Business intelligence is growing in importance and the economic downturn that is currently affecting the United States and starting to impact Europe and the rest of the world only increases the need for it, says Nigel Raynor, senior analyst with the Gartner Group.
The market for business intelligence products is US$2.8 billion and preliminary results from Dataquest predict it will grow to over $5 billion by 2005, he reports. However, the problem is that business intelligence has gotten a bad rap. For some organizations the term has become an oxymoron as the executives – who need the kind of analysis they hoped to get from the mountains of data their organizations take in – become frustrated with the system’s lack of “intelligence”, Raynor says.
There is also confusion as to what qualifies as a business intelligence product among users and vendors, he says.
“Things we thought of as business intelligence in the past are things like data warehouses, data marts, management reporting, management information systems (MIS), and so on,” he says. “What we see recently is a lot of new terms that we would still say: ‘this is intelligence,’ but there is a lot of confusion in the market about what these things are. In particular is the case of customer relationship management [CRM] which has driven a whole new other type around things like customer intelligence and click stream analysis. Customer profitability is one of the hot issues with most businesses today. Those are things that we hear a lot about [and] Gartner still views those as forms of business intelligence.”
Complicating matters further has been an increasing convergence between the transaction applications such as the ERP (enterprise resource planning) systems, data marts, and CRM systems and so on, with business intelligence, he says. Over the last ten years, organizations have been implementing such systems and many of them have become “largely frustrated with the reporting analysis capabilities of these systems,” he adds.
“These systems are designed to process transactions, but they’re not designed to answer the difficult business questions that users need on a daily basis,” he explains. “They’re not well suited to predicting what might happen in the future. You need special business intelligence solutions to support that.”
To address these challenges enterprises have to have a business intelligence strategy and a framework to support that strategy, Raynor says.
A “business intelligence framework” has two components — an infrastructure piece and then a functionality piece, he explains. The Gartner Group has determined that transactional applications are not the right place to do advanced business intelligence. “They do not support it and are not designed to do it and it’s too restricted an environment,” he adds.
“On top of that infrastructure piece we need some functionality: we need business intelligence applications that can help answer those difficult user questions, we need reliable reporting tools, and we need underlying fact forms and data mining capabilities as well,” he says.
However, the difficulty for many organizations once they are able to standardize on one set of transaction applications is what happens when they acquire a company that uses a different set?
“How are you going to manage that business completely?” Raynor asks. “You need to implement a business intelligence strategy where you can put together an infrastructure which can take data from the transactional applications and put those into some form of data store, to build a data warehouse and perhaps one or two data marts as well, and increase your operational data store for new valuable information.”
Another issue has been the focus on what he calls particular domain areas. Users have been focused on domains such as highlights, OHR (organizational human resources) or distribution and unfortunately, that transaction, or that particular domain cannot answer those enterprise level questions. It’s difficult for users sometimes to print reports on some of those domains, he points out.
“On the IT side many business intelligence initiatives, many data warehouse initiatives, haven’t been required to return what people anticipated,” he says. “They have helped for some short-term problems and they’ve helped enable ‘information democracy,’ but they’re not really addressing some of these more sophisticated business needs that users have. That’s causing what we call ‘BI fragmentation’ where users are going off and buying all of these niche applications to address these issues, creating a plethora of platforms and redundant data sources with inconsistent data between them.”
Meanwhile, the roles of the users are changing. In the financial sector, the role of CFOs has changed significantly, he finds.
“Today, we see the CFO in the finance function focused very much on elemental business intelligence and less on transaction processing,” he says. “We see that balance shifting more towards what we call ‘corporate performance management’ – where the CFO and the finance function have to support appraisal business decision making and business intelligence across all domains, not just inherent ones.”
A case in point is Gerry Cox, director of finance and IT with Gerling Insurance. “I have what some may call an enviable role and others not such an enviable role as being responsible for both finance and information systems and I firmly believe that the lifeblood of an organization is information,” he says.
Gerling, among the world’s top companies in industrial and commercial insurance, has its international headquarters in Cologne, Germany and 12,000 staff worldwide.
Cox says that with over half of its business being generated by overseas activities – with subsidiaries in Canada, the United States and Mexico — having the right information at the right time in a form that is readily understandable is essential to Gerling’s management.
“Now more than ever I think there is a need to focus on better, not more information, and I can see the importance of this from both sides of the fence with my dual role,” Cox says. “As a finance director I need to know: how are we doing, how do we compare to our balanced scorecard, our competitors and the rest of the market? I need management information. I need it fast. I need it to be reliable and I need it to be understandable. What I need creates not only financial information, but also known financial measures and it needs to be information that measures the past but also gives me a view to be able to anticipate the future. Basically there is one simple question: where can I see what I need?”
Putting his hat on as an IT director, Cox recalls an old saying: data rich, information poor. “That was something I heard many years ago, but I think it’s even more prevalent now that we have the advances in technology coming along thick and fast. We have a multitude of systems — financial systems, business systems, statistical systems, and HR systems — running from a multitude of platforms whether they be mainframe, spreadsheets and paper.”
