How Effectively Are Companies Using Business Analytics?

DecisionPath Consulting Research October 2010

Thought-Leading Consultants in: Business Analytics Business Performance Management Business Intelligence Data Warehousing

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Executive Summary:
In our experience as business intelligence and business analytics consultants, we have seen a wide range of BI adoption and maturity. Weve also seen a wide range in the perception of BIs role among the clients we serve. Through this survey, we were able to look at some of the reasons why there is such a wide range, particularly in the perceptions of BI between IT and business professionals. Here are three key findings of the report: 1. At a company level, theres a widespread lack of maturity. Although BI adoption is widespread, it is often stuck at lower levels of BI maturity often seen as standard reports instead of mission critical applications that executives can use to keep their fingers on the pulse of their day-to-day job functions. 2. At a business function level, theres a disconnect between BI need and current BI use. While BI is being used in most job functions (roles), there are important gaps in how effectively BI is being used to solve the day to day challenges. Business users want to be able to leverage more sophisticated business analytics, but since they dont know whats available, they struggle to articulate a more sophisticated solution 3. At an IT/BI management level, theres a vicious cycle. Theres a vicious cycle occurring with the IT/BI team being deluged with requests for new applications, but business users thinking that the BI team isnt able to get BI applications developed and deployed fast enough. This constant demand makes it difficult for the BI team to develop higher-impact applications with higher ROI; this perceived lack of responsiveness causes the business user side to overlook the BI program as a mission critical tool.

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Introduction
We designed the survey to explore how business analytics and business performance management applications are being used by companies. In this process it was important to examine perspectives of both IT professionals and business professionals. The makeup or our respondents gave us a good balance of both, with 48% identifying as being on the business side (managers in Finance, Operations, Sales and Marketing) and 52% falling into the BI/IT category.

Business Side
What is business analytics?
We asked our business side respondents what terms they used to describe the analysis of business information to support better decision making and improve business results. While the terms business intelligence and analytics were frequent responses (64% for each), the term reporting was the most frequently selected option (82%) (See Table 1).

What it means
For anyone on the technology/development side of BI, it may come as a surprise that business intelligence and analytics werent selected 100% of the time. Given the widespread use of advanced BI applications, its surprising that many still think that analysis of business information to support better decision making and improve business results still refers to traditional reporting. The companies where this view prevails might be missing the opportunity to better leverage true 21st century business analytics.

How is business intelligence being used?

We next asked our participants to describe the current use of business intelligence in their companies, and found that most often BI and analytics are equated with traditional reporting (64%) used primarily by power users (64%). Only a third of respondents (36%) viewed business intelligence as a widely useable strategic or mission critical management system (See Table 2). When asked for the desired future use of business intelligence in their companies, we found that business professionals wanted to evolve their business analytics programs into strategic systems that provide management with the ability to keep a finger on the pulse of their business (55%) and use business analytics for competitive advantage (64%) (See Table 3). Adding to this, we asked participants to describe how business analytics were being delivered. Their responses were in-line with previous questions, showing that most business people used BI for reporting (with perhaps better data visualization), but fewer than half used it for more sophisticated styles of BI such as advanced or predictive analytics (See Table 4).

What it means
The current vs. future state of BI for executives reinforces what weve seen in our experience in working with business executives. Although most companies recognize the potential of business analytics to be strategic or mission critical for their success, they havent quite focused or invested appropriately to implement these more sophisticated, and value adding, systems.

Where is Business Intelligence Being Used?

We asked respondents a few questions about the scope of BI in their organizations: how widespread its use was, and how business users are able to create new BI applications. Only 10% indicated that they had no BI, while 70% indicated that BI was being used across more than

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one department. Only 20% indicated that BI was widespread across most or all of their organization (See Table 5). In terms of creating new BI applications, we found that only 10% have any sort of formal IT or BI governance. 40% of respondents submit requests to the BI team, and the largest set of respondents 50% indicated that they build out their own applications or write their own reports with minimal involvement from their companys IT or BI organization (See Table 6).

What it means
Responses show that a stovepiping, or siloed, approach to BI is fairly pervasive. Business owners create their own data repositories or spreadmarts with little formal BI/IT and business coordination. This leads to expensive manual processes, often costing hundreds of thousands of dollars to maintain, and achieving less than desired results. Without a coordinated effort and formal process, businesses arent able to appropriately identify the highest value BI opportunities for the organization, and arent able to weigh them against the costs and risks associated with the development of a particular application.

