Business Intelligence by the numbers

There's no doubting that a good BI solution can be a highly effective tool for turning a mountain of organisational data into a goldmine of insightful information. But just how well are Australian organisations measuring their businesses and what kind of intelligence is BI really delivering?

By Heather Caulfield

For the last three years Australian CIOs have nominated business intelligence applications as their top technology priority.

It's an application that has its genesis in the executive information systems of the 1980s and which will be worth an estimated $184 million to local IT vendors this year.

By 2011, industry analyst Gartner Inc. estimates that the value of the industry will have risen to $251.5 million.

Neil McMurchy, business intelligence research director at Gartner, believes that the current interest in BI is the inevitable outcome of the investments in ERP, financial and customer applications over the past ten to fifteen years.

He points to the massive investments that companies have made in enterprise systems over that time saying, “We have all this information about customers, performance and so on. The question becomes 'How can we use it effectively beyond statutory reporting?'”

Another factor is a change in the way that organisations think about the nature of competitive advantage.

Few companies would nominate their physical assets as something that helps them to perform better, smarter, faster or more efficiently than their competition.

Instead, they attribute advantage to brand, customer engagement and efficiency. In other words, competitive advantage is being derived through the exploitation of corporate information.

It makes sense then that reporting, analytics and business process and decision support remain the primary drivers for those looking to make the leap into BI.

“Many organisations are still incredibly inefficient about reporting,” McMurchy says.

“It's something that they have to get right because the external demands for reporting are only going to increase through statutory requirements, green imperatives and customer groups. A lot of that external reporting is not of benefit or is of relatively little value to the organisation so you have to get really efficient about it.”

McMurchy points to the current turmoil in the world's financial markets as a probable catalyst for even more onerous reporting demands and tightened processes that will reduce organisational risk in decision-making. Both, he notes, are opportunities for BI.

Challenges and opportunities
The biggest challenge to BI within Australian organisations is the trap of such projects being owned and sponsored solely by IT.

McMurchy is blunt when he says, “If BI is seen as an IT issue, it fails.”

Another hurdle is that BI can be culturally challenging, particularly when deployed as a decision support tool. It can imply that a manager's intuition in decision-making is no longer good enough.

McMurchy, however, is upbeat about the role that BI is playing in Australian businesses.

“Organisations are doing really interesting things in terms of better customer insight and obtaining better advantage.” Because of that competitive advantage however, those that are gaining most are likely to be the quietest.

At its annual BI conference in Sydney in 2009 Gartner plans to introduce a new BI Excellence Award for Asia Pacific.

Similar award programs have been running in North America and Europe for the past three years, but this will be the first time such a program is held in this region.

It's acknowledgement of the increasing sophistication of many local deployments and of the growing maturity of the market.

A company-wide strategy
One company that seems to have independently come to many of the same conclusions as Gartner is Ricoh Australia, the local subsidiary of the worldwide digital office solutions organisation.

The organisation has been using an IBM Cognos solution since the early 2000's, when it first deployed the software to bring speed and flexibility to report writing and the production of management data.

In 2007 the need for a more strategic view of corporate information saw the company adopt a full-blown BI solution, upgrading to IBM Cognos 8BI.

Initial projects saw the development of a sales dashboard and introduced drill-down functionality so that managers could interrogate reports in detail.

Additional dashboards are now being prepared to address the requirements of other departments.

“BI is used across the business but many people are largely using it as a reporting tool. It's not true BI in that sense,” Rob Livingstone, Ricoh CIO explains.

“The high level dashboards are typically used by key middle management and executives. The further up in the organisation that you go, the more BI-oriented the reports become.”

Livingstone supports the idea that BI can be culturally challenging, noting that Ricoh's implementation meant a change from IT-as-the-generator-of-reports to IT-as-the-provider-of-a-tool-for-management.

“We had to change the IT development and support model, moving it away from pure report generation into true BI. This meant coming up with the optimal design for the supporting data structure, models and data schemas.”

For approximately one month after the IBM Cognos solution went live, Livingstone noticed resistance from a small number of business users who had become used to seeking their data via IT, but this was quickly overcome once management discovered the wealth of data now at their fingertips.

Livingstone enthuses, “Having demonstrated how the BI process is working it's really switched on a few lights within the business. Key users and managers now 'get it'. BI is no longer being pushed by IT. Instead it's being driven by the business for the business. IT is just one small, but critical element of that.”

Another shift has occurred with business managers learning to better use and understand their own data.

