Business intelligence: An oxymoron, or competitive necessity?

South African executive teams are starting to take a keen interest in business intelligence (BI), demonstrating that there is a shift towards recognising BI as a must have rather than just a value-add from IT departments.

This is according to a month-long online survey conducted among its readership base by ITWeb during January and February. Marius Ackerman, a director of Pretoria-based BI consulting practice Abic, compiled the survey questionnaire and analysed the 210 complete responses received.

The ITWeb survey aimed to get an indication of which companies in which sectors in SA are using BI, who within these companies considers it important and what they are using it for.

Over 31% of the survey participants are MDs or CEOs, or directors reporting to CEOs. This, says Ackerman, suggests that it is mainly senior management that has a keen interest in BI. Only 5% of respondents are IT professionals.

This indicates that BI has become more strategically important to senior management teams responsible for running businesses in challenging economic conditions.

Marius Ackerman, director, Abic

"This indicates that BI has become more strategically important to senior management teams responsible for running businesses in challenging economic conditions," says Ackerman.

Most vendors operating in the SA market would agree with this. Julian Field, GM at information asset management solution provider Ascential Software, puts it better than most: "Not only are local management teams recognising how important BI can be to their bottom lines, they`re also starting to ask more of the right questions before deciding on a solution. They`re no longer just looking at how many types of reports they can draw, but at the content and scope of these reports and who it is that actually needs them."

Field defines BI as "taking information and making business decisions with it". Technology, he says, should be used to facilitate the automation of providing information in a way that enables management to make better decisions, faster.

His observation that more people within organisations are demanding access to company information is echoed by most local BI players, whether they are selling BI tools or a solution that begins at the data warehousing level.

In the days of the mainframe, BI was the exclusive reserve of executives and senior decision-makers who depended on their information systems department to provide standard and customised reports. Typically users were at the mercy of IT professionals` schedules and would have to wait for days and sometimes weeks to receive these reports. Now better technology, simpler end-user tools, a networked PC environment and the advent of the Internet means that personalised BI information can potentially be accessed by each and every employee within an organisation on a more real-time basis.

Alongside the increasing number of people who can access the information gleaned through BI initiatives, the widening scope of this information and the dramatic cut in access times, has been a shift from an internally-focused information-gathering process to a more external approach.

Clear evidence of this shift can be found in the results of the ITWeb survey; 90% of the respondents say they are using BI to gain a better understanding of their customers. Ackerman says this clearly shows that the main driver for BI among the survey respondents is their desire to create more value for both customers and companies.

Drilling down further into the results of the online survey, Ackerman notes that BI seems to be of particular interest to financial services institutions, even more so for retail banks. "With 69% of our sample coming from the financial services industry, and retail banking accounting for 61% of the total sample, this sector seems to be taking serious note of the opportunities presented by BI."

He says there are a number of factors that could be contributing to the financial services sector`s keen interest in BI. "Firstly, the majority of these institutions have invested in solutions to unlock value from their corporate data in the recent past. In this regard, data warehousing and the use of analytical applications plays an important role, especially in the support of customer relationship management (CRM) and e-business initiatives." This suggests that these companies have reached a maturity level where they have come to realise that having a data warehouse and BI tools are just not enough to provide decision-makers with actionable intelligence.

"Secondly, BI is seen to be a critical resource and process enabler for the creation of shareholder value by some of the leading financial services institutions. Thirdly, some of these institutions actually derive competitive advantage from their BI systems."

The fact that financial specialists and employees in other industry sectors also place strong emphasis on BI is shown by research conducted last year by local research house BMI-TechKnowledge.

With 69% of our sample coming from the financial services industry, and retail banking accounting for 61% of the total sample, this sector seems to be taking serious note of the opportunities presented by BI.

Marius Ackerman, director, Abic

The research, summarised in a report entitled "South African Business Intelligence Tools Market: Assessment and Forecast 2000 - 2005", was conducted among SA vendors and users through the use of structured questionnaires between October and December last year. Information was collected from both face-to-face interviews and telephonic interactions. Among the various questions posed to those who took part was which departments in their organisations used BI tools. Some 68% replied that these were used in their accounting and finance departments.

