Boy, how things have changed. Just think about how fast information is transmitted today. In 1805, it took six weeks before word of Admiral Nelson's victory at Trafalgar reached Montreal. Now, news from any remote place in the world is flashed to the rest of the world in a matter of seconds.
So it goes in business intelligence (BI) circles, where how a company receives and processes critical business information can mean the difference between a firm that is recording its financial ledgers in black ink or red. Perhaps that explains why Reuters Business Insight pegs the business intelligence marketplace at $35 billion in 2004, and says it is growing at a seven-percent annual clip.
"For information-driven companies, data is the most strategic corporate asset," explains Clive Harrison, EVP of worldwide field operations at Informatica, a BI software developer.
Business leaders concur, saying that when it comes to information, they're feeling the need for speed. "Without timely information from our stores, we couldn't react to market trends as quickly as we should, and risk missing out on sales opportunities and hurting our profitability as a result," says Harry Bekkema, application team leader at Mark's Work Wearhouse.
The retail giant ($420 million in sales in 2003) recently deep-sixed its old point-of-sales sales reporting system and replaced it with an integrated, open, Web-based sales reporting application from IBM partner Business Objects. Marks says the company now has a quick, clear, and concise view of enterprise-wide sales results that enables floor managers to anticipate customer preferences and roll out the right inventory in stores. "By monitoring our business in real-time, we can make better decisions to help drive our business forward," says Robin Lynas, Mark's CIO. "We can then respond with better, timelier decisions to help drive our business forward."
Consequently, larger IT companies like IBM are making business intelligence a big priority. According to a company spokesperson, Big Blue spends approximately $1 billion in R&D that pertains to business intelligence—the most in the industry. It's an investment that is just recently paying off. IBM now boasts Aetna, Bank of Montreal, Pep Boys, and Choice Hotels among the companies using its business intelligence software.
Teeing Up and Teeing Off
High on the list of factors feeding the burgeoning growth rate of BI is an increasingly strict regulatory environment for businesses. Government regulations, primarily in the form of the Sarbanes-Oxley Act in the U.S. and the Combined Code on Corporate Governance in the U.K., are fueling the drive to make companies more honest and open with their corporate information and in their external reporting. Hence the need for business intelligence tools to help companies comply with new government regulations.
Control is another key issue—specifically, greater control over a widening flow of data. According to Gartner Group, by 2012, global companies will have to handle 30 times more data than they do in 2004. A data avalanche of that volume will cause widespread information-system overloads, causing companies to look for better metrics and systems to manage more corporate information. The expected high price of such BI systems—already $250,000 for installation and $1 million and up for maintenance—will rise exponentially and could give pause to cash-strapped companies.
Garter also predicts that a subsequent rise in lousy data is boosting company business intelligence efforts. Gartner estimates that more than 25 percent of critical data within Fortune 1000 businesses will continue to be inaccurate or incomplete through 2007. "Most enterprises don't fathom the magnitude of the impact that data-quality problems can have," says Ted Friedman, a principal analyst at Gartner. "These problems cause wasted labor and lost productivity that directly affect profitability."
Spreading the Wealth
Business Intelligence gurus like Friedman say that making BI tools available to staff-level workers, not just executive decision-makers, is the key to successful imple- mentations. Industry observers say that more companies are using BI tools to bulk up line-worker processes, often at the expense of corporate spending earmarked for executive-level strategy initiatives.
Ventana Research estimates that an increasing number of firms will target more of their budgets toward technology initiatives that deliver information to line- and staff-level workers and less for strategic decision making. Other industry observers believe that increased BI spending can support thousands instead of hundreds of users. Talk to a BI advocate, and things like transportation cost reduction, fraud detection and prevention, customer issue resolution, field service personnel deployment, personal performance tracking, pricing optimization, portfolio risk reduction, and prospect-up selling are all identified as areas that could profit from using business intelligence.
"It's all about finding and understanding the flow of data in organizations," says David Rutberg, VP of operations at XpertUniverse, Inc., a business intelligence software developer that specializes in the emerging field of "tacit" knowledge (i.e., the process of extracting human knowledge that is otherwise locked up in people's heads).