Topic Gateway Series No. 56 1 Prepared by Alexa Michael, Peter Simons and Technical Information Service March 2009
About Topic Gateways Topic Gateways are intended as a refresher or introduction to topics of interest to CIMA members. They include a basic definition, a brief overview and a fuller explanation of practical application. Finally they signpost some further resources for detailed understanding and research. Topic Gateways are available electronically to CIMA members only in the CPD Centre on the CIMA website, along with a number of electronic resources. About the Technical Information Service CIMA supports its members and students with its Technical Information Service (TIS) for their work and CPD needs. Our information specialists and accounting specialists work closely together to identify or create authoritative resources to help members resolve their work related information needs. Additionally, our accounting specialists can help CIMA members and students with the interpretation of guidance on financial reporting, financial management and performance management, as defined in the CIMA Official Terminology 2005 edition. CIMA members and students should sign into My CIMA to access these services and resources. The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom T. +44 (0)20 7663 5441 F. +44 (0)20 7663 5442 E. tis@cimaglobal.com www.cimaglobal.com 2
Definition The term business intelligence (BI) is used to describe the technical architecture of systems that extract, assemble, store and access data to provide reports and analysis. It can also describe the reporting and analysis applications or performance management tools at the top of this stack. Confusingly, BI can also be used to describe just front end reporting and analysis tools. However, BI is not just about hardware and software. It requires cultural change and company wide recognition that a company s data is an important strategic asset that can yield valuable management information. It is about using this information to improve decision making. Overview is about improving decision making. It involves developing processes and systems that collect, transform, cleanse and consolidate organisation wide and external data, usually in an accessible store (a data warehouse), for presentation on users desks as reports, analysis or displayed on screens as dashboards or scorecards. However, BI is broader than technology. It is about using the information available to a business to improve decision making. With technology, the right information can be accessed, analysed and presented at the right time to the right people in the right format. The information then needs to be used to inform evidence based decision making. This requires leadership and cultural change. Effective decisions are those that achieve impact. An effective decision making process has three key elements: 1. How strategic decisions are informed, considered and communicated. 2. How performance and risk are assessed and managed. 3. How routine operational decisions are guided, made and governed so the intended impact is actually achieved. Management accountants who can combine financial expertise with business understanding have the potential to support decision making in a wide range of roles throughout this process. 3
Providing evidence in the form of financial and management information has long been the basis for accountants role in the decision making process. Supporting the strategic planning process and providing the metrics and analysis to support evidence based decision making are important. These will no longer suffice, however. The CIMA Forum, a network of senior finance personnel from major organisations, believes that management accountants have a much bigger contribution to make. in practice Recent developments The role of finance is changing. Globalisation has given businesses around the world access to similar resources, while competition has resulted in many business processes converging on similar standards. The CIMA Forum contends that effective decision making is the key to superior performance. Leading companies have transformed their finance and account functions, but this is not just about cutting costs. They are also developing finance personnel who can support decision making across the business by helping to apply financial disciplines. These include managing for value, performance management, risk management and analytics. [See CIMA s Executive Report Improving decision making in organisations: the opportunity to transform finance]. Available from: www.cimaglobal.com/executivereports [Accessed 16 January 2009] Despite investment in BI applications, many accountants often still use spreadsheets to re-work numbers, to consolidate information from different systems, to conduct ad hoc analysis and produce reports, budgets, forecasts and reforecasts. This focus on producing management information or number crunching perpetuates the myth that accountants are scorekeepers on the sideline rather than players in the business team. This limits their potential to take on business partnering roles. Meanwhile, management s information requirements have changed. The quality of management information expected by business users is expanding both in terms of the range of data to be considered and the level of analysis required. There is an increased demand for information at all levels. From strategic issues to routine tasks, executives, managers, information workers and staff all expect more information and clearer insights to support decision making. 4
