TOWARD A GREATER UNDERSTANDING OF BUSINESS INTELLIGENCE: SURVEY RESULTS

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1 TOWARD A GREATER UNDERSTANDING OF BUSINESS INTELLIGENCE: SURVEY RESULTS Mark I. Hwang, Business Information Systems Department, Central Michigan University Mount Pleasant, MI 48859, (989) , mark.hwang@cmich.edu James J. Cappel, Business Information Systems Department, Central Michigan University Mount Pleasant, MI 48859, (989) , james.cappel@cmich.edu ABSTRACT While business intelligence (BI) has gained considerable notoriety in recent years, many firms are still searching for a better understanding of how BI can be leveraged for the greater benefit of the company. This study, sponsored by several large organizations, involved a web-based survey of hundreds of business professionals from large organizations. The survey addressed opinions about BI and company BI practices. The results revealed that while BI is perceived as quite important and its use is expected to grow, there is substantial variation in company BI practices, BI success rates, and top management s appreciation of the value of BI. These findings suggest further research is needed to identify BI best practices and that organization should strive to keep current on BI technologies and applications if they hope to achieve the valuable payoffs BI can deliver. INTRODUCTION The term business intelligence (BI) was coined by Howard Dresner of the Gartner Group in 1989 to describe a set of concepts and methods for improving business decision making through the use of fact-based support systems [8] [13]. It has been closely associated with data warehousing, decision support systems and online analytical processing (OLAP). The goal of BI is to explore data collected in an organization s data warehouse to produce insight that can be used for business gains. Techniques used for BI purposes include traditional query and reporting tools, OLAP, and data mining. Since the mid 1990s, interest in BI has grown steadily. IDC estimated that the BI software market would hit $6.8 billion in 2005 and grow 7.5% per year for the following five years [17]. Similarly, Forrester Research estimated the BI market to be worth about $6 billion in 2005 and that it would grow to $7.3 billion by 2008 [7]. While it is relatively easy to collect data, deriving value from mountains of data continues to be a challenge. As a result, a Gartner study of 1400 chief information officers ranked business intelligence as their number one technology priority for 2006 [5]. In today s increasingly competitive environment of global competition, there are a myriad of ways that companies can utilize BI to increase revenue, improve efficiency, and gain competitive advantage. For example, the retailer Lowes has been using BI tools for years to identify fraudulent returns, plan inventory levels, and monitor corporate performance [9]. The Procter & Gamble Company uses BI to identify and predict market shifts so the company can respond by

2 serving customers better [10]. BI applications also extend to detecting insurance fraud, helping hospitals schedule emergency room resources more effectively, making customer call centers more efficient, and allowing companies to make product price adjustments on the fly to avoid sales revenue decreases [4] [14] [15] [16]. BACKGROUND Despite the growing interest in business intelligence, there is no generally accepted definition of BI. BI has been used in at least two different contexts: as a system and a process. As a system, BI has been equated with decision support systems and executive information systems [6]. As a process, BI has been defined by the Data Warehousing Institute as a process of turning data into knowledge and knowledge into action for business gain [11]. While there are merits to both perspectives, we think a more complete view of BI is that it is a discipline that can be described by a process or a system, although the system is broader than a traditional decision support or executive information system. This discipline is distinguished by the use of data analysis tools and analytical approaches designed to understand, predict, optimize, and take action based on current and future business activity. This work employs technologies such as data and text mining, geographic information systems, language translation, statistical analysis, predictive modeling, simulation and advanced visualization. This broad view of BI allows companies to transform data into actionable insight to achieve strategic goals in customer relationship management (CRM), supply chain management (SCM), and quality assurance such as Six Sigma. Support for the discipline view of BI can be found in the BI competence center being established in leading global corporations [1]. As noted above, BI is closely related to technologies such as data warehousing, data mining, and applications such as CRM and SCM. However, as a distinct discipline, BI needs to be studied by itself to gain a better understanding of the phenomenon. For organizations contemplating BI initiatives, unfortunately, there is little published research that describes the practices and prescribes solutions that are supported by empirical data. Currently, only a few white papers authored by practitioners have examined BI from the perspective of IT professionals [3] [12]. However, BI has evolved beyond just an IT issue and requires organizations to consider the people and business issues involved [2]. The purpose of this study was to investigate company BI practices and the perceptions of business professionals about BI. A survey research approach was used since it provides an efficient way to collect and analyze data from many respondents in disperse locations. METHODOLOGY A web-based survey was conducted of middle to upper-level managers from the business functions of Marketing, Information Technology, Finance, Purchasing, Manufacturing and Operations, and Research and Development from organizations with more than $100 million in annual sales. Participants were identified using commercially available lists and data were collected over a six-week period. A total of 282 respondents completed the survey. A panel of industry participants contributed feedback through a series of conference calls during the survey s development and the survey was pre-tested with a pilot group of participants prior to its full-scale release.

