Big vs. Small BI: Which Set of Returns Is Right for Your Company?

Ann All

The bad news about business intelligence: Intangible benefits will likely outweigh the tangible ones. The good news: BI's tangible benefits, such as the increased productivity gained by automating or simplifying processes, can be pretty terrific. And intangibles can give your company a huge edge over competitors.

 

John Colbert, vice president of research and analytics for BI advisory company BPM Partners, offers this example: BI may help a company reduce the amount of time needed to close the books at the end of a fiscal period from 10 days to three days, obviously a tangible benefit. Keeping the reporting process predictable and transparent is more intangible. Yet while always important, it's becoming even more so at a time when investor uncertainty has sent financial markets reeling.

 

"Maintaining investor confidence is a benefit that is difficult to measure but tremendously significant. It's just like the credit card commercial. I'd put it in the priceless' category," Colbert says.

 

Companies may not worry as much about calculating returns for BI as they do for other types of enterprise software because the need for it is "usually pressing," says Dorothy Miller, founder of consulting company BI Metrics, author of three books about BI, and an occasional contributor to IT Business Edge. "The requirements and goals usually seem fairly obvious to those who are waiting for the information. The time and resources are considered better spent on providing the business intelligence rather than measuring the benefits after the fact."

 


In an environment when companies are cutting budgets, many are still spending on BI. Just 10 percent of executives responding to an annual survey administered by BPM Partners expect to decrease their BI focus or funding this year. These numbers are supported by Gartner, which found BI software was the top spending priority for CIOs in a survey released earlier this year, and Forrester, which predicts the BI market will grow from $8.5 billion in 2008 to more than $12 billion in 2014.

 

"The more encompassing applications of BI are where you see a dramatic increase in ROI."


Michael Corcoran
Information Builders

Companies also appear pretty happy with existing BI investments. Sixty-eight percent of BPM Partners survey respondents said their projects met or exceeded their expectations. Twenty-two percent said it was too early to tell, while fewer than 10 percent reported their projects fell short of expectations.

 

Companies that want to derive broad value, both tangible and intangible, from their BI investments should consider expanding their focus beyond financial forecasting and modeling, says Michael Corcoran, chief marketing officer for Information Builders, a provider of BI solutions. "The more encompassing applications of BI are where you see a dramatic increase in ROI."

 

That means offering BI to employees throughout an organization, not just managers, an approach that Corcoran acknowledges has its critics. In my April interview with BI analyst Nigel Pendse, author of the annual BI Survey, he contends this approach is mainly popular with BI vendors that want to sell more software licenses.

 

Pendse offers the example of a retailer: "The only person in a retail store who would need a BI tool for sure is the manager, maybe some people in the departments. But nobody at the checkouts needs it. They don't have any discretion over the decisions they make. A BI tool would not only be a waste of time and money, but would actually distract them from doing their jobs."

 

Factory workers and delivery personnel are examples of other employees for whom BI would be a distraction, says Pendse. Yet Information Builders client Utz Quality Foods, a Pennsylvania-based snack food manufacturer and distributor, allows its delivery drivers to send and receive sales data and other information on handheld devices. In some cases, Utz shares such data with suppliers and other partners. The result, says Corcoran, is elimination of paper and/or manual processes, "which results in very calculable ROI."

 

Ford Motor Company, another Information Builders client, installed a Web-based reporting system at 14,000 dealerships that allows dealers to compare their performance on warranty repair costs with peers. In an Information Builders case study, the executive responsible for Ford's Global Warranty Operations says the system has saved the company $40 million to $60 million a year. "Some of the smartest deployments show individuals or groups how they compare from a metrics standpoint with their peers," Corcoran says.



Add Comment      Leave a comment on this blog post

May 19, 2009 1:15 AM Peter Thomas Peter Thomas  says:

Ann,

Great job on weaving together the different threads of thinking of a number of people (including me).

The ideas expressed by your interviewees have led me to blog my thoughts in the following article:

http://peterthomas.wordpress.com/2009/05/19/big-vs-small-bi-by-ann-all-at-it-business-edge/

Peter

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May 20, 2009 10:38 AM Jorge Couto Jorge Couto  says:

Congratulations by this excellent article. As BI is beginning to 'cross the chasm' this article is worth helping to set the right expectations into the sponsors about the return on investment of BI Projects and teaching the strategy of begin small.  As it is common to say that 'Satisfaction is equal to Perception less Expectation', articles like this help a lot in the process of putting  BI 'inside the tornado', paraphrasing Geoffrey Moore.

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Jul 29, 2010 3:41 AM OptionBit OptionBit  says:

I do agree that BI tools will remain a staple of IT spending for years to come, it's just interesting that BI companies can't seem to make it on their own. How many standalone BI companies are left....MicroStrategy,....

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Sep 10, 2010 1:43 AM order fulfillment order fulfillment  says:

Well, I personally think both of them are pretty much important when it comes to the returns of the company but then again which one is right depends on the outlook we have towards the company. Many insurance companies, aim for both, despite big being the ideal choice. So I think it is a matter of personal preference rather than a common one. Furthermore, maintaining the trust of the investor is far more important in my opinion                                                                                

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