In the wake of the financial downturn, business are turning to BI software to find new ways to manage costs.
In case you hadnt gotten the memo, the business world changed dramatically for the indefinite future after the financial market meltdown of late 2008. Im not talking about short term cost cutting, but a tectonic plate shift in strategic business thinking in the United States, according to my analysis of a new survey of senior business executives.
This upheaval will drive use of Business Intelligence Software in at least five ways unfamiliar to most organizations.
Massive changes in business conditions over the next 12 months were predicted by almost all of the 355 managers and senior executives of medium and large companies responding to the Bloomberg Businessweek Research
Services survey in May. Specifically:
60% Said companies in their industry are developing new business models, such as more outsourcing, more joint ventures, reducing investment in fixed assets and increasing emphasis on introducing new services.
55% Said companies in their industry were expanding into new markets and geographies.
54% Said companies in their industry were focused on profitability, not revenues.
46% Said their industry is consolidating due to mergers.
27% Said their industry was focused on revenues, not profitability (this is contrary to the conventional wisdom that revenue growth is the top priority after a recession).
10% Said no changes expected in their industry
The turmoil is even more pronounced in companies with more than $1 billion in revenue -- only 5% of the respondents from big companies said no changes were expected.
One way to cope with this turmoil is to invest in information technology to find and manage new opportunities and squeeze more net income from existing operations. So IT spending is going to pop, especially in 2011. More than half of the survey respondents said IT spending would increase next year vs. 2010, with 23% saying their IT spend would increase by at least 5%.
And check out the operational investment priorities of these companies finance departments over the next 12 months:
38% Indicated business intelligence software and analytics tools were on their shopping list, the highest priority among the various IT tools.
21% Said improving the quality of financial reporting and accounting was on their shopping list.
20% Said compliance and risk mitigation tools were a priority. Note that 40% of financial services company respondents said compliance and risk mitigation were a priority.
19% Are looking for systems to automate payments processing.
Statistically speaking, the companies most focused on new business models are even more likely to invest in business intelligence and analytics tools. Based on my research, here are the five tasks to be done by BI and analytics tools that may be outside of your current portfolio of tricks:
Identifying lots of new opportunities based on analyzing unstructured data from your companys help desk emails and web site page traffic patterns, as well as from external sources such as Facebook postings and tweets. Thats the holy grail for business intelligence softwarefinding the areas of growth and potential, notes Michael Tejedor, a senior product manager at Microsoft and a BI maven. Identifying activities that will yield the highest benefit is what analytics are all about, especially high-end predictive analytics.
Proliferating business model experiments will necessitate a new type of financial monitoring to weed out the losers fast. A hallmark of Internet era innovation is to proliferate new approaches quickly and kill the losers fast. The finance department and line of business managers will need BI and analytics tools that can be quickly configured to incorporate new data sources and metrics and accelerate decision making.
Most corporate reporting practiced today are based on management concepts invented a century ago, notes Philip Say, a vice president for financial apps at SAP. However, speed is everything today. Online analysis, collaboration and search processes are the norms for how people expect to find information, formulate decisions and act. If organizations expect to adapt to this new world order for how decisions are made, then yes, it will translate into some new investment in either infrastructure or data management services.
Broader access to financial and operational data are pre-requisites for developing and deploying new business models. The best ideas will come from the people closest to the markets and the customers, and they typically dont have access to financial data in the ERP system or the analytics tools in the BI suite, or they cant find the right information.
Insight is waiting to be liberated from within most organizations today, Say notes. Most companies have all the data to model smart decisions today; however the search and rescue mission of finding information often requires excessive time and energy. Speed should be front of mind for IT managers leading BI or enterprise performance management efforts today.
Faster access is another pre-requisite. The monthly report is history in the current environment. For some new ventures, daily or weekly data updates and analytics will be required. Are your data warehouses and transaction systems ready for the increased workload? Data drives smart decisions, but speed and access still remain a bottleneck, often forcing managers to rely on intuition, experience and educated guesswork, Say notes.
New metrics will drive new business modeling. Everyone uses TCOtotal cost of ownership. Total cost of utilization (TCU) may soon replace TCO in finance department discussions with IT managers, product managers and other decision makers. And capital spending analyses will also change, since most companies will be shifting to an asset-light, operating expense emphasis. In a world where outsourcing design, production, and IT are purchased via a cloud services provider, standard metrics like return on assets become less valuable. You and your finance colleagues will need to rework several components of your standard business modeling tool to accommodate those new ventures.
Allow me to promote a quick and simple solution to some of the BI and analytics challenges. Rather than rebuild an existing BI and analytics infrastructure to accommodate new business models that may be here today and gone tomorrow, consider promoting a Software as a Service solution.
Cloud BI and analytics have matured to the point where they can provide a viable solution to the challenges of incorporating unstructured data and predictive analytics into a BI infrastructure designed to find and manage new ventures. Trying this alternative not only gives you a fast and low cost way of solving an immediate problem, but it gives your organization a chance to try a new model of IT in a relatively low cost, low risk situation.
After all, cloud computing is part -- and ever growing part -- of many new business models, too.