After being beaten into submission by the tech slowdown, business intelligence software companies are now bouncing back.
Delayed software purchases and general economic malaise in the tech sector contributed to lower-than-expected earnings among BI software vendors during 2000 and the first half of 2001. Moribund earnings, in turn, led to lavoffs and consolidation within the industry. But despite the slowdown, demand for software that can track, analyze and disseminate enterprise information remains high, and analysts say the sector is poised for unprecedented growth.
In June, research company IDC (International Data Corp) predicted a compound annual growth rate for business intelligence tools of 27 percent, up from $3.6 billion (US) in 2000 to $11.9 billion in 2005. Survey.com, an e-Research services company, thinks that businesses will increase annual spending on business intelligence and data warehousing solutions by nearly 74 percent over the next here years. While current average annual spending is just over $480,000, within three years that will rise to more than $800,000, according to the April 2001 report.
With figures like that being bandied about, it’s no wonder that business intelligence marketplace is crowded, with more than a dozen companies vying for position. Among the leading vendors are SAS Institute, with about nine percent of the market, Cognos with eight percent, and Business Objects with about seven and one half percent. Other major players include Brio Technologies, DigiMine, and Actuate and Informatica.
But let’s start with a definition. Ask ten executives what business intelligence means and you’ll likely get ten different answers. To some, business intelligence is the process of gathering and storing information on customers, suppliers, distributors and others – aka data warehousing. To others, it is the process of data mining, or sifting though the warehouse of stored information to uncover relevant patterns. A number of big database vendors, including IBM, Microsoft and Oracle, have begun introducing elements of BI to their data warehousing products.
Compounding the definitions muddle, the concept of business intelligence is often based with competitive intelligence. CI is based on a five-stage process called the intelligence cycle, which includes planning, direction, information collection, analysis and reporting. Generally, competitive intelligence focuses on a company’s external operating environment and on information gleaned about competitors.
BI’s main focus is internal – tracking customer activity along with financial performance, the supply chain and other functions. Most BI software allows companies to track data from various nerve centers within the organization – sales, marketing, finance, operations – and sifts through that data to find relevant patterns. BI tools can be used for executive reporting, giving managers the ability to determine good an bad performance at a glance. It’s also used for analyzing product performance at the retail level, so that managers can identify top-selling products in different areas. Business intelligence software allows companies to measure the effectiveness of individual marketing promotions, determine where their visitors click and how often, identify the point at which they abandon their online shopping cars, and so on. With weekly, daily and near-real-time monitoring reports at their fingertips, managers can use BI software to go beyond gut feeling.
At the heart of intelligence is the concept of analysis – but this is where in the past most BI software packages fell short. Software generally isn’t capable of anything more than the most rudimentary forms of analysis, according to Fuld & Company, a leading CI firm that offers a comprehensive review of 170 business and competitive intelligence software packages on its Web site (www.fuld.com). “While software can offer help in generating valuable information, it cannot assess the subtleties of a business decision, or offer implications and recommendations,” the report says. Partly for that reason, Fuld & Company gave most of the software applications it reviewed a poor or failing grade.
The Fuld report found that no software vendor is yet able to offer a total BI solution to corporations; that in the majority of software packages the analysis component is flawed; that out-of-the-box solutions rarely work; and that companies considering the use of BI software should be prepared for significant additional costs related to customizing the additional costs related to customizing the shelf product to their unique situation. The ideal marriage of human intuition and artificial intelligence in one business software application remains a distant dream.
But don’t tell that to the players – companies like Business Objects, Cognos and Brio Technologies – who have been busy introducing products designed to win them a bigger slice of the lucrative BI pie. Chief among the hot new product trends in Web analytics – better software for analyzing data. Wireless reporting tools also feature prominently on this year’s hot list.
In July 2001 Business Objects released the first three of a series of modules designed to provide insights into sales, customers and marketing campaigns. Sales Analytics let business managers explore sales data as well as track and analyze key sales metrics. Managers can use the software to see if the sales force is spending too much effort on low-value deals, or if the revenue stream is overly dependent on a few high-value deals. Customer Analytics enables organizations to track and analyze key customer segments and loyalty metrics – a manager might identify high-value customers who are spending less, and devise a retention program designed to woo them back. Campaign Analytics enables organizations to analyze and maximize marketing campaign performance using metrics such as “return on investment summary” or, “cross-sell analysis”.
Business Objects also recently announced a new version of the company’s mobile business intelligence portal. InfoView Mobile 4.0 enables mobile workers to access key corporate information from their cellular phone and personal digital assistant (PDA) devices and view this information in several formats including colour and charts. The new version enables customers to download WebIntelligence reports – revenue by territory or sales of top customers, for example – wherever they happen to be.
Cognos, another industry leader, is moving in a similar direction, although on May 30 the company announced a reduction of approximately 300 people – about 10 percent of its global workforce – as a temporary coping strategy. At the same time, Cognos said it would return to profitability in the second quarter of this fiscal year, and the company is on track to release a new analytics applications portfolio and integrated BI platform, EP Series 7.
Cognos recently implemented a business intelligence solution for Vancouver Hospital & Health Sciences Centre in British Columbia. The software, called PowerPlay, allows hospital employees to drill down into data pertaining to admissions, discharges, average length of patient strays, patient satisfaction, surgical wait times, emergency room statistics and number of patients per ward. The software enables hospital employees to workers to determine such things as how longs patients are being treated, how long patients have to wait for surgery, how many patients are being treated, how long this compares with other centers. This information is contained in 15 “information cubes,” each with analytical identifies such as age, gender, ailment and procedure. For example, a census cube facilities identification of occupancy trends, seasonal activity variations, geographic location of patients, physician admission patterns and many other aspects of hospital operation, all accessible through a Web browser and available to all employees.
Brio Technologies in July reported disappointing fiscal first-quarter 2001 results, with revenues decreasing approximately 12 percent from a year ago, but the company expects to return to profitability later this year. Brio One, the company’s flagship product, delivers point-of-sale information and other inputs to a data warehouse, then analyzes the data and illuminates opportunities for cross-selling and localized trends. The software provides a succinct analysis of key performance indicators tailored for different levels of management and colour-coded to telegraph the status of stores and districts. New performance metrics on the way will give management a dashboard view of the entire company.
Round one may have ended badly for most BI software vendors, with black eyes and bloody noses, bit round two is just beginning, and the prevailing sentiment within the industry is one of optimism. That bodes well for the future.
By: Rod Chapman
Source: Information Highways