3 Participating organizations Most companies (59%) had annual sales of less than $1 billion and fewer than 5,000 employees (64%). Many companies had operations in multiple continents, most commonly in North America, Europe, and Asia. Organizations from more than twenty different industry classifications were represented, with the top industries being consulting/professional services (10%) and software/internet (10%). Respondent characteristics The leading business functions represented in the sample were: Marketing (17%), Information Technology (14%), Sales (12%), Customer Service (9%), Research & Development (8%), Finance (5%) and Engineering (5%). By job title, participants consisted of: 26% Managers, 24% CEOs or COOs, 17% Professionals, 14% Directors, 11% Vice-Presidents, and 8% Other. Males comprised 81% of the sample compared to 19% female. Respondents had a median of five years of work experience with their current employer and a median of twenty years of professional work experience. Importance of BI and Future Outlook FINDINGS A clear majority of respondents reported that BI is very important (48%) or important (41%) to the success of their company, while only 7% said it was neither important nor unimportant and 3% unimportant. Almost three-fourths of participants (73%) thought their company should have more involvement in BI activities, compared to 21% who said about the same level of involvement, and 2% less involvement. About two-thirds of respondents (65%) predicted their company will increase its BI involvement in the next two to three years, while 25% said it will stay about the same and 3% said it will decrease. An additional question asked respondents to rate whether various factors were barriers to greater BI adoption in their company. The highest rated barriers to BI were insufficient stuff, insufficient budget and lack of skilled staff. BI Success The survey contained two measures of participants opinions about the success of BI efforts in their company. First, compared to other companies in their industry, 12% described their companies BI activities as best in industry, 41% better than average, 29% average, 14% below average, and 5% far below average. In an additional question, about one-forth of respondents (24%) said that 80% or more of their BI projects are successful, 42% reported a 50-79% BI project success rate, and approximately one-third (34%) said less than half of their BI projects are successful. Management s Understanding of BI

4 Since management support/commitment is commonly identified as an important factor impacting the success of organizational initiatives, the survey asked participants the extent to which they think their senior management understands the value of BI. Slightly over half of respondents (51%) rated their senior management s understanding as very high or high, while 34% indicated it is moderate, and 13% said management has low or no understanding of BI. Structure of BI Activities Organizations were rather evenly divided in terms of the extent to which their BI activities are centralized versus decentralized. About 38% of respondents described their company s BI activities as centralized versus 39% for decentralized, ad hoc and an additional 21% said their BI efforts consist of a chartered network of experts around the company. CONCLUSIONS The results of this study indicate that most respondents perceive BI to be quite important and they expect it to grow in the future. However, the findings also suggest there is substantial variation in the way BI practices are implemented, the degree of success achieved by BI activities is also somewhat variable, and top management s understanding of BI is not pervasive across companies. These challenges suggest that different organizations are at various points on the BI experience curve and that many companies are still struggling to identify the best ways to harness the power of BI. Business intelligence encompasses many different types of technologies, and as these technologies and the business challenges companies face continue to evolve, understanding and application of BI for organizational benefit will likely be on ongoing issue. Future research can aid companies by attempting to identify BI best practices. For example, future research could investigate whether certain BI organizational structures, the use of certain BI technologies, or greater understanding of BI among top managers is associated with greater BI success. Companies are encouraged to keep current with industry practices and technical developments related to BI. The annual SAS Data Mining Conference in Las Vegas attracts more than 700 industry participants to learn about the latest trends and applications in data mining ( Vendor training and workshops from organizations such as IBM, SAS, and ESRI are also highly useful in keeping current with the latest data mining and BI technologies ( The Data Warehousing Institute also serves a leading resource about data warehousing and BI practices and even offers BI certification programs ( University institutes such as the Central Michigan University Research Center also provide workshops, seminars, and forums about data mining, text mining, spatial analytics, predictive modeling, and spatial analysis ( Collectively, the use of these resources will help companies gain a better understanding of the power of BI and how it can be applied for greater organizational effectiveness. REFERENCES [1] Beal, B The democratization of information. SearchCRM.com Retrieved August 10, 2005, from

5 [2] Betts, M Smarter BI. Computerworld, 39(38): 47. [3] Eckerson, W Smart companies in the 21st century: The secrets of creating successful business intelligence solutions. Retrieved August 10, 2005, from [4] Robb, D Measuring the emergency room pulse. Computerworld, 40(38): 46. [5] Gartner Press Release. Garner says business intelligence software market to reach $3 Billion in Retrieved May 12, 2007 from [6] Gray, P New thinking about the enterprise. Information Systems Management Journal, 22(1): [7] Hall, M Where s BI? Computerworld, 39(38): 66. [8] Hayes, F The story so far: Business intelligence. Computerworld Data Management Special Report. Retrieved December 12, 2005, from [9] Havenstein, H IT struggles to show BI value. Computerworld 41(5): 1, 41. [10] Hoffman, T Toward more innovative IT. Computerworld 40 (44): 30. [11] IBM Fundamentals of DW and Business Intelligence for Knowledge Management Student Notebook. IBM Corporation. [12] KCR Research Business intelligence trends survey. Retrieved May 15, 2007, from [13] Martens, C Business intelligence at age 17. Retrieved May 15, 2007, from 8 [14] McAdams, J. 2006a. Detecting a web of fraud. Computerworld 40(38): 36. [15] McAdams, J. 2006b. Fine-tuning a sales strategy. Computerworld 40(38): 47. [16] McAdams, J. 2006c. Making price adjustments on the fly. Computerworld 40(38): 43. [17] Sherman, R Executive guide: Business intelligence. SearchCIO.com. Retrieved December 12, 2005, from 05