It is obvious from both the ITWeb survey and the BMI research that BI is starting to be viewed in a more mature way in SA than before. Not only are more companies starting to recognise its value, many now also have a clearer understanding of the true meaning of BI. Nearly all the respondents (97%) in the online survey say they view BI as a planned process of collecting, analysing and interpreting business information. Also, 90% believe BI is about the provision of information for planning and decision-making purposes.

However, there is still the tendency to view BI as a particular technology, rather than as a strategic initiative that spans the provision of information across an enterprise. Some 69% of the online survey respondent base says BI is about creating a data warehouse.

Michael Kupowitz, BI solution manager at e-business software solution provider SAP, says the data warehouse should be seen as the engine that drives BI. However, he adds that BI should be seen "in the context of strategy. To maintain business objectives and strategic imperatives, organisations need to make use of all the BI applications together with a data warehouse to assist in attaining and maintaining their business objectives."

Gary Lawrence, SA country manager for BI solution provider Business Objects, also cautions against the tendency to see separate initiatives, eg CRM projects, as BI implementations. "CRM is only a small part of BI - it`s collating information on your customers. You still have to be able to match this against business information coming in from all other areas of the business."

Bruce Jones, sales support manager at enterprise software and services provider SAS Institute, says there are similar misconceptions about e-intelligence, which covers the gathering and analysis of customer behaviour on the Web.

E-intelligence, he says, should also be seen as a subset of BI, as the Web "is just one of the channels you reach customers through".

CRM is only a small part of BI - it`s collating information on your customers.

Gary Lawrence, SA country manager, Business Objects

Although the lack of a general clear understanding of the scope of BI is a problem, says Ackerman, one of the more worrisome findings of the ITWeb survey is the apparent lack of knowledge concerning commonly-used methods of analysing the information collected through BI implementations.

"Despite the availability of quantitative analysis methods and supporting tools, 64% of our sample indicated that they are using SWOT analysis for BI purposes," says Ackerman. A simple yet effective analysis method, this allows companies to conduct qualitative analysis of their information in addition to the statistical analysis that is usually associated with BI. It`s a good, if somewhat limiting, place to start.

However, he says it could be reasonably assumed that other, more effective methods of analysis should be in use as well and that this is simply not the case. In fact, over half of the respondents had no knowledge of the Five Forces method, which is used to analyse the impact of the competitive forces that companies deal with, namely suppliers, buyers, substitutes, new entrants and existing competitors. Other methodologies scored badly as well, with 47% of the respondent base admitting they had never used a financial ratio analysis, almost 42% saying they had no knowledge of the balanced scorecard approach and over a third indicating hypothesis generation and testing had never been used within their organisations.

Jones says that although the use of BI at SA companies is maturing, those wanting to extract more value from the information at their disposal will of necessity have to place a greater emphasis on the effective analysis of this information. He believes vendors are currently going through "the pain of educating the market" in this regard.

Field agrees. IT vendors, he says, no longer follow the "throw it in the pot and see what we can do with it" approach. They have learnt, he says, that part of the process in achieving a successful BI implementation is showing users how to get the most out of the information their technology implementations allow them to collate.

However, BMI`s research shows that vendors see the lack of education around BI as the main business inhibitor in this space, indicating significant attention still needs to be focused on assisting users to get the best possible results out of their BI initiatives.

Ackerman stresses that while effective analysis of information is required to transform BI into actionable intelligence, achieving a solid return on investment from a solution also rests on the processes used to retrieve and analyse the information. He`s somewhat disturbed at the fact that the online survey on ITWeb shows that over half of the participants say they have no formal process in place for either the collection, analysis or dissemination of BI. Yet another concern, he says, is the high percentage (51%) stating that there are no strategic objectives for BI in their companies. "In other words, information is being collected, but this isn`t part of a larger plan.

"These findings are alarming for BI practitioners, as the importance of having a formal process for the conduct of BI cannot be emphasised enough. An ad hoc approach to the conduct of BI can lead to inaccurate and misleading intelligence output with dire business consequences if important decisions are based on this."

Management teams wanting to get the best that they can out of their BI projects need to spend more time developing a BI strategy than they do now.

