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Corporate adoption of SaaS BI tools growing -- slowly

Beth Stackpole

Amid all the hoopla over cloud computing, Software as a Service business intelligence technology is gaining in demand, particularly among smaller and medium-sized organizations. But SaaS BI tools

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are still far less entrenched among corporate users than other types of on-demand enterprise software are.

Market research firm IDC forecasts that total SaaS BI revenues will expand three times as fast as the overall BI market through 2013, logging a compound annual growth rate of 22.4%. That’s an impressive-sounding projection; the reality, though, is that the SaaS BI market remains minuscule compared with sales of traditional on-premises BI software, according to IDC.

Gartner Inc. also sees steady but slow SaaS BI adoption going forward. In an online survey of 1,225 BI professionals that was conducted in November 2010 as part of Gartner’s research for the latest version of its Magic Quadrant report on BI platforms, only 27% of the respondents said that their organizations were using SaaS BI tools or planned to do so within the next 12 months.

The relatively slow uptick in SaaS BI deployments can be attributed to several factors, according to industry analysts. For example, cloud BI tools initially were offered primarily by startup vendors without proven track records, and there were concerns among potential users about the viability of some of those companies. Such concerns now appear to be abating somewhat as many of the larger BI vendors roll out SaaS offerings of their own and the remaining startups in the market become better known.

However, the biggest barrier to doing business intelligence in the cloud continues to be data security. Many companies, particularly those in highly-regulated industries, have ongoing concerns about the idea of entrusting mission-critical business information to a systems infrastructure that sits outside the corporate firewall -- putting it beyond the immediate control of the IT department.

SaaS BI and critical data: Not a good mix?
“Most of the reticence around SaaS BI platform adoption has to do with moving mission-critical data into the cloud,” said Gartner analyst Rita Sallam. “A lot of companies are concerned from a security standpoint in doing that.”

Sallam and other analysts said most of the companies they know of that are moving toward the SaaS BI model have already gotten their feet wet with using cloud-based software and storing data outside their firewalls through prior experience with other enterprise applications -- customer relationship management or enterprise resource planning software, for example. As a result, they tend to have a higher comfort level with the security controls offered by SaaS vendors than do organizations that are new to the on-demand approach.

In addition, business managers and users in many cases are the ones pushing for SaaS BI implementations, and their support for the technology may override any security concerns or other objections from the IT department.

“Business people tend to be driving this as a need within the enterprise,” said Shawn Rogers, an analyst at consulting firm Enterprise Management Associates Inc. in Boulder, Colo. “The business is really greedy about increasing what they perceive will deliver more flexibility and promote a more agile environment.” Executives from the business side see potential benefits such as reducing both up-front capital expenditures and operational IT costs, plus being able to quickly deploy new BI applications and scale systems up or down as needed, Rogers noted.

SaaS business intelligence technology can also be alluring to organizations that don’t have the budgets or IT resources required to invest in the care and feeding of an on-premises BI system, which often can take a year or longer to fully deploy.

Adding SaaS BI tools to the IT menu
That essentially was the business case for SaaS BI at Distribution Market Advantage (DMA), a national network of food distributors based in Schaumburg, Ill.

In 2004, DMA went in search of a BI platform that it could use to deliver reports and provide data analysis capabilities to restaurant chains and institutional customers, enabling them to drill down into product-delivery and inventory data in an effort to uncover cost savings and eliminate redundancies. The BI technology was intended to replace a manual reporting process, which didn’t provide information to customers on a timely basis and wasn’t effective in pulling together data for them, said Jim Szatkowski, DMA’s vice president of data services.

Initially, the organization considered deploying a traditional BI system. But after evaluating the various options, executives decided that the on-premises approach wasn’t in keeping with DMA’s business model and opted for SaaS BI tools instead.

“Our core competency is supply chain services and food-service distribution -- we are not a technical services company,” Szatkowski said. “We needed a low-cost, scalable way to deliver highly-effective tools and not worry about all the things that go into it. For us, the SaaS delivery model was the BI enabler.”

Beth Stackpole is a freelance writer who has been covering the intersection of technology and business for 25-plus years for a variety of trade and business publications and websites.


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