The BI stack now includes the financial and reporting analysis tools which had previously been seen as specialist solutions for the accounting function. Financial information alone will not suffice. Management information must relate financial to non-financial data and not just report past performance but monitor the current operations and also help to predict the future. BI has developed to meet those needs and is becoming pervasive, covering financial and non-financial data. It is capable of making information available to a wide range of users, as appropriate to their roles. There are new solutions to address problems with data quality and the integration of systems. Major companies in the financial, telecommunications and the retail sectors and some government agencies have been early adopters. This technology is now more mature and is becoming cheaper. It is already being used across a wide range of sectors and also by smaller companies. IT staff cannot deliver successful BI projects without the input and support of business users, particularly management accountants. Management accountants are very well positioned to ensure the success of any BI implementation. BI may threaten traditional accounting roles in producing management information, but it provides an opportunity to release capacity to provide the decision making and support that business requires. 5
The main players in SAP and Business Objects - Together, these are the biggest players in the BI market. SAP is best known for its enterprise resource planning (ERP) system but it has been expanding into BI with the development of SAP Netweaver and SAP BI accelerator. It has also acquired Pilot Software and OutlookSoft Corporation. The acquisition of Business Objects in 2007, a leading vendor of reporting and analysis tools, should give SAP a strong position in this market. SAP also offers its Business ByDesign as software for service offering which can make BI cost effective for smaller companies. Oracle and Hyperion - Oracle s reputation was originally built on database systems rather than ERP. Siebel already provided Oracle with an analytics capability in its customer relationship management (CRM) application, but the acquisition of Hyperion adds strength in the important area of financial reporting tools. Hyperion is highly rated for its consolidation and financial accounting functionality. It is not yet clear how recent acquisitions will fit together. Oracle s Fusion project is developing a co-ordinated approach. IBM and Cognos - IBM already had capabilities in databases and data management with its DB2 product and SQL servers. The acquisition of Cognos with its reputation for financial, performance management and planning tools should be a valuable addition to IBM s information on demand suite. Microsoft - The Windows operating system and the MS Office suite, for example, Word, Excel and Powerpoint, have achieved world domination. Despite this, the acquisition of Great Plains, Microsoft s BI offering, is not regarded by many people as having the same depth as the more specialist competitors products. However, with the combination of ProClarity, Dundas Data Visualization and the familiar MS Office suite integrated as the top layer, Microsoft s new PerformancePoint has the potential to bring BI to a much wider market. Information Builders - Information Builders BI platform enjoys a good reputation for its ability to integrate data. Its web delivery puts it in a strong position to offer pervasive BI offering throughout a large organisation. SAS - SAS is privately owned. It has a broad BI offering that is highly rated but it is best known for its capabilities in data mining and predictive analytics. It has recently formed a strategic alliance in data processing with Teradata, a data warehouse provider. Some may regard SAS as expensive, but most of its customers are enthusiastic advocates. 6
The role of the management accountant in business intelligence Management accountants should consider the potential for BI in their business and be prepared to champion BI projects where appropriate. BI could enable management accountants to provide a wider range of information in more accessible formats. In addition to reporting and monitoring, BI could provide more forward looking analysis based on a combination of both financial and non-financial information. It could also release many accountants from the rigour of the reporting cycle to take on decision support roles. Management accountants can engage in BI in the following ways: 1. BI strategy Management accountants can work with IT to develop a BI strategy and the business case for the investment in BI. They should help to determine the actions to be taken and risks to be managed so that expected benefits can be realised. Most large organisations will already have an ERP system and database. These are the core, and usually the most expensive, building blocks of a BI stack. BI reporting and analysis tools could allow non-technical business users to access the potentially valuable data already captured. Investing in BI tools could be seen as an incremental cost to release the data s potential. 2. Implementation Management accountants can support implementation, ensuring that change management and project management disciplines are applied. The purpose of a BI project is not to acquire the latest in IT systems but to improve decision making by delivering the information and analysis that decision makers require at different levels in the organisation, and ensuring that this information is used. This can require change of a transformational nature. 3. Data quality Management accountants can help to ensure data quality, perhaps taking responsibility for this problem area which is often unclaimed. The ideal is to capture data correctly in the first instance and to have control mechanisms which eliminate duplication and inconsistent classification in subsequent records. Accountants are well placed to apply the disciplines they have learned in accounting processes to help ensure the quality of data. 7