Susan Andre, MD, Sagent South Africa

Susan Andre, MD of data warehousing and BI solutions provider Sagent South Africa, echoes his feelings. At a business breakfast hosted by Sagent in Johannesburg in March to discuss the findings of the ITWeb survey, she said far too many companies expend most of their efforts on implementing the technology required to facilitate BI initiatives. "Management teams wanting to get the best that they can out of their BI projects need to spend more time developing a BI strategy than they do now. The BI strategy should first of all be tied in with the overall information strategy. Once a BI strategy has been formulated, the process of how to implement should be planned thoroughly and executed according to the plan. Technology can be of great value throughout this process, however, companies will derive more value from technology only if it is used as an enabler for BI and not as a replacement for defining the BI strategy and BI implementation plan."

Ackerman states that thought-leaders in the competitive intelligence arena believe an intelligence process is fundamental to the success of any BI project, even more so than having a dedicated intelligence unit reporting to a company`s top management. "This also holds true for professional and governmental intelligence services that follow an intelligence process and/or cycle to deliver intelligence output. Without a formalised process and strategic objectives, organisations run the risk of having a BI initiative without focus, direction and the necessary standards to ensure that quality intelligence output is produced."

It is clear that in order for any BI strategy or implementation to be successful, the buck has to stop somewhere. A dedicated BI "owner" is needed, even in organisations where BI projects have buy-in from executive management that allows operational staff to tackle the complexities around sourcing the required information from various and often-diverse business channels and systems.

Unfortunately, the ITWeb survey suggests that far too many companies overlook this requirement. Close to half the participants say the ultimate responsibility for ensuring BI is handled in an efficient and effective way is not assigned to anyone in particular.

"The lack of having a specific person or position designated to ensure that BI is properly conducted could be related to the lack of clarity that exists on the role of BI within many organisations," says Ackerman.

It also sends a warning signal to those committed to developing BI into a strategic enabler. Although there are many arguments against having a particular business unit take responsibility for BI, eg the marketing division, this would at least allocate responsibility somewhere.

Ackerman suggests that the time might just be ripe for the emergence of a chief intelligence officer in those organisations that are really serious about making BI initiatives deliver a measurable return on investment.

That all these issues require urgent attention is underscored by BMI`s finding that the main driver for BI is a growing need for consolidated information.

Estelle de Beer, BI manager at enterprise software provider Sybase, says: "The need to integrate disparate systems as more and more companies in the local market merge is powering a new wave of BI."

Integration, she says, is never simple and almost always expensive. "It`s also a lot more effective if done on the data level rather than on the application level. Companies requiring an integrated view across areas of business need to do integration on the data level."

She sees a move towards a "quicker" route by companies, which are now pulling business information out of all their technology installations and giving it to users via a consolidated platform. Vendors, she says, are assisting here by placing an increased emphasis on data modelling.

Consolidation is a concept Marc Scheepbouwer, marketing director at Global Technology Business Intelligence (GBI), is seriously enthusiastic about. GBI supplies a wide range of solutions aimed at meeting BI requirements in large organisations.

He says the traditional domain and definition of BI is morphing into something called enterprise intelligence enablement (EIE), which comprises an intelligence platform that addresses data, analysis and application integration. Through the development of a single version of the truth, Scheepbouwer says EIE empowers companies to use BI as a competitive advantage.

He states that in order to deliver meaningful information to executive decision-makers, middle management has to access information in a consistent manner.

The point of departure here should be the development of a data platform, he says, where data is collected from various channels across the enterprise and stored in a warehouse or other repository using a common set of definitions and transformation rules, eg cost, value and profit definitions.

An analytical platform resting on top of this platform can then accurately report, analyse model and plan, using previously defined business rules, ratios and complex calculations.

The application layer, which supports the delivery of information to such initiatives as balanced scorecards, CRM projects, activity-based costing and planning and budgeting, will then be populated with accurate and integrated information from the other two platforms.

Using these three EIE components allows management to compare apples with apples, making the decision-making process easier and more effective, says Scheepbouwer.

Fundamental to the success of this approach is the development of a BI strategy that looks at information requirements across the enterprise. This ties in with Ackerman and Andre`s emphasis on the need to talk strategy before talking technology. Scheepbouwer says EIE is particularly effective in large extended enterprises where information needs to be drawn from a variety of large systems across a number of business channels and where standardising on technology installations is no longer an option.

