Reprinted courtesy of AnalystViews.com.
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Many analyst firms are predicting that Business Intelligence (BI) will be one of the hot areas for IT investment in 2005. In this article, we'll look at analysts' views of what BI really is, some of the reasons behind the increased interest in BI, and some of the pitfalls to which users should be alerted. We will also provide some analyst recommendations for how best to proceed with BI.
What is BI?
For an answer to this question, we turn to a concise summary provided in a recent Technology Evaluation report:
"BI is neither a product nor a system. It is an umbrella term that combines architectures, applications, and databases. It enables the real-time, interactive access, analysis, and manipulation of information, which provides the business community with easy access to business data. BI analyzes historical data—the data businesses generate through transactions or by other kinds of business activities—and helps businesses by analyzing the past and present business situations and performances. By giving this valuable insight, BI helps decision makers make more informed decisions and supplies end users with critical business information on their customers or partners, including information on behaviors and trends."
The report also commented on some of the other acronyms that are related to, and often confused with BI. According to Technology Evaluation, "Part of the confusion about BI lies in the flurry of acronyms relating to analyzing business information. In addition to business intelligence, terms like business performance management (BPM), business process management (also BPM), corporate performance management (CPM), and business activity monitoring (BAM), have also emerged. All of these are a part of BI. They are all dependent on BI tools, but it should be noted that BI is not dependent on them."
Why the increased interest in BI?
Several reasons for increased interest in BI have been articulated by analysts. The two main reasons cited are Sarbanes-Oxley compliance and a change in focus of IT departments towards providing more value to the business. Robert Frances Group states that "BI will continue to be front and center in 2005 because of the focus in enterprises on compliance and reporting."
Several recent surveys of CIOs have supported the view that IT departments are increasing their focus on business process improvements. As a result of its survey of over 1,300 CIOs, Gartner believes that implementing BI software is a way that CIOs and their IT organizations can contribute to making their companies' business processes better and more efficient. According to Gartner, "Business intelligence is changing from the quantity of data to the quality of data in terms of getting the right information to the right people at the point of need." Gartner's survey found that BI ranked second on the CIO's list of top ten IT priorities for 2005 (second only to security).
Several other firms back up these findings. A Merrill Lynch survey of 100 CIOs found a similar feeling among CIOs: "Software has become a higher priority as companies try to get more out of their existing systems through the use of business intelligence," and Alinean Research recently published a recommendation that, "Looking ahead, companies should examine and possibly undertake business intelligence projects that are important to have, even in this modest recovery."
Technology Evaluation provided the strongest positive view of the future of BI, stating that "based on present trends, the use of BI will become so widespread that every desktop will have a BI icon. BI will become an integral part of an enterprise's information system and, like word processing software, BI will be used by almost all end users, business users, and government officials to gauge whether their strategies are aligned with their companies' overall strategic plan."
The trend towards increased interest in BI extends beyond the U.S. as well. According to Forrester Research, "almost 30 percent of European firms will consider BI software in 2005." IDC claims that in Asia Pacific (excluding Japan), "Security and BI solutions are both expected to exhibit the highest 2003-2008 compound annual growth rate (CAGR) -- 21.0 percent."
BI vendors are enjoying increased revenues as a result of the surge in BI interest. According to Datamonitor, "the world's biggest privately-held business intelligence and analytic software maker, SAS Institute, got a bit bigger after reporting a 15 percent rise in revenue last year. SAS' customer intelligence applications continued to grow strongly -- more than doubling last year."
In addition to pure-play vendors such as SAS, ERP vendors are positioning themselves to be winners in the BI market. According to Nucleus Research, "With ERP vendors clamoring for customers, adding value to their platforms will be the carrot that they hope lures in new customers. As BI first emerged as a solution for wrestling data out of ERP systems, ERP vendors will move to reclaim lost ground and offer expanded BI capabilities to provide one stop shopping. The result will be a shake-up with the current pure play vendors, and some interesting dynamics as BI vendors and their ERP partners learn some new steps in the co-opetition dance."
In a recently published press release from its Business Intelligence Summit in London, Gartner Group's leading BI analysts highlighted seven major flaws inherent in BI and outlined Gartner's best practices for avoiding them. We have summarized their findings in the following table:
|Best Practice to Avoid Flaw|
|' Too many IT departments build a data warehouse based on the assumption that once it is built, users will automatically see the benefit. '||' BI applications require a clear and intimate understanding of the business itself and it is only by working on business and IT issues in tandem that the real value of BI is realized. '|
|'Managers need to negotiate the numbers'||'Too many people hide behind spreadsheets because they are used to them and because they know how to manipulate the numbers to satisfy the politics of their organizations.'||'Enterprises should use the pressure of compliance to achieve greater things, such as cleaning up the many data silos, creating more ownership around performance data and eliminating many of the thousands of spreadsheets'|
|'Through 2007, more than 50 percent of data warehouse projects will have limited acceptance, or be an outright failure, as a result of lack of attention to data quality issues. Furthermore, many organizations fail to see that they have an issue with data quality, focusing rather on identifying, extracting and loading data.'||'Data quality issues need to be addressed on an ongoing basis and enterprises need to accept that these are not just IT issues.'|
'Our enterprise applications vendor will deliver the best solution.'
|'All too often, enterprises assume that a 'one-stop shop' solution will be both the most cost effective and best solution for the business. Companies should not assume that major enterprise application providers offering BI solutions and tools will always address all of the information requirements.'||'Always compare your enterprise application vendor's solution with that of a market leading specialty vendor. '|
' Darwin was right - BI projects need to evolve'
|'Just as using the same templates time after time mean plans rarely evolve, building in the same limitations in to a new system is one of the greatest inhibitors to success.'||'Building in the same limitations in to a new system is one of the greatest inhibitors to success. BI needs to evolve but BI projects should not - they should start and stop and not evolve.'|
' We can outsource the whole thing .'
|' Through 2006 less than 10 percent of enterprises, where outsourcing could be a viable strategy, will be ready or able to outsource their BI applications and operations completely. '||'Enterprises must define their BI key competencies and capabilities in order to determine what to in- or outsource. As ever, the golden rule of outsourcing applies; avoid the temptation to outsource everything and only outsource things that are not a core competency.'|
'Just give me a dashboard!'
|'A management dashboard should be seen as the finishing touch.'||'Companies must have a solid and stable BI infrastructure in place first. They should then create a networked approach where these new technologies are able to communicate with other BI technologies inside and outside the organization, as well as with other technologies such as business process management and application integration.'|
Source: Gartner Press Release ' 'Fatal Flaws' of Business Intelligence and How to Avoid Them'
Gartner provided several key recommendations for any companies implementing, or considering implementing a BI system:
- 'Make sure you have senior level business sponsorship for BI'
- 'Have a unified BI infrastructure'
- 'Leverage existent wisdom and evolve your BI initiatives'
Nucleus research also added the following recommendation:
- 'Organizations should leverage ERP investments by implementing a strategy to utilize Business Intelligence (BI) to improve performance.'
For more summaries of current IT analyst opinion, visit AnalystViews.com.