To gain a better understanding of the true performance of their sales and operations, more merchants are implementing business intelligence (BI) solutions. “Most companies know how to manage the transactional aspects of their business,” says Lance Holbert, a director with Hitachi Consulting’s business intelligence and performance management team in Dallas. Now they’re looking to gain insight from the data generated by these transactional systems.
To be sure, transaction and enterprise resource planning (ERP) systems do a great job of automating transactions and capturing the data generated. But most are not designed to provide information in a format that allows for analysis and comparisons. That’s where BI systems come into play.
BI solutions are more of a technology tool than an application, says Mark LaRow, vice president of products at MicroStrategy, a BI solutions provider in McLean, VA. They allow merchants to pull data from multiple systems, such as sales, customer relationship management (CRM), and inventory applications, and assemble the information so that they can gauge the organization’s performance and make profitable decisions. For instance, a BI solution can show which vendors’ products sell best when paired with various promotions. With this knowledge, merchants can fine-tune their marketing campaigns and product mix.
Companies likely to benefit the most from BI solutions are those with multiple products, target customers, suppliers, and promotional campaigns. “This combination of ‘lots ofs’ drives the need for reporting,” LaRow says. The business is too complex to manage via instinct or even with the aid of individually prepared reports and spreadsheets.
From transactions to intelligence
The business intelligence industry got its start in the 1980s, says Ken Rudin, CEO/cofounder of LucidEra, a BI company in San Mateo, CA. As companies began automating their processes, they saw that their systems were capturing a tremendous amount of information. By accessing the data, managers could see how their firms were doing and then boost performance.
Most early BI applications were used by a few employees who were skilled in manipulating data and performing statistical analysis. Because IT employees were needed to help create reports from the BI systems, getting the data could take weeks. In today’s business environment, however, that sort of lag time isn’t acceptable — nor does it need to be. “Business intelligence has moved from paper to static reports over the computer to interactive information where people can move and arrange data,” says LaRow.
As a result, while the systems used by business analysts and other number crunchers remain an important part of many companies’ operations, more executives are moving to BI solutions that provide information to greater numbers of workers. “Customers are looking at the next step in business intelligence, which is bringing it to the masses,” says Todd Paoletti, director of solutions marketing with South San Francisco, CA-based BI provider Actuate.
That allows more employees to make better decisions day to day. For example, BI solutions can help employees in the shipping department more accurately determine which products need to get out the door by the end of the shift. They can also assemble customers’ order histories from across all channels and present the data to sales associates as they’re on the phone with clients.
In these BI systems, the focus often moves from detailed reports that run into hundreds of pages to summary reports and alerts that highlight outliers, says Patricia Waldron, director of retail solutions with Cognos, a Burlington, MA-based solutions provider. For instance, a sales manager may get a report that identifies just the 10 top and bottom sellers, rather than a sales ranking of each SKU.
Harry & David, the Medford, OR-based purveyor of gourmet foods and gifts, implemented two business applications from Cary, NC-based SAS this past fall: Web Report Studio, which allows users to develop reports on their own, and a Microsoft application that enables users to perform in-depth statistical analysis from within Excel.
“Our goal was to put a tool on the desktops of our marketing analysts, to allow them to mine data, configure queries, and get answers on their own,” says Tammy Miles, Harry & David’s senior manager of database marketing. Previously analysts had to requests reports from the IT department. Now the analysts can quickly create and tweak the reports on their own, freeing up the programmers to spend more time developing applications.
More companies are extending access to their BI solutions to external parties, including customers and suppliers. Recreational Equipment Inc. (REI) is a case in point. The Kent, WA-based merchant of outdoor gear and apparel, which deployed PivotLink from Bellevue, WA-based SeaTab Software in 2001, uses the solution to provide data to 270 vendors and business partners as well as to about 500 employees.
Employees in merchandising use the system to support buying decisions, says John Strother, REI’s director of inventory and logistics, while store managers use it to analyze inventory levels and product performance. Vendors can access data on the sales of their products, the percent of on-time deliveries and accurate invoices, and the number of products returned, among other information. “Once people saw this, they embraced the ability to have insight around the data,” Strother says.
That insight is proving valuable. REI’s same-store sales grew by more than 9% in 2005 and 2006, in-stock levels have increased, and the company’s women’s lines and private-label brands have grown significantly. “One key to our success has been PivotLink and the access to data,” Strother says.