Can Business Intelligence Solve Major Business Issues?

Based on our experience with business executives, we identified key challenges that professionals in several functional areas face, and asked how well suited their organizations BI programs were in being able help them address these issues. Heres what we found:

Business Analytics and Biggest Challenges by Role

Finance:
Finance professionals indicated that a number of areas were either very important or important. They also indicated that they have, at best, adequate BI to address these areas. Two areas in particular were identified as issues where finance professionals have inadequate or no BI: understanding the relationship between operational performance and financial results, and understanding the risk or impact of external events on company performance and financial results. See Table 7 for a list of major challenges in order of importance.

Operations:
In operations, managers and executives listed several issues as either very important or important to their role. The issue identified as most important to respondents was the ability to monitor and manage costs. For this issue, the majority of respondents felt that they had good or adequate BI. In the issues following closely behind monitoring and managing costs managing customer expectations, monitoring and managing product quality and matching capacity to demand the majority of respondents felt their BI was inadequate or lacking. In most of the strategic areas translating company strategy into operational plans, and aligning performance with company objectives the majority of respondents felt as though they had good or adequate BI. See Table 7 for a list of major challenges in order of importance.

Sales & Marketing

Sales and Marketing professionals indicated that the following issues are either very important or important to their role: understanding the competitive landscape, acquiring and retaining customers, managing marketing campaigns, and managing product lifecycles. All of the

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respondents indicated that they had, at best, adequate BI. The areas where they indicated having inadequate or no BI are highlighted in Table 7.

What it means
Our survey findings provided highly relevant anecdotal insights into the issues facing business people and the dergee to which BI is helping them address those challenges. The findings also show that business people see the benefits of business intelligence to their role, and that they view their current business intelligence program as adequate at best. The disconnect between the perceived business value of BI and the actual state of adoption of BI has puzzled people for years. Simply put, if BI can help business people meet important business challenges, then why havent companies made more progress in rolling out high-impact BI applications? Based on our extensive experience in developing high-impact solutions using clients information, the kinds of responses we received for this survey question confirm this disconnect between the business needs of organizations for BI and organizations ability to meet these needs. In some cases the information infrastructure is inadequate, and in other cases there are different barriers to BI success. In the next section, well explore the perceptions of the IT sides of organization to shed more light on why there may be this disconnect.

Business Intelligence Side

Where BI is Being Used
While it is clear that there are areas of disconnect between the BI/IT and business sides of an organization, we did find some areas of commonality. For instance, most of the BI director respondents agreed more or less with the business-side assessment of how pervasive BI is in their organization. Most see that BI is partly coordinated across a few departments. One notable difference is the degree to which BI teams feel they have enterprise BI (i.e. a fully integrated and governed program across all departments). 31% of BI professionals described their BI program as enterprise BI vs. 20% of business professionals (See Table 8).

What Matters on the BI Side

We asked BI directors and managers to rate the importance of several responsibilities common to a BI professional, and found that their most pressing responsibilities are as much organizational as they are technical. For example, 92% of respondents indicated that explaining the benefits of BI was very important or important, as opposed to the 85% who indicated that integrating disparate data sources (one of the most fundamental elements of BI) was very important or important. Similarly, justifying the investment in BI was as important as maintaining data quality (77% rating both as very important or important). The complete list of responses in order of importance (the frequency with which the respondents indicated this responsibility is very important or important) can be found in Table 9.

What it means
While many may view the role of a business intelligence director as predominantly technical, we see that the ability to connect the business need to a technically successful program as equally important (or even more important). From our experience, when companies fail to connect their BI programs with the business side, the result is often a technically successful implementation that yields sub-optimal results, manifesting (as is seen in a previous section) in silos of information that are incomplete, contradictory and ultimately costly both in terms of the unreliability of the data and the time and money spent generating manual reports.

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Challenges for BI and Business Analytics

We asked participants to rate common BI and analytics challenges they face in their roles. Again, we saw the biggest challenges coming from a disconnect between the BI and business side. Respondents feeling that the business value of BI isnt being measured (73% indicating a very big or big challenge), and there is inadequate time (64% indicating very big or big challenge) and funding (55% indicating very big or big challenge). (See Table 10.) In addition to pre-defined responses, we asked participants to write-in their biggest BI challenges, and responses included concerns that weve heard quite often in our experience. Some of these responses were: [Stakeholders] don't really use BI to drive intelligent business decisions. They know it can help with day-to-day operations, but are unclear as to the benefits of forecasting trends and identifying potential issues and bottlenecks Lack of user buy-in; telling the BI story in a packaged, compelling way to engage senior leaderships attention and [to prioritize for] commitment over time. Each business unit has [a] silo solution; each comes up with a different answer to the same question Lack of sufficient resources to respond to all business requirements and to generate value [Executives] jump the line with their latest emergency

