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Business Intelligence Tools Can Help Control Costs
Business Intelligence Tools Can Help Control Costs
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus

There have been many predictions about IT belt-tightening in a down economy. But some business intelligence (BI) software observers say companies can't afford to ignore analytics tools in the midst of a recession that demands cost cutting.

BI tools aim to simplify information discovery and analysis so decision-makers can access, understand, analyze, collaborate and act on information. BI software deals with measuring, managing and improving the performance of everything from individuals, processes, teams and business units.

Worldwide BI platform, analytic applications, and performance-management software revenue reached $8.8 billion last year, a 21.7 percent increase from 2007 revenue of $7.2 billion, according to Gartner. The research firm expects single-digit growth this year and in 2010 despite tighter IT budgets.

"BI capability today is as critical as e-mail and word processing, yet only about 40 percent of companies are using BI," said Franz Aman, vice president of intelligence platform Relevant Products/Services at SAP BusinessObjects. "In the midst of a recession, BI is not just a matter of competitive differentiation. It's a matter of survival."

Repurposing BI in a Down Market

Although vendor consolidation drove much of the BI revenue growth, this sector of the software industry is nonetheless holding up better than almost all other enterprise application sectors, according to Dan Sommer, a senior research analyst at Gartner. That's because companies can leverage BI to drive revenue and cut costs.

Many companies are still struggling with reporting requirements, but best-practices organizations use BI software to identify unprofitable products, customers and employees, and take action accordingly. Leading organizations also use BI metrics to drive strategic goals and increase productivity, and to help knowledge workers identify the right information at the right time, which improves decision-making, Sommer said.

"The need for BI is repurposed, with more focus on identifying cost centers, isolating unprofitable products, and finding risk. So the focus is on the bottom line and cost optimization rather than growing revenues," Sommer said. "Software vendors are fine-tuning their TCO messaging to users much more today, as that is what will get the ear of budget holders."

Sommer said best-practices companies are also using BI to become world-class organizations, rather than just to cut costs, through initiatives such as building predictive models, closing the loop between strategy and execution through strategy maps and scorecards, and building decision support into business processes.

The Shifting BI Focus

Dan Vasset, program vice president for the business analytics division at IDC, agrees that the ways in which corporations are leveraging BI is shifting in the current economy. A couple of years ago, companies employed BI to drive revenue, Vasset said. That means understanding Relevant Products/Services behavior to acquire new customers and drive new Relevant Products/Services. Today, he noted, the focus is more on cost containment.

For example, companies may use BI on the data from a call center to better understand customer complaints. If negative trends are identified, the company can move to eliminate them. BI is also being used more to identify the most valuable customers by examining their interaction history with the company and treating them with special care.

"Companies are using BI to understand what drives profitability and the costs associated with a particular sale," Vasset said. "One company I spoke with determined that their best customers, based on revenue, were costing them so much in service that they weren't profitable. It didn't actually make sense to sell more to them."

As the market recovers, Vasset predicted companies will again use BI to gain market share, gain new customers, and develop new products. One thing is certain: The amount of data available for analysis continues to grow. Even though it's a down economy, he said, more companies are generating, retaining and analyzing more data because they see the value.

Finding Return on Investment

ROI can be tricky to predict with BI software. There are reports of companies saving millions of dollars. But that's no guarantee that every company will see the same, or even similar, results. Some companies see qualitative results rather than quantitative. And some discover answers to questions they didn't even know to ask.

"Customers are finding ROI in ways that they haven't necessarily anticipated because they gain an understanding of their business they didn't have before," Aman said. "Many times, people don't even know the right questions to ask. Knowing what to look for can lead to new products that drive additional revenue."

Aman points to Forbes magazine. At a recent Gartner BI summit, Forbes executives credited BI software with enabling customer segmentation that led to the launch of a new magazine in the midst of a publishing downturn. Forbes launched an Indian edition in May, making it the company's first foreign business publication. The company also launched a women's business Web site in April called ForbesWomen.

"If you actually understand your customer base really well -- and if you can segment it in interesting ways -- you may find that the ROI is not necessarily in cost savings but in new opportunities," Aman said. "No matter what your goals are, the data quality and the underlying information-management approach is a critical foundation to successful BI."

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