Written by Madan Sheina, Ovum
As companies brace themselves for a recession, investing in business intelligence (BI) software might well be their best defense. BI, if implemented and used correctly, is sure to win over many more fans in the coming year. However, BI vendors will no longer enjoy their premium-priced policies of the past.
BI has proved to be an unusual segment of enterprise software in that it never seems to have a down-cycle. That's because BI is a Janus-faced technology. If the economy is doing well then BI and data warehousing helps companies optimize their operations and grasp new and lucrative business opportunities before their competitors do. However, if the economy isn't doing so well then BI becomes an effective cost-savings tool, allowing companies to squeeze greater cost efficiencies from their existing processes and resources, and identify and mitigate business risk. BI's shift to the latter is all too evident today within the beleaguered financial sector, where many banks and financial services institutions are starting to refocus away from just customer relationship management (CRM) focused activities like up-/cross-sell and combating churn, to also understanding high-risk loans to avoid exposure to high debt. The need for companies to have visibility into their business, in both good and bad economies, has therefore buoyed up sales of BI software despite other types of business applications tailing off.
BI Is Your Best Recession-Fighting Tool
BI is tailor-made for an economic downturn and becomes one of the hottest tools in corporate IT portfolios. With the dreaded "R" word on everyone's lips right now, companies are bracing themselves by tightening their budgets, scaling back their investments and operations, and maximizing efficiencies from what they have in place. To meet these challenges, companies have to be nimble and agile in terms of their key business operational processes and strategic decision-making. What they really need is greater visibility into their core business processes. And that's where BI comes into play. Many companies are instinctively slashing back on costs across the board.
But the smart organizations are taking a more calculated and informed approach to tightening their belts, making sure that the costs they cut don't cut across their top business priorities. BI provides a foundation for companies to steer through bad economic times by creating new approaches to measuring every aspect of their business. For instance, BI allows companies to: catch, retain and focus on their most profitable customers; enhance cross-/up-selling; understand their supplier relationships to negotiate more skillfully; use knowledge of products to reduce service costs; and pinpoint operational inefficiencies crying out for cost-cutting.
Doing More BI With Less - Expect New, Leaner BI Practices To Emerge
BI and data warehousing projects are always construction zones - they're never completed projects and constantly have to adapt to new business pressures and requirements. 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 piecemeal departmental deployment to across the wider enterprise. Look out for the risk-averse financial services sector to lead the charge in new BI projects over the coming year as they realize the need to analyze their businesses and the market in order to boost revenue performance and segment (profitable) customers more clearly.
However, BI vendors should also be prepared to sell to increasingly cost-conscious customers. Companies are insisting they do more and more sophisticated types of BI with less money and IT staff. We believe that's a good thing. It will help to 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. Both will increasingly force customers to look beyond the traditional BI vendors - SAP/Business Objects, Oracle/Hyperion, IBM Cognos, MicroStrategy and Information Builders - at disruptive models like software as a service (SaaS), open source and BI/data warehousing appliances, as well as smaller, lesser known niche tool providers.