What it means
Lacking time and resources are two common challenges most professionals (BI and business side) face, and will continue to face. Additionally, the picture that respondents paint above indicates a lack of direction, strategy, and execution. These challenges can be mitigated if companies take a methodical approach to developing their BI programs. Given limited time and money and frankly, management buy-in its crucial that organizations formally plan their BI initiatives and identify the most beneficial opportunities that is, opportunities that weigh the potential value against the risk of pursuit and develop a portfolio of BI projects that deliver the highest return on investment.

Summary: Getting to Mission Critical Analytics

Ultimately, this survey provides insight into the differences between the companies business and BI sides. Both groups understand that utilizing information can help them better manage and monitor their performance, and provide them with business analytics tools that, if implemented correctly, can become mission critical in managing their day to day job functions and can transform them into companies that use analytics for competitive advantage. The problem most face, though, is the inability to connect this abstract understanding of the use of business analytics into a concrete program that involves the right information, technology, management buy-in, and applications. While many companies arent there yet, more and more are moving in this direction, and the longer that companies wait to get serious about their use of business analytics, the less likely they will be able to reap the benefits that analytics can bring. While this survey has been a good snapshot of where companies are right now, and where they want to go we want to continue to explore the issue and would like your input. If you would like to weigh in on the subject, please feel free to take part in our survey. Well update the findings of this report as more participants respond.

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About DecisionPath Consulting

DecisionPath Consulting is a recognized leader in leveraging business intelligence and data warehousing technologies to drive profit and productivity improvement for large and mid-sized organizations in a wide range of industries. We work with business and IT managers to design customized business performance management, business analytics, and business intelligence systems that have a substantial impact on business performance - whether measured in revenue growth, margin improvement, cost reduction, customer service improvement, asset utilization, productivity improvement, or other relevant metrics, enabling performance improvement by all functions of the enterprise.

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Report Tables
Table 1
Different terms are used to describe the analysis of business information to support better decision making and improve business results. Which of these terms do you use? (Select all that apply) Answer Options Percent Reporting 82% Analytics 64% Business intelligence 64% Decision support systems (DSS) 36% Data warehousing 27% Management information systems 18% Informatics 9% Other (please specify) 9% Decision engineering 0% Executive information systems (EIS) 0%

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Table 2
Which of these statements describes the CURRENT use of business intelligence in your company? (Select all that apply) Answer Options Percent Traditional reporting, but using newer/better technology 64% Analytical tool for analysts and power users 64% Self-service mechanism to make information available to a broad audience 36% Monitoring system that helps management "keep a finger on the pulse" of the business 36% Mission-critical system that drives processes and profits 36% Strategic system that provides a competitive advantage 27% Don't know or no perspective 0% Other (please specify) 9%

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Table 3:
Which of these statements describes the desired FUTURE use of business intelligence in your company? (Select all that apply) Answer Options Traditional reporting, but using newer/better technology Analytical tool for analysts and power users Self-service mechanism to make information available to a broad audience Monitoring system that helps management "keep a finger on the pulse" of the business Mission-critical system that drives processes and profits Strategic system that provides a competitive advantage Don't know or no perspective Other (please specify)

Percent 36% 55% 45% 55% 45% 64% 0% 9%

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Table 4
Which of these types of information delivery and presentation (sometimes called "styles of BI") are available to you, and which do you personally use? (Select all that apply) Answer Options Available Used Traditional reporting 73% 64% Charts and graphs 91% 82% Scorecards and dashboards 82% 64% OLAP (slice and dice) 64% 45% Advanced analytics (regression, collaborative filtering, data mining, etc.) 64% 45% Predictive analytics (statistical forecasting, credit scoring, etc.) 36% 9% Activity/event monitoring and alerts 36% 27%

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Table 5
Which statement best describes how widely business intelligence (BI) is used in your company? Answer Options Percent We currently dont have BI 10% BI is used by a few departments/functions, but not mine 0% BI is used by a few departments/functions, including mine 70% BI is used by many or all company departments/functions 20% Other (please specify) 0%