He adds that a best-of-breed approach is the "ticket to the game" today. "In an increasingly complicated business world, a fragmented approach is often extremely inappropriate."

The need to integrate disparate systems as more and more companies in the local market merge is powering a new wave of BI.

Estelle de Beer, BI manager, Sybase

He gets no argument from Field, who says he thinks vendors are "getting users to understand the necessity of a best-of-breed approach instead of growing their own solutions. Almost all self-developed implementations have failed, mainly because by the time they are completed they`ve fallen behind requirements. This means they`ve lost the more immediate return on investment a best-of-breed implementation can provide."

South Africans should choose the cheapest solution in the long-term instead of trying to "roll their own", says Field. De Beer also points out that those attempting to develop BI initiatives in-house are also often tripped up by an ever-increasing total cost of ownership. This is a result of the original implementations eventually being asked to regularly deliver on information query loads they were never designed to cope with.

Another consideration vendors are often asked to comment on by SA users is whether smaller companies should approach BI any differently then their larger counterparts. Not necessarily, says Kupowitz.

"Many businesses - both large and small - are very similar in the extent to which they create value along the business supply chain. Both small and large organisations rely on the same basic business principles and have a product or solution on offer," he states.

"The obvious similarity of a BI implementation in a large and a small organisation is the identification and understanding of the positive and negative business elements."

The main differences, says Kupowitz, include the fact that larger corporations will have more employees and customers than small and medium enterprises (SMEs). The more employees and customers, the more training, data capturing and information needed. Also, although an SME may have the same amount of BI reports as a large organisation, the amount of data that needs to be analysed by the latter is much greater.

"A prominent difference," he adds, "is that SMEs can react faster to change and opportunities identified by BI reports. The smaller the company, the less internal administration and communication needed. Therefore, the faster the necessary changes take place."

Given the myriad of issues that are currently inhibiting the growth of BI, does it have a future in SA?

Field believes data quality, or the lack of it, was the biggest cause of failure in early BI implementations. He believes both vendors and users have either already moved past this or are in the process of doing do. He claims there are more BI-related requests for information and requests for proposals being issued by local companies and government than ever before and that there is a "huge future" for BI in this country.

Ackerman points out, however, that ITWeb`s online survey suggests that BI is not yet that entrenched or important for operational managers in their day-to-day activities, whether they are account managers, sales managers, marketing managers or other operational managers. He believes that the prevailing perception that BI is only of use at strategic level for strategic analysis and strategy formulation needs to be addressed in order to bed down new implementations more effectively.

The obvious similarity of a BI implementation in a large and a small organisation is the identification and understanding of the positive and negative business elements.

Michael Kupowitz, BI solution manager, SAP

Apart from a growing need for consolidated information, the BMI research shows that vendors believe CRM and enterprise resource planning instalments (50%), the need to understand business better (38%), greater business process management (25%) and the need for a return on investment (25%) rank among the main BI business drivers in SA. Its research report predicts that IT spend allocated to BI projects will increase over the next three years - in some companies by up to between 11% and 20%.

As mentioned earlier, as far as the challenges faced by vendors in the forecast period up to 2005 are concerned, BMI`s research shows that most vendors (63%) believe a lack of education is the biggest business inhibitor. They also feel a diminishing IT spend by local companies and the SA economy (both 50%), limited skills (38%) and the rand/dollar exchange rate (25%) will also slow growth in this space.

Ackerman stresses that this apparent lack of education is a major concern. "Our sample indicates that only 26% of respondents have BI analysts who have completed some form of intelligence training and 33% have contact with BI specialists to assist them."

He`s also concerned about the fact that specialised BI units, intelligence centres and war rooms are still a new concept in SA.

"Companies can go ahead and implement the infrastructure they require, develop a BI strategy and install tools. But even after all this, if they don`t analyse the information they collect, they still just have information."

His overall impression following the ITWeb survey is that while local users and vendors have made fairly significant gains in recent times, South African BI initiatives are - generally speaking - still "immature". However, both the online survey and BMI`s research shows how willing local businessmen are to extract value from their current and future BI initiatives. And, as the adage goes: where there`s a will, there`s a way...