Business Intelligence Gets Smart(er)

It looked like your average faux fish, mounted on a faux wood plaque. But when you walked by, the fish would turn its head, open its mouth and start singing, "Don’t Worry, Be Happy" or "Take Me to the River." Pure kitsch. And as it turned out, pure gold for the True Value store owners lucky enough to have them in stock. "It was a hit," says Neil Hastie, former CIO of TruServ, a member-owned hardware cooperative of 7,000 or so independent retailers. "We ran out of them." So when the same company came out with a gopher singing "I’m All Right"—remember Caddyshack?—it seemed like a sure bet. "Everyone thinks, ’God, this is the second fish! Let’s order the hell out of it.’ So we did," Hastie says. "We ended up with truckloads of gophers we couldn’t give away."

Fortunately for TruServ, the company had business intelligence (BI) software that helped it recognize the gopher fiasco early enough to liquidate the unwanted rodents and recoup some of its expenses. That ability to quickly make sense of oceans of data can be a competitive advantage, making BI software essential for many companies.

CIOs are hardly flush with cash these days, but they are interested in BI—very interested. A 2003 Forrester Research report found that 45 percent of companies surveyed planned to shop for BI software this year, which explains why vendors such as Business Objects and Cognos have seen double-digit increases in their revenue. With today’s BI tools, business folks can jump in and start slicing and dicing data themselves, rather than wait for IT to run complex reports. This democratization of information access helps users back up with hard numbers business decisions that would otherwise be based only on "gut feelings."

A broad range of applications for BI is helping companies rack up impressive ROI figures. Business intelligence is being used to identify cost-cutting ideas, uncover new business opportunities, roll ERP data into accessible reports, react quickly to retail demand and optimize prices. TruServ’s Hastie, for example, spent $250,000 on BI software from Business Objects and says the investment paid off in about two months. Besides using it to track anomalies like the gophers through an executive dashboard, TruServ is also pressing it into service as a CRM tool and is using it to integrate data from disparate accounting systems, which will help the company close its books two days earlier every month.

Otherwise tight-fisted CIOs are spending money on BI software because its relatively low investment yields fast payback, says Larry Downes, strategy consultant and author of Unleashing the Killer App and The Strategy Machine. "[Unused data] is still a great source of untapped productivity and competitive advantage for most companies," he says. Just how much data is going unused? Downes guesses companies are extracting value from only about 20 percent of their data.

Of course, the potential of any unused data is only as good as the quality of the data itself. The success of any BI implementation depends on having clean data to mine. Some companies are so gung-ho about BI that they’ve invested in multiple systems, which may be tough to integrate, says Forrester analyst Laurie Orlov. She says it’s not unusual for larger companies to have at least five BI platforms. She also warns of information overload, citing as a cautionary tale a CIO who said his 100,000 employees all have access to hundreds of dashboards, what Orlov calls a "firehose problem."

Time To Leverage That Data

To get at that data stuck in corporate America’s big-ticket enterprise systems, many companies are turning to BI software. "We’ve seen a number of companies that invested a lot in ERP or CRM that have not necessarily seen the big returns they expected," says Rebecca Wettemann, vice president of research at Nucleus Research. "They’re looking to BI as a way to, with a small additional investment, squeeze additional value out of those systems."

FiberMark North America spent $4.5 million on ERP software from J.D. Edwards and $3.5 million on Oracle, but the manufacturer of specialty packaging and paper couldn’t easily get at the data. "Typically, ERP systems collect data wonderfully, but don’t report out worth a darn," says Joel Taylor, director of IS. "We were desperate to get good information quickly." Taylor spent less than $75,000 on QlikView—BI software from QlikTech that grabs FiberMark’s data from J.D. Edwards, Excel spreadsheets, and Oracle and Access databases, and stores it in the server’s RAM (eliminating the need for a data warehouse).

Now, instead of printing 1,000-page monthly sales reports for each of FiberMark’s 29 salespeople, Taylor’s staff has shown them how to access the data from the corporate intranet any time they want. "With a very short training cycle (15 minutes), they’re up and flying," says Taylor. "They print four pages, not 1,000." He says the system paid for itself in nine months in saved paper, toner, and printer wear and tear alone. More important, though, salespeople and executives can get at data that’s refreshed daily.

When Quaker Chemical began operating as a global entity in 1999, newly appointed CIO Irving Tyler suddenly had to create a single global view from 14 transaction systems. Tyler had already built data warehouses for U.S. and European customer and product information, so he decided to scale up into a global data warehouse, giving users access through an Internet-based BI tool from SAS. The whole process took three months.

He put plans for a three-year migration to a common ERP system lower on his priority list. "In reality, an ERP system is not very clever," he says. "If we hadn’t put in the capability of business analytics tools for the data warehouse, we couldn’t operate globally. Because suddenly, a global manager responsible for sales and product results literally would have had to go to 14 sources for information."

Besides making data accessible, BI software can give companies more leverage during negotiations by making it easier to quantify the value of relationships with key suppliers and customers. Given a corporate directive to cut purchasing costs by $2 billion in 2002, Motorola needed a consolidated view of its global supplier network. It used Informatica’s PowerAnalyzer to analyze purchasing data to ensure that buyers around the world were taking advantage of negotiated deals. The tool automatically alerts buyers when they exceed spending thresholds that entitle the company to discounts. "It should jump out at you that the next $10,000 worth of spend with this vendor should be 5 percent less," says Chet Phillips, a director of IT at Motorola. "When you’ve got tens of thousands of vendors, that’s an issue. You want that information to be pushed to you." Motorola surpassed its goal of saving $2 billion last year, and Phillips says its BI tool was directly responsible for as much as $140 million of those savings. Motorola has now begun collecting procurement data from its manufacturing outsourcers. The idea is to ask suppliers to extend all negotiated deals to those business partners, who are then expected to pass along some of those savings to Motorola.

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