Doing business the intelligent way

Ovum analyst Helena Schwenk why BI remains a top priority for CIOs and how they can the technology as a recession busting tool.

“In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts”
-Helena Schwenk, Ovum

IT budgets will come under increased scrutiny and pressure in 2009, especially if the economic downturn continues. But, while a recession might well force companies to pull back on some IT investments, Ovum believes that any new initiatives will address specific business pain-points and offer quick and visible payback. BI fits into this category – focusing on key issues like securing and increasing revenue from profitable customers, rationalising and reducing operational costs, providing greater visibility into cross-selling opportunities and improving customer satisfaction. Hence, Ovum believes that BI will continue to rank among the top three priorities for CIOs in 2009.

Recession busting technology

While many companies will instinctively use BI as a cost-cutting tool, smart companies will continue to invest in BI solutions to intelligently scale back operations and maximise efficiencies from business processes they already have in place. In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts, making sure that any cost cutting measures don't cut across their top business priorities or cut out the valuable Brazilian rosewood with the deadwood. Moreover, they will increasingly focus on using BI to maximise revenues, optimise operations and grasp new and lucrative business opportunities before their competitors do. While a recession might well force companies to pull back on some IT investments, there's rarely any question of a BI project being pulled or cancelled due to a cut in costs. If anything, an economic downturn could in fact speed up its deployment from a piecemeal departmental deployment to deployment across the wider enterprise. Ovum expects the risk-averse financial services sector to lead the charge in new BI projects over the coming year as they realise the need to analyse their businesses and the market in order to boost revenue performance and to segment (profitable) customers more clearly.

However, BI customers are also becoming increasingly cost-conscious. Companies are insisting they do more and more sophisticated types of BI with less money and IT staff. Ovum believes that's a good thing – it will make BI more focused and efficient, which in turn has a better chance of returning tangible benefits. It will also continue to force BI vendors away from their traditional premium pricing models, resulting in broader adoption of BI beyond an elite group of executives and analysts to front-line business users.

New models

As a result of the economic downturn customers are becoming more risk averse and are looking for more cost-effective ways of implementing BI. This will challenge traditional BI and data warehousing implementation approaches and put new development, deployment and packaging models like open source, software-as-a-service (SaaS) and pre-packaged appliances on the radar screens of more BI customers in 2009, particularly SMBs. Additionally Microsoft's market entry and BI strategy aim to make BI a commodity technology that customers will expect to implement easier and for a lot less than complex, premium-priced solutions of the past. These are some of the key BI technology trends that are developing:

Open source: Open source BI is still a fledgling market and its evolution is still a far cry from its evolution to free solutions that are advanced by the developer community around the globe. However, it is no coincidence that Linux is now the fastest growing platform for new BI projects. The continued interest in open source BI in 2009 is a clear counter-reaction against the market dominance of a few vendors due to consolidation. Open source BI pioneers like JasperSoft and Pentaho, which were once considered temporary illegal aliens in the BI market, are establishing themselves as permanent residents, getting funding, issuing new code releases and starting to win over larger non-traditional enterprise customers.

Economic forces are also playing directly to open source, particularly for first-time BI buyers. These companies are looking for a cost-effective way to deploy BI without having to fork out a hefty upfront fee for a packaged commercial offering. First-time open source implementations will always be prototypes. But if successful they will evolve into fully productive BI systems that are backed by commercially licensed support services from open source BI vendors.

SaaS BI: providing BI as a hosted online service – is gaining increased market acceptance, especially among smaller, cost-conscious businesses. 2009 will be a decisive make-or-break year for SaaS BI adoption, especially as seemingly similar cloud infrastructure models start to take root. Most of the early adoption thus far has been among SMBs or departments of large organisations. The real test for SaaS BI will be to break into the enterprise market. When SaaS starts to uproot complex enterprise applications, including BI, it will truly have broken into the mainstream. The year 2009 is probably too early for that to happen. But vendors will start to demonstrate how a small and simple SaaS solution can quickly kick-start an actionable enterprise-wide BI strategy without having to undergo a big and complex customised enterprise data warehouse (EDW) project first. In large enterprises, Ovum expects these SaaS deployments to proliferate by first complementing existing BI tools, applications and infrastructure.

Ultimately any spike of SaaS BI adoption in 2009 rests on the success of SaaS's poster-child application, namely Salesforce and whether it can withstand the economic pressures being put on its slim margins model. However, Ovum expects at least one major breakthrough in 2009 – the on-demand model will also (finally) enable BI vendors and partner channels to offer functionally focused or vertically oriented analytic solutions, without the pain of conventional BI deployment approaches. Ovum believes there is an untapped opportunity for vendors to offer vertically focused SaaS that can quickly plug skill-gaps in organisations that are restricting them from doing specialised and advanced analytics like pipeline analysis, predictive analysis and fraud loss prevention. BI in the cloud will also ride on the coattails of steady SaaS BI adoption. Even though the definition of cloud computing continues to shift like the clouds in the skies, the notion of hosting BI infrastructure and using BI services will start to gain the attention of CIOs and IT directors. Much of that is due to the noise that major cloud platform players – Google, Microsoft, Amazon, Salesforce.com and others – have made in 2008.

Application form factors: The emergence of new competition from influential vendors like IBM, Oracle, HP, Microsoft and Teradata is helping to reinforce the value of data warehouse appliances and is bringing it into the BI mainstream as an alternative model. The appliance form factor – which gives companies the operational ability to plug and play BI technology without wasting time and money on assembling the hardware and software infrastructure – is catching on fast and threatens to break the traditionally high price-entry barriers for BI. Significantly, it offers mid-sized firms a chance to engage in complex and high-end BI, which can be deployed at a fraction of the cost and time compared to traditional enterprise data warehousing. In 2009, Ovum expects more BI tools and applications will be increasingly bundled with data warehouse appliances. More data warehouse vendors will also pre-integrate BI tools and applications – either their own and/or those of their partners – into their appliance bundles. These data warehouse/BI appliances will also be increasingly tailored, packaged, and priced for specific vertical market segments and even specific functional application.

Helena Schwenk is a Senior Analyst within Ovum's software application team and is based in the UK. She has over 15 years' experience working within the IT industry as both an analyst and IT practitioner. Her areas of focus include business Intelligence, performance management and data warehousing. Schwenk holds a BA (Hons) in Computing and Information Systems.