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Table 6
When you have a need for additional BI (which could range from a modification to an existing report to a new BI application), which of these process descriptions best describes how you satisfy it? Answer Options Percent Formal: which BI requests are worked by the BI team/IT is determined by the budgeting process, a formal IT governance mechanism, or a formal BI governance mechanism IT-driven: individual functions and/or users submit requests to the BI team/IT; it selects requests to work on, based on its understanding of business value, risk, and technical difficulty Do-it-yourself: individual functions and/or users build their own BI applications, write their own reports, etc., using tools of their own choosing; the BI team/IT is minimally/not involved

10%

40%

50%

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Table 7
How important is each of the following tasks to your role? (ranked from most to least important in each role; **indicates inadequate or no BI) Finance Mergers and acquisitions Understanding the relationship between operational performance and financial results** Working capital and cash management Reducing the time required for the monthly/quarterly/annual closing cycle Sarbanes-Oxley compliance Planning, forecasting and budgeting Understanding the risk/impact of external events on company performance and financial results** External financial reporting Internal financial reporting Financial consolidation Operational management of accounts receivable, accounts payable, and payroll Taxation Internal audit Operations Monitoring and managing costs** Translating company strategy into operational plans Aligning operational performance measures with company objectives Obtaining a clear view of operational performance Developing, executing and monitoring consistent, repeatable operational processes Obtaining operational performance information timely enough to take appropriate corrective action(s) Monitoring and managing product quality Understanding the relationship between operational performance and financial results Managing customer expectations Matching supply and demand; matching capacity and demand Managing an extended enterprise / exchanging information with trading partners Sales and Marketing Understanding the competitive landscape** Acquiring and retaining customers** Optimizing sales and distribution channels** Managing marketing campaigns** Managing product life cycles Customer segmentation Determining customer lifetime value Optimizing pricing Category management**

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Table 8
Table 8 Which of these statements best describes the state of BI in your company? We're just getting started Departmental BI: BI is used by one or a few departments with no coordination of projects or integration of data across departments Partially coordinated BI: BI is used by multiple departments, with some informal project coordination and sharing of data Enterprise BI: BI is managed as an integrated program of projects, all supported by an enterprise data warehouse 8% 8% 54% 31%

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Table 9
Table 9: How important is each of the following tasks to your role? Very UnVery unimportant Important Neutral important important Answer Options Explaining the benefits of BI 54% 38% 8% 0% 0% Integrating data from disparate source systems 54% 31% 15% 0% 0% Building and articulating a business case for / justifying investment in BI 46% 31% 23% 0% 0% Maintaining data quality of source system data 38% 38% 23% 0% 0% Managing the portfolio of BI projects, including project prioritization and sequencing Planning for long-term growth (i.e., wider and more mature usage) of the BI program Attracting and retaining staff members with BI technical skills Building/deploying BI applications Keeping the BI skills of staff members current as technology and methods change

23%

54%

15%

8%

0%

8%

62%

31%

0%

0%

23% 38%

38% 23%

31% 23%

8% 8%

0% 0%

8%

67%

25%

0%

0%

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Table 10
Table 10: To what extent do you face this challenge to your BI program? Answer Options
Users believe that BI projects take too long; they either lose interest or change the requirements by the time a project is completed Measuring the business value realized through use of BI Inadequate funding relative to desired capabilities and results Inadequate data governance Inadequate involvement in BI by executives and the business BI projects are lower priority than other IT initiatives/projects for managerial attention and funding Insufficient/ineffective business process change to leverage the information BI provides BI projects are lower priority than other business initiatives/projects for managerial attention and funding Meeting user expectations regarding query performance (response time) Lack of analytical and/or computer skills in the business Lack of business agreement with a BI strategy and roadmap Making/keeping our data architecture flexible and robust enough to meet business needs for information Business users dont trust the accuracy of the information we provide Company culture does not emphasize factbased decision-making Meeting user expectations regarding ETL performance (i.e., batch processing successfully completed on time) Very big challenge Big challenge Moderate challenge Little challenge Not a challenge

9% 9% 18% 27% 27% 9% 9% 9% 0% 10% 10% 0% 9% 10% 0%

55% 64% 36% 27% 9% 18% 27% 36% 27% 10% 10% 27% 9% 20% 18%

27% 18% 36% 27% 27% 55% 45% 27% 45% 60% 60% 36% 45% 40% 27%

9% 0% 0% 9% 36% 18% 9% 9% 27% 20% 20% 27% 18% 20% 36%

0% 9% 9% 9% 0% 0% 9% 18% 0% 0% 0% 9% 18% 10% 18%

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