Time and place
As BI solutions are deployed to make data available to external parties, ensuring that they provide real-time (or near real-time) data becomes critical. Many BI systems now offer “alert” capabilities, says Diana McHenry, director of global market development with SAS. The system might send the merchandising manager an e-mail as soon as the weekend’s sales figures are available or the inventory manager an alert when the stock of certain products reaches a predetermined level.
To provide these capabilities, the technology architecture must be scalable. It’s no longer just a handful of business analysts who are using the data; potentially thousands of customers and business partners are as well. The systems also need to be fail-safe. Before, if the BI system went down, the analysts could wait for IT to get it back up. Today if a customer- or supplier-facing system isn’t working, the business could slam to a halt.
Most merchants refrain from locating their BI applications on their transaction systems, in order to avoid interfering with those operations, says Ranga Bodla, director of product marketing with Mountain View, CA-based Pilot Software, a division of SAP AG. As a result, companies typically need dedicated servers on which to run the BI application. If a company goes with a hosted solution, adding a dedicated server isn’t necessary, of course.
Until recently, merchants didn’t show much interest in hosted solutions, however. Vendors say that companies were concerned about having sensitive inventory or customer data residing outside their networks; in addition, they wanted to tailor their BI systems to fit their needs.
But that thinking is changing, says Holbert of Hitachi: “We are starting to see more BI as a service.” Companies want to avoid the investment required to purchase a system. On-demand solutions also tend to be faster to launch. And given the impact that BI applications can have on a company’s performance, it’s not surprising that merchants want to get the solutions up and running as quickly as possible.
Based in Minnetonka, MN, Karen M. Kroll has written for American Way, CFO, and Inc. magazines, among other publications.
Intelligence design: a BI case study
A manufacturer/marketer of breakfast sausage, Odom’s Tennessee Pride sells its products to grocery store chains and food service companies as well as, via an online store, to consumers. Like many other companies, Tennessee Pride implemented an ERP system in 1999, while preparing for Y2K. But though the system helped Tennessee Pride operate more efficiently, extracting information was a challenge.
“From a data structure point of view, it was incredibly complex,” says Mike Hader, director of information technologies for the Madison, TN-based company. Assembling an accounts receivable aging, for instance, required accessing about 17 tables for, among other things, invoices, ship-to locations, customers, and debit and credit memos.
So in 2002, Hader’s team implemented a BI solution from Actuate Corp. Management’s initial goal was to provide employees with information on sales, inventory, and operations. The company wanted the system to eventually link with external suppliers and the food brokers that it uses to work with larger grocery chains.
Tennessee Pride employees in sales, logistics, and manufacturing use the system to track several measures by SKU, such as the quantity on hand, the quantity to ship, and the age of the product by lot number. This requires pulling information from the inventory, sales order, and production systems as well as the manufacturing schedules and then assembling it into a single “dashboard,” or summary report at the SKU level.
To accomplish this, Hader and his colleagues developed a common glossary of terms so that all employees could be certain they were reviewing the same information. Hader’s team also had to synchronize data reporting periods. Some data, such as warehouse transfers, are generated in real time. Other information is produced in batches. Training helps compensate for this, Hader says. So users of reports regarding on-hand inventory, for example, know that the numbers may not reflect shipments that went out that day, as Tennessee Pride receives that information in batches from a third-party warehouse.
Hader’s team also built into the reports a feature that enables anyone reviewing them to click on a summary number, such as overall salary expense, and automatically link to the numbers used in the calculation. Providing this capability has cut the number of instances in which an employee has to manually research the calculations that make up a particular expense item, Hader notes.
The team’s work has paid off. Hader says that the value of Tennessee Pride’s inventory level declined by about $1 million during the past year. To be sure, some of this resulted from a drop in the cost of raw materials. But, Hader says, a significant portion of the reduction is due to the company’s ability to more tightly control and more quickly turn inventory — and that wouldn’t have been possible without the information provided by the BI solution.
Five tips for improved implentation
Assess your needs. Before deciding on a business intelligence solution, determine how your organization will use the information provided. Zero in on the most significant challenges, and focus on obtaining information that addresses them. “You can’t prescribe until you diagnose,” says Russ Hill, senior director of retail and consumer packaged goods with San Francisco-based solutions provider Business Objects SA.
