Business Intelligence: Bright Spot in IT Investment

October, 2008

Many business executives today complain that they are data-rich but information-poor. Business intelligence (BI) applications–which convert organizational data from myriad sources into meaningful information for management decision-making–promise to address this problem. As a result, even as businesses tighten down on new investments in response to current economic conditions, they continue to place a high priority on BI applications.

According to our recent survey of technology trends, nearly 60% of organizations are investing in BI initiatives this year. Yet as our data shows, obtaining a positive return on investment is not easy–or at least it is not easy to demonstrate–and budget overruns are more common for BI than for nearly any other technology in our study. While many companies are convinced that business intelligence applications are crucial for management effectiveness, IT managers are struggling to control the escalating costs of BI implementation and ongoing support.

This Research Byte is a summary of our full report, Business Intelligence Adoption Trends and Economic Experiences.

Business intelligence applications collect, analyze, evaluate, and report information that can be used to formulate business strategies and guide operational activities. The applications often rely on data warehouses and data marts. They include tools for extracting data from various systems and tools for analyzing and reporting information. In recent years, BI systems have moved from strategic applications to operational applications, sometimes extracting data directly from transactional systems such as ERP and CRM systems, and delivering operational metrics deeper into the organization. BI systems help top mangers identify spending trends, detect fraud, and lower the costs of marketing campaigns. They can also be used to alert customer service representatives to up-sale opportunities. In the typical organization, there are dozens of examples of how BI applications can support better decision-making by managers and frontline personnel.

The growth of this market has brought a wave of consolidation. Major vendors such as IBM, Oracle, and Microsoft are bolstering their offerings, often by acquiring best-of-breed BI-focused vendors. At the same time, open source solutions are emerging as a low-cost alternative to proprietary BI systems. BI applications deliver hard ROI through reduction of time and resources spent on gathering and reporting financial and other information. Soft returns are often more difficult to quantify. Most agree that having access to more timely and accurate data results in better decision-making and operational performance, but it is often impossible to prove with hard evidence. And for next-stage projects, the business case may ultimately rely on the high cost of falling behind the competition.

BI Adoption and Economic Experiences
According to our most recent survey of technology trends, BI applications are at a high level of adoption, as demonstrated by Figure 1. About 84% of organizations are engaged with BI at some level: 16% are researching or piloting the technology, 27% are implementing BI for the first time, 8% have BI application in place with no further plans, and 33% are expanding their implementations.

BI Apps Fig1 - Business Intelligence: Bright Spot in IT Investment

The percentage of companies that have BI applications but do not plan to expand their systems is quite low compared to the percentage increasing their BI portfolios. This generally indicates that organizations are having positive experiences with BI, although it may also signal that business intelligence efforts tend to evolve continually once the initial deployment is complete. In other words, once the initial BI capability is in place, organizations tend to apply it in new areas of the business.

The full version of this report provides technology adoption statistics and reports on the ROI and TCO experiences of organizations that have implemented BI solutions, based on our most recent annual survey of about 200 IT organizations. The results are presented for the entire sample and by organization size and sector. In conclusion, we discuss precautions IT managers should take to control the total cost of ownership for business intelligence applications.

Measuring ROI and predicting the costs of BI applications is difficult. Moreover, reaping the benefits of BI requires not only high-level management buy-in but also a commitment to changing business processes to take advantage of better intelligence. There is plenty of evidence, however, that organizations that make the commitment and lay the proper architectural foundations will obtain long-term competitive advantages by increasing operational agility, lowering risk, and improving the quality of decision-making.

This Research Byte is a brief overview of our report on this subject, Business Intelligence Adoption Trends and Economic Experiences. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website at (click for pricing).