Raynor reports that traditionally, the business intelligence market has come from a lot of people – more on the technology side – data warehousing vendors, business intelligence testing or tool vendors that have provided technology infrastructure and generic solutions to try to address some of these issues.
While vendors have certainly helped and gone a long way to providing what Raynor calls ‘information democracy’ – allowing end users to get better access to transactional data – they still struggle with some of the more complex business questions such as: customer profitability, comparative analysis, marketing segmentation, supporting the budgeting process and supporting new management [initiatives] like the balanced score card.
“So what we’ve seen in the business intelligence space is the growth of niche business intelligence application vendors serving those needs,” Raynor adds.
“Nobody today can provide a complete solution,” Raynor says. “What the ERP vendors and other people must realize is that transaction applications are not the place to do the reporting and they’ve got to help enable the business intelligence framework that organizations are trying to put together. In particular [the vendors] have got to provide the direct business content into the infrastructure and make it easy for users to get their business content into the infrastructure and to add value to their applications by providing evolved business intelligence applications and reporting tools to support the more sophisticated questions, complex questions that users are asking and they can do that in a number of ways: they can build, they can partner and they can acquire potentially,” he concludes.
Putting the intelligence back into business
One vendor, the CODA Group – a financial accounting and procurement software developer – hopes its latest release will help organizations banish business and intelligence as an oxymoron forever by meeting some of the specific challenges Gartner’s Raynor described above.
The Bedford, N.H., company has launched a new business intelligence software program called CODA-Intelligence to provide CFOs and other key information consumers with rapid access to up-to-the-minute financial information from anywhere, using any device – from personal digital assistants (PDAs) and mobile phones, to laptops or standard PCs.
CODA started in 1979 by specializing in accounting software. Their original product had one single integrated database said to allow financial accountants to produce information without having to do such things as reconciliation across various ledgers. Last year, CODA was re-launched as a supplier of corporate financial software, after Holland-based Science Systems acquired the CODA business from Baan Company for $49.3 million. The new company combines Science Systems’ expertise in accounting, finance and business consultation and IT services with CODA’s finance solutions.
Whether comparing investing and leasing costs, tracking key performance indicators or analyzing stock price performance against that of competitors, CODA-Intelligence is intended to provide the information and powerful analysis capability required to make informed strategic business decisions.
Gerling has been using CODA’s accounting programs for the last three years. “The key question for me, as an IT director, is how can I pull all that information together? Executive information systems, balanced scorecard, traffic lighting, data warehousing — we’ve heard all of these descriptions for many years now, so this is not at all a new concept, but perhaps CODA-Intelligence could provide a real solution to this,” Cox says.
CODA-Intelligence addresses the need for organizations to take data from across their applications for manufacturing, supply chain, CRM, HR, sales, accounts and turn the data into accessible and meaningful information. Typical types of financial intelligence required in decision-making are:
For the CFO – debtor days over a selected time period, trend analysis, Profit and loss summaries, gross margins by product and geography,
For the CEO – long term share performance versus competitors, quarterly turnover per share, customer satisfaction and customer lifetime value,
For the CIO – comparative hardware purchasing costs versus leasing strategies. The breadth of the solution means that the needs of information consumers from all levels of the organization can be met.
The new business intelligence software presents the requested information to the user in the format required, and personalizes the way the information is received – so the user gets the reports, information and analysis they want without having to wade through mountains of data, says CODA’s vice-president of product strategy Jeremy Roche.
To address the conflict between transactional applications and business intelligence that enterprises often struggle to deal with, CODA has recreated the honorific data based on the transactional data compared to financial, but also the transactional data that is required from all of the operational systems.
“In order to move data into an online analytic processing form you have to be convinced that the data is clean and that it balances,” Roche says. “CODA is unique in the design of its applications in ensuring, by having a single integrated ledger, that all data in regards to CODA is clean and balanced. When we extract that data for analytic purposes we are 100 per cent confident that it is clean and correct and that our customers can rely on it to make management decisions.”
The next challenge for CODA’s engineers were the human resources issues raised by the main expertise of the providers of the applications that the customers will use, Roche says.
“Many end user companies don’t have on hand the kinds of skills they need in order to create these applications,” he says. “With the slow down we’ve seen in the world economy, people are less able to afford the payroll costs of having these experts on hand for the few times they actually need to use them. CODA addresses this largely by having out-of-the box solutions to satisfy their requirements.”
The third challenge is meeting the business intelligence framework that needs to support the production of business intelligence data as identified by Gartner’s Raynor.
CODA-Intelligence is what the company calls a “fast track” packaged solution that speeds up implementation and makes the process of collecting the necessary data more cost-effective, eliminating the need to reinvest heavily in data warehousing and maintenance. Roche says the packaged approach removes the need to recruit and retain skill sets which are increasingly sought after and typically in short supply.
CODA-Intelligence allows for information to be distributed, using industry standard reporting, and analysis and information delivery products such as portals. The new software integrates with the company’s prior release CODA-Financials.