Realistically assess the work involved in extracting, manipulating, and validating data. It requires knowledge of the data layout of each data source. That becomes complicated when you consider that an ERP system can have tens of thousands of transaction storage tables. You need to know how to handle incomplete data as well as records that are incompatible during the merge process. “The complexities of dealing with data are really high,” says Jeff Morris, senior director of product marketing for solutions provider Actuate Corp.
Go for a quick win, and build on the solution from there, says Patricia Waldron, director of retail solutions for provider Cognos. “It’s an easier sell within the organization that way.”
In contrast, selling management on a “big bang” type of deployment, in which you expect to realize major benefits a couple of years down the road, doesn’t work as well, says Ranga Bodla, director of product marketing with Pilot Software. Business today changes too quickly for companies to be willing to wait that long.
Help employees get comfortable using the tools. At cataloger/retailer Harry & David, some of the marketing analysts initially were apprehensive about their ability to work with the database and generate BI reports on their own, recalls Tammy Miles, senior manager of database marketing. As they started using the software, however, they came around. “Once they get their feet wet, you can see the empowerment,” she says. “You can see the wheels spinning once they realize how easy the tool is.”
Plan for growth. When employees see the results of a business intelligence initiative, most want to expand the use of the BI solutions. As a result, merchants implementing BI solutions should plan on exceeding their initial scope by a factor of 10 or 12, says Mark LaRow, vice president of products at solutions provider MicroStrategy.
A sampling of BI solutions providers
Note: Most business intelligence solutions currently are licensed on a per-user or a per-CPU basis. Systems that are licensed per user typically charge based on how heavily each employee uses the BI solution. The fee for power users may be several thousand dollars, while the charge for users who run reports just once a month may be several hundred dollars.
ACTUATE CORP. 888-422-8828; sales, 800-914-2259; email@example.com
Products and features: Actuate 9 offers a full line of BI and reporting tools accessible within a single interface, including the Actuate Performancesoft Suite and Actuate Java Reporting Development. Cost: Actuate business intelligence software starts at $500 per named user.
BUSINESS OBJECTS 866-681-3435; www.businessobjects.com
Products and features: Business Objects’ enterprise information management (EIM) products and services integrate and enhance information to provide a foundation for business decisions. The EIM solution includes data integration, data quality, and metadata and lifecycle management products.
COGNOS 800-426-4667; www.cognos.com
Products and features: Cognos 8 BI delivers BI capabilities including reporting, analysis, and dashboards on a single, services-oriented architecture. Cost: Pricing is role-based; list price for an implementation with 150 BI consumers, 15 business authors, 15 analysts, 10 managers, five professionals, and two BI administrators would be about $200,000, including one year of support and maintenance.
HYPERION 800-286-8000; www.hyperion.com
Products and features: Hyperion System 9 BI software is a comprehensive platform that offers interactive, financial, and production reporting; Web analysis; and an analytic platform for business modeling. Cost: A 125-user deployment of Hyperion System 9 Release 9.3 starts at about $100,000.
MICROSTRATEGY 703-848-8600; firstname.lastname@example.org
Products and features: MicroStrategy 8 provides a seamless integration of reporting, analysis, and monitoring. It can scale to thousands of users and terabytes of data.
PILOT SOFTWARE 650-230-2830; email@example.com
Products and features: PilotWorks offers an application for performance management goals, initiatives, and metrics. It allows users to obtain performance data, annotate the information, export it to other tools, and archive the data. Cost: Prices start at $25,000.
QLIKTECH INTERNATIONAL 888-828-9768; firstname.lastname@example.org
Products and features: Qlikview uses a patented in-memory association technology to simplify sophisticated data analysis. The click-driven, interactive interface is promoted as being easy to learn and use. Customers are live within 30 days; most implementations take less than a week.
SAS 919-531-0754; email@example.com
Products and features: Solutions for retail companies include customer, merchandise, and operations intelligence as well as performance management solutions. These provide the ability to analyze, forecast, and maximize profits across the enterprise.
SEATAB SOFTWARE 425-460-1000; firstname.lastname@example.org
Products and features: PivotLink BI is a software-as-a-service (SaaS) solution that puts BI in the hands of executives, employees, customers, and vendors. It typically is deployed in less than 30 days.
SPOTFIRE 617-702-1600; www.spotfire.com
Products and features: Spotfire DXP offers a rich visual and interactive analysis environment for a variety of business users, enabling them to perform ad hoc analyses and capture and share guided analytic applications.