“The dashboards mean there is a broader base looking at data, rather than just an individual viewing a report. The result is many eyes looking at the same dashboard, creating a greater possibility of interaction between business units. It is a process that builds knowledge within the business,” Livingstone says.

Ricoh has been careful to avoid treating BI as a static application.

It's one of the pitfalls that Gartner warns about, suggesting that companies need to apply program management skills to their applications in order to establish how change will be addressed over the life span of the BI technologies.

One finding estimates that users may request changes that affect 35 to 50 percent of a BI application's functions within the first year.

Livingstone agrees, saying, “Strategy and project management are critical. Technology is a secondary consideration.

The real issue is about requirements definition, design and project management. Ricoh's IT initiatives are governed by the overall company vision and strategy.” “Rather than people coming up to IT and asking for a report, we ask for a business case justification for the information,” he explains.

“It makes them think about the specific needs they have, which may include dashboards, ad hoc analyses, data extracts and so on. So instead of delivering 20 or 30 separate reports with different selection criteria, for example, we are able to develop a dashboard with a consolidated view of all those reports. It's all about having one entry point to be able to answer many, many questions quickly and easily.”

Many departments, many facilities
Warner Village Theme Parks is another convert that has come to BI through a need for better reporting.

The company is responsible for such diverse tourist attractions as Warner Bros. Movie World, Sea World, Wet 'n' Wild Water World, Australian Outback Spectacular and Warner Roadshow Studios.

It relies heavily on fast access to information about ticketing sales, food and beverage revenues and staffing.

Until recently that data was captured on an IBM AS/400 system but according to Sharon Tribolet, financial controller at Warner Village Theme Parks, the system was never user-friendly and reporting was slow.

“Every business wants to be able to make good quick decisions. We are a daily business and we measure everything daily, so it's really important for us to get information in a timely fashion. With our old system some data wasn't available even overnight,” she says.

For the past 18 months the company has been working with Microsoft Dynamics Gold Partner and Inner Circle member, Professional Advantage, to create and deploy a new BI solution using a Microsoft SQL 2005 data warehouse, Reporting Services and Microsoft Excel.

Tribolet explains “We chose these products because there was no additional cost to the business. We already had it all in some shape or form.”

Using Microsoft Excel as the front end has also meant immediate familiarity for end users. Early development concentrated on getting the design of the data warehouse right and identifying the underlying business rules.

“We spent a lot of time up front working on documenting where our most complicated rules live,” Tribolet says.

A pilot program was completed in early October and the solution is now being rolled out across all areas of the company's business – from finance, sales and marketing to the company's call centre; across retail, food and beverage, through to the operations, show and entertainment divisions. Users will include management, analysts, accountants and supervisors.

Like Ricoh, Warner Village Theme Parks has ensured that the rationale and design for its BI solution are firmly linked to the company's business requirements.

Initial functionality is limited to revenue reporting and analyses, with data coming from front gate and web ticketing systems plus retail, food and beverage point of sale systems.

This will soon be expanded to enable examination by outlet, visitor demographics and ticket types, ultimately leading to comparative analyses such as the number of transactions per outlet versus the number of products sold versus total revenue.

“We've started with a definite focus,” Tribolet notes, “then we'll be looking at how we can extend it. Right now we're using it to provide a daily snapshot of the previous days' business but this will expand with the more information that we put in there.”

Tribolet admits that much of the information being generated through the BI solution was always available within the organisation but it was maintained in disparate systems and required an expert to find the data.

The aim was to ease the business risk by making data more accessible, available from a single location, and to present it in a simple format.

“It's about the ability to analyse the data rather than have so many people working on getting the data out,” Tribolet observes.

Although initial reporting focuses largely on sales data, it is the Finance Department that has driven Warner Village Theme Parks' project.

By keeping development under its tight control, Finance was able to give the project a consistent, stable basis that incorporates the necessary data and business rules.

At the same time, the Department has also been able to set and manage expectations across the company.

With the initial version of the application being rolled out, other managers are now being given their chance to provide feedback and to consider additional reporting and information requirements.

One area already planned for future development is greater visibility of staff costs.

“Hours worked by staff is a very big KPI here, with salaries and wages our biggest cost,” she says.

“We will look to include time and attendance data in the data warehouse. Many stages down the track we'll also add other financial information and eventually get a dashboard view for managers but we haven't really focused on the financial system yet.”

Narrowing the scope
While both Ricoh and Warner Village Theme Parks are working towards company-wide BI solutions, other organisations are using the technology for far more specific – sometimes niche – applications.

