Business Intelligence Software's Time Is Now

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Expectations for increasing demand helped fuel a wave of consolidation in the BI market. Software vendors including SAP (SAP), IBM (IBM), Oracle (ORCL), and Microsoft (MSFT) all made big BI acquisitions in recent years.

Cost Analysis Tool

As useful as it may be, BI software can be expensive. And companies that don't take the necessary pains to ensure it works properly risk making decisions based on incomplete or inaccurate data. Companies can spend as little as thousands of dollars on BI software, or up to millions of dollars. A typical business intelligence deal in a large enterprise with a large vendor is somewhere from $150,000 to $300,000, says Boris Evelson, principal analyst at Forrester. Typically this includes just the software licenses and the first year of maintenance.

Add in other essential services, and a company can expect to spend more on BI than for other types of software, Evelson says. "For every dollar you spend on business intelligence software, you better expect to spend five to seven times as much on services," such as ensuring it jells with the rest of the company's software, he says.

Welch's says using the software to reduce transportation expenses makes BI worth the cost. The beverage company makes some 50,000 shipments of its juices and other drinks to supermarkets each year, generating reams of data. The challenge for Welch's has always been turning those millions of bits of data into useful information. But using online business intelligence software helps the company drill down and tweak individual shipments to make sure they're carrying full loads. "We started doing this prior to the recession, but it's been a wonderful tool in the face of the recession because it gives us more insight into our cost structure than we've ever had," says Bill Coyne, director of purchasing and logistics for Welch's.

Coyne says the system has uncovered a great number of opportunities to cut costs that likely would have gone unnoticed before. Also, because the system is faster, it turns what once amounted to 30 hours of work into 30 minutes. With the software, analysts now spend 80% of their time analyzing information and only 20% gathering it, whereas before it was the other way around, says Coyne.

Capitalizing on Quality Data

Still, about two-thirds of large U.S. companies believe they need to improve their analytical capabilities and only half believe they are spending enough on business analytics, according to an Accenture (ACN) survey of 250 executives that was released in December. In it, about 57% of companies said they don't have a beneficial, consistently updated, companywide analytical capability, and 72% are working to increase their company's use of business analytics. Today, only 60% of major decisions are based on analytics, according to the survey, while 40% are based on intuition.

Companies that have established business intelligence tools throughout the organization in a consistent manner stand to benefit from the ability to get high-quality information and respond more quickly. For example, in the month leading up to the December 2006 European launch of Wyeth's (WYE) Enbrel prefilled syringes used to treat rheumatoid arthritis and other conditions, the company saw forecasted demand triple. Because the company uses SAP Business Information Warehouse to aggregate information from throughout its enterprise, the plants were able to anticipate this spike in demand and respond accordingly. "We can very quickly move product or capacity from one location to meet patient needs or market demands anywhere in the world," says Wyeth CIO Jeffrey Keisling.

Business intelligence software can also help companies mine customer data that they already track to potentially sell new products or services. For example, Ingram Micro (IM), a wholesale technology distributor, discovered that it was missing out on opportunities to renew maintenance contracts. Ingram Micro sells hardware and software to smaller resellers who sell it in turn to businesses and consumers. "Our visibility into that piece of product evaporated as soon as it left the warehouse," says Justin Crotty, vice-president for services at Ingram Micro North America. So, three years ago, the company started using online software from MaintenanceNet that analyzes data the company already captures to identify 80% to 90% of renewal opportunities, up from 30% previously. That has resulted in increased services revenues, even while hardware sales have slowed throughout the industry.

Strategic Modeling for the Future

The economic slowdown has also affected the number of bookings in the cruise industry. To cope, Carnival Cruise Lines (CCL) is trying to lure back former travelers. "We're focusing on getting them to come back, refreshing in their minds what a fantastic time they had on their last cruise," says Shannon Balliet-Antorcha, director of database marketing and customer data integration for the Carnival Cruise Lines brand.

Trouble is, Carnival doesn't have an unlimited marketing budget to create material for all of its former travelers, so it concentrates on those likely to go on a cruise during a recession. Using software from SAS, Carnival can look at internal customer information but also third-party information about household income and composition. By analyzing that information, Carnival can quickly and easily create marketing campaigns for the right audience.

"Large companies are like large ships that are difficult to turn," says John Colbert, vice-president for research and analysis at BPM Partners, a management consulting firm. Lots of companies use business intelligence to understand what has happened in the past, but it's really important, he says, to do strategic modeling to understand how to move forward, whether it means solidifying relationships with your most profitable clients or figuring out which employees are the least productive and will need to go in the next wave of layoffs.

Brinker hopes better information will give way to better management of labor costs going forward. "It's starting to help," says Kenny Sullivan, senior director of operational and analytical systems at Brinker. "We're starting to be more efficient."

King is a writer for BusinessWeek.com in San Francisco.