Business strategizing must precede data analysis

There has been considerable consolidation among business intelligence (BI) software vendors. Just this year, Hyperion Solutions bought Brio Software; Business Objects bought Crystal Decisions; and the CEO of Information Builders has reportedly said a purchase is very likely next year. SAS has been making acquisitions. Microsoft has entered the BI market. And, at least one analyst predicts SAP AG could be a potential major BI vendor. To gain some perspective on BI and other data management software, we spoke to Warren Shiau, senior analyst for the software research program at IDC Canada Ltd.

IT Focus: What is your take on all this consolidation activity?

Warren Shiau: Sometimes consolidation activity will actually enhance the amount of choice available to users. Let me put context around that. Let’s take for instance a situation like Linux. Not long ago there was something like 150 to 200 unique Linux distributions. It is not until Linux started consolidating around Red Hat and to a lesser extent UnitedLinux that users have considered Linux to be a viable enterprise platform choice.

There are a lot of smaller vendors in BI who were supported by the stock market or private capital and the buoyant IT market. We’ve moved on and business has tended to go back to fewer but stronger vendors. When a financially strong vendor like Hyperion takes a vendor facing financial challenges like Brio, and buys it because the product line and technology are strong, it is ensuring that Brio’s Canadian customers will continue to have that choice to use Brio. By sheltering Brio’s product and technology under the umbrella of Hyperion’s resources, consolidation allows greater choice to continue.

Crystal Decisions has been enjoying a large amount of growth the past few years. Its main business is in query and report tools, not complete BI solutions . Having bought Crystal Decisions, Business Objects obtains a strong Canadian position in an area of BI that is strong right now, and Crystal Decisions obtains a path for future growth. Crystal Decisions users who are buying into a relatively simple end-user query and report tool now have an in-house migration path to a more complex comprehensive BI solution.

So, consolidation activity is, on one hand, narrowing down the choice, but on the other hand, it is creating stronger entities. It’s positive; there are still enough vendors competing.

IT Focus: How realistic are software vendors’ claims that by applying customer and market data, Canadian manufacturing, wholesaling and retail firms could have more efficient supply chains, reduce their inventory, be more responsive to customers’ needs, be more competitive and so on?

Shiau: It is not so much any general application of customer and market data that creates competitive advantage; it is the efficient application of customer and market data; that is, how quickly you can do it. For example, you can be collecting various reports from different suppliers, different vendors, different warehouses, different customers, etc. but if your system doesn’t give you up-to-date data, or if it’s a snapshot of the situation a month ago, then how useful is it to you? So the real necessity is for customer and market data to be available in real time.

When vendors start talking about providing real-time intelligence, realistic possibilities for strongly enhancing efficiency in areas such as production and inventory arise. Real time is the differentiating factor. If the information you are analyzing and basing schedules or allocations on is always behind what is being produced in the factory, and what is en route to the warehouse, what is in inventory, etc. then how do you have real efficiency, real responsiveness to customers, or generate real competitive advantage? The more your BI lags, the more you need to build buffers into your schedules, allocation and planning and the more inefficiencies you build into your business processes.

IT Focus: Do you see any opportunities being overlooked by Canadian companies in these industry sectors when applying BI, CRM analytics, data warehousing and other data management software?

Shiau: Once you understand your business processes and the IT infrastructure you have supporting and surrounding them, you can start understanding what sort of data you can generate, store and analyze to more efficiently run your business, and how quickly you can do that within the constraints of your IT infrastructure.

Opportunities can also arise in situations where there are BI islands — different pieces of BI solutions and data management solutions sitting in isolation in companies. It could be the data warehouse that is isolated with all sorts of data being fed into it, but the data just sits, not being analysed, or is analysed in a very off-line fashion. You could have an analytics package sitting off in one department and it is applied in one specific way in that department, when the department’s function crosses multiple business processes. The analysis that could be used to improve the efficiency of entire processes across the organization instead benefits an island within the organization. This often happens when there is a lack of IT and business strategy around understanding the business processes that make up how the company operates.

IT Focus: What other hurdles face Canadian companies in getting the full benefit of such software?

Shiau: A lot of hurdles arise from either the basic computing infrastructure or the lack of IT personnel resources in place, particularly in smaller manufacturing/retailing/wholesaling operations where the margin is very thin. It becomes hard to implement something that may eat up a significant portion of the operating budget over a half-year or year that’s not going to start producing returns until a half year or a year later.

When you get into larger companies that may have different elements of their data management solution in place in isolation, then we’re starting to talk about problems managing data. How do you manage data from multiple sources that needs to be pulled into an organizational BI system? How do you integrate various analytics packages or BI tools?

ROI starts to become a factor when you get to the very large idea of pulling together all the isolated data management and BI elements to implement a comprehensive strategy. Let’s say you have critical data for analyzing a business process scattered throughout a bunch of different departments, functions and systems within the company. It is difficult to foresee how much IT resources and effort it will take, how much cost will be involved, and how much time it will take.

That makes it very hard to realistically estimate ROI.

That’s why we’re seeing a lot of renewed emphasis on targeted BI spending in the Canadian market. Crystal Decisions’ growth is an example of this. Buyers know what they are going to get with Crystal because they are buying a solution that is targeted on query and report functionality. This targeting makes it easier to predict the IT resource and effort needed for implementation, the cost, and the time, which makes it easier to realistically estimate ROI. Same idea with a data warehouse: if all you want to do for the time being is set up a data warehouse and feed it with data, it’s relatively easy to figure out cost, effort, time and ROI.

To overcome these hurdles you really need to start with organizational buy-in on the value of understanding the business processes that make up the business. That’s an argument that centres on margin. Do we really know how efficient we are? Do we need to know? If we could add XX points of operating margin how much of a competitive advantage would we get? How can BI be used to let us know all this? If the CEO and executive suite buy into the argument that understanding the business processes that make up the business is essential to using BI, then it’s possible to start determining what data you need to analyse efficiency, productivity, and how well thought out your processes are. That’s the key starting point for unlocking the full benefit of BI.

IT Focus: Do you see any other trends in the broad context of data management software that our readers should be aware of?

Shiau: Users may want to start looking at what the enterprise vendors may be offering in BI in two areas, and encourage standalone BI vendors to develop equivalent integration or solutions: One is ease of implementation, because enterprise vendors may be offering BI functionality that is already integrated into a larger applications offering, business process offering, database offering, software stack, etc. Two, reduced implementation risk, because enterprise vendors (or their partners) may offer managed implementation packages where they take responsibility for the implementation of a comprehensive business process and BI solution for the user under a guaranteed timeline and cost.

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