Banks and credit unions are amongst Australia's biggest users of BI.

The Bank of Queensland originally implemented a SAS BI solution for compliance reasons but has since discovered a benefit in customer care that is now helping to grow the business.

Medical Benefits Fund (MBF), Australia's largest privately owned health insurance company, is another SAS user.Since the early 2000's it has been using SAS Enterprise Miner to analyse transaction level data and help in the detection and prevention of fraudulent claims.

Within its first six months after deployment the project achieved a return on investment of more than 200 percent.

Deakin University in Victoria uses an IBM Cognos solution to assist in planning infrastructure investments, staffing, marketing activities and compliance reporting related to student enrolments.

Kubota Tractor Australia adopted a highly-targeted approach to BI, deploying iQ4bis to gain faster access to accurate sales data and to reduce dependence on both IT staff and Microsoft Excel.

While the company's immediate need related to unit sales and profit margins, the ease of the system soon encouraged more sophisticated analysis.

Staff began using it to examine sales by zone, product and by dealer.

They now regularly conduct comparisons of all three – an activity that once upon a time would have required manual examination of multiple reports.

Kubota's GM sales and marketing Paul Barry says, “Now it's just a click away.”

Barry estimates that it took less than a month for staff to lose their initial hesitancy and to wholeheartedly adopt the new system.

“The IT side of the implementation was seamless. It was just peoples' habits that were the only inhibitor. Once people saw how quickly they could access and decipher the information, there were no Excel reports any more. The big problem with Excel is that it's just flat data.” Barry believes that Kubota's success with BI is due to the time spent defining needs early on.

“That meant we knew what we were after, which was to provide internal users with a system that was easy to use, had very easy to understand information and, finally but most importantly, opened up our sales history,” Barry says.

“This was something which was very difficult in the past. When providing a BI system you need to have in your mind why you are setting it up. If it's just to have a nice little toy you're probably wasting money, but if you're finding it difficult to get information from your current system, BI is certainly a fantastic tool.”

BI in the public sector
Australian public sector BI successes are more difficult to find.

This may be due a reluctance to make public the nature of any analysis or it could signal a hesitancy to be seen promoting individual software solutions.

Either way it makes it difficult to fully examine or refute the finding in a January 2008 Gartner research report which stated that Australian government agencies tend to lag behind private firms when it comes to BI.

The study suggested that the public sector culture poses particular challenges when it comes to performance management initiatives as does the need to frequently respond to short-term political influence. Compounding this is a lack of executive-level sponsorship for BI strategies and projects.

Two agencies that have successfully negotiated BI implementations are StateFleet and Sydney West Area Health Service (SWAHS), two relatively high profile BI examples within the NSW State Government.

State Fleet is using BI as a risk management tool to calculate more accurate lease rates and residual values for the vehicles it provides to the Government, while SWAHS has deployed the technology to provide better access to data across all areas of its operations, providing information on individual hospital performance, operational units, and key metrics on patient treatment.

The question of value
Measuring the return on investment that Australian companies are achieving from their BI deployments is tricky.

Many of the benefits quoted by vendors are valid but remain vague and ill-defined at best: a single source of the truth, greater visibility across the business, the ability to “slice and dice” data, or empowerment of business users.

The disparity of situations to which BI is applied further complicates any measurement. Every organisation approaches BI for its own reasons and will have its own criteria for success.

Gartner's McMurchy explains the difficulty: “Say you have good analytical abilities and you predict market trends. That's good but it's then dependent on that executive doing something with the analysis to reduce cost or increase revenue. The fundamental way of deriving benefit from a BI strategy is that the business has to do something with that information. If the business does not engage it doesn't matter how good a data warehouse you build or what BI tools you use.”

It's a complete contrast to investment in almost any other kind of enterprise application – an ERP, automated procurement or new finance system for example – where users can expect a direct and measurable benefit.

The issue of ROI is not just relevant to Australia, McMurchy adds.

“People are generally very aware of the [BI] opportunity and are often very frustrated about their ability to explain it to the business and to get the business to understand.” Barry suggests that the measurable benefit of Kubota's BI system is time, but acknowledges that there is much more to consider.

“There is a time saving as far as how much time people were spending on creating reports. The intangible benefit is having a vast array of information in front of you. The decision-making that results from that information is a little harder to quantify.”

Looking back on Ricoh's experiences, Livingstone concludes, “It's all about having one entry point to be able to answer many, many questions quickly and easily. What is the value of information and knowledge that lead to better decision making? What would be the cost to the business if we didn't have it? It would be significant.”

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