaS BI vendors, but smarter ones (like THINK IT’s Jeff Kaplan) recognized the situation for what it was. Simply put, LucidEra and a lot of other first-generation SaaS vendors were simply too early. They had to invest in the infrastructure needed to support their applications; if they failed to reach significant size soon enough, the lack of capital would leave them unable to support that infrastructure.

Analysis

The next batch of SaaS BI providers (and SaaS-based business software companies, in general) will not have to face that early investment thanks to cloud computing. A number of hosting companies have created offerings to support SaaS vendors in the last year, allowing them to use resources as needed and play in the software business instead of the infrastructure business. LucidEra’s problem was that it was too early for the cloud, and its timing large in-house infrastructure had become obsolete and impossible to pay for.

But the idea that LucidEra’s closure was the death knell for BI for small and mid-sized business is completely off base. Want evidence of that? Look at Quantivo, an on-demand provider of customer analytics. Last Wednesday, the company announced that it had moved its service to a cloud – namely, Amazon’s EC2 – giving it the ability not just to offer customers a sustainable service, but to allow them to jam as much data into it as they need to without causing Quantivo’s infrastructure to turn turtle.

“Amazon gives us an infrastructure that’s virtually infinitely scalable,” said Brian Kelly, Quantivo’s CEO. “Our customers can take as much data and do as much crunching with it as they desire.” One customer, for example has 30 million unique customers and 6 billion unique records that it sifts through with the service.

That service, by the way, is a B2C-focused behavioral analytics solution called Affinity Analytics, which discovers behavior patterns in customers and helps companies discover the conditions that precede purchases. This can often be a fairly complex operation; Kelly likes to talk about a large DIY store chain running a promotion for paint. “You know on Monday whether you’ve sold more paint, but you won’t know what other products that paint pulled along, especially when they cross categories. And you certainly won’t know if the customers that come in the following weekend for painting supplies were there because of the previous week’s paint promotion.”

Quantivo’s product also works in anticipating sales and helping sales act at the right time. For example, studying patterns of customer activity can indicate what behaviors cabinet buyers engage in 90 days before making a major purchase, Kelly said.

This capability has been available to large companies, but midsize companies were largely excluded from the party until the advent of SaaS. Affinity Analytics is available for as little as $5000 per month, Kelly said, making it a better fit for more marketing budgets. “And with the cloud, data is no longer a barrier to entry, either,” he quickly added.

Conclusion

The combination of the cloud’s expandability and its relief of the SaaS provider from major infrastructure investments bodes well for even smaller businesses; there’s little doubt that BI offerings targeted at small business with even lower price points will crop up soon. For now, consider Quantivo as a proof of concept for how the cloud will democratize business intelligence.