4. Performance management Management accountants can help to articulate the business s information needs for decision making and they can also support performance management with metrics that reflect value creation. Too much business planning can be focused on budgets and financial metrics. These are often measures of outcomes in the short run rather than indicators of performance towards achieving strategic intent. Non-financial metrics may better describe progress towards achievement of sustainable competitive advantage for the long run. 5. Analytics Management accountants can provide less quantitative or financially articulate colleagues in the business with analysis and modelling of financial and nonfinancial data. This will help them to assess performance and enable evidence based decision making about the future. Conclusion For accountants, the main attraction of BI is that it has the potential to release them from the cycle of producing management information. They will be able to engage with business managers, combining business understanding and financial discipline, to perform a decision support role or to challenge managers to improve performance. It is true that BI may put at risk some traditional accounting roles in producing financial and management information. However, management accountants should be champions of BI. For some, there will be opportunities to become experts in using BI and more advanced analysis. For many more, however, BI presents an opportunity to take on financial management or business partnering roles. The future for these accountants may not be in accounts but in finance with wider career prospects, as active players on the team rather than as score keepers on the sideline. 8
Further information Articles CIMA members can obtain articles on this topic from the Business Source Corporate database, which can be found in the CIMA Professional Development section of the CIMA website. www.cimaglobal.com/mycima Conte, P. Real-world business intelligence. System inews, September 2008, Issue 347, pp 33-35 Hoberman, S.? DM Review, October 2008, Issue 10, p. 33 Kosambia, S. the self-service way. DM Review, July 2008, Volume 18, Issue 7, pp 20-22 Mohanty, S. Measuring the value of intelligence in business intelligence. DM Review, December 2008, Volume 18, Issue 2, pp 20-23 Simons, P.. Financial Management, September 2008, pp 48-49 Available from: www.cimaglobal.com/financialmanagement Smith, F.O. Oco on-demand business intelligence solution smartens up SMB market. Manufacturing Business Technology, July/August 2008, Volume 26, Issue 7/8, p. 39 Tsai, J.. CRM Magazine, September 2008, Volume 12, Issue 9, p. 42 Intelligent businesses rely on business intelligence. CPA Technology Adviser, November 2008, Volume 18, Issue 7, p. 60 Leveraging business intelligence for revenue improvement. Healthcare Financial Management, August 2008, Volume 62, Issue 8, Special Section pp 1-8 Articles Abstract only articles available to CIMA members from Business Source Corporate through My CIMA www.cimaglobal.com/mycima Henschen, D. Special report: business intelligence gets smart. Intelligent Enterprises, September 2008, Volume 11, Issue 9, p. 17 9
Henschen, D. gets smarter. Information Week, 9/8/2008, Issue 1201, pp 42-48 Wang, H. and Wang, S. A knowledge management approach to data mining process for business intelligence. Industrial Management & Data Systems, 2008, Volume 108, Issue 5, pp 622-634 Books Biere, M. (2003). for the enterprise. Upper Saddle River, NJ: Prentice Hall PTR Howson, C. (2008). Successful business intelligence: secrets to making BI a killer app. Emeryville, CA: McGraw-Hill/Osbourne; London: McGraw-Hill [distributor] Inmon, W.H. and Nesavich, A. (2008). Tapping into unstructured data: integrating unstructured data and textual analysis into business intelligence. Upper Saddle River, NJ; London: Prentice Hall McDonald, K. et al. (2006). Mastering the SAP business information warehouse: leveraging the business intelligence capabilities of SAP Netweaver. 2nd ed. Hoboken, NJ; Chichester: Wiley Rokash, L. and Maimon, O. (2008). Data mining with decision trees: theory and application. New Jersey; London: World Scientific. (Series in Machine Perception and Artificial Intelligence) Shmueli, G., Patel, N.R. and Bruce, P.C. (2007). Data mining for business intelligence: concepts, techniques and applications in Microsoft Office Excel with XLMiner. New York; Chichester: Wiley-Interscience Stackowiak, R., Rayman, J. and Greenwald, R. (2007). Oracle data warehousing and business intelligence solutions. 2nd ed. Indianapolis; Chichester: Wiley Turban, E. et al. (2008). : a managerial approach. Harlow: Pearson Prentice Hall Utley, C. (2008). with Microsoft Office PerformancePoint Server 2007. Emeryville, CA: McGraw-Hill/Osbourne; London: McGraw-Hill [distributor] Volitich, D. (2008). IBM Cognos 8 business intelligence: the official guide. Emeryville, CA: McGraw-Hill/Osbourne; London: McGraw-Hill [distributor] Williams, S. and Williams, N. (2007). The profit impact of business intelligence. San Francisco: Morgan Kaufman; Oxford: Elsevier Science [distributor] 10
Reports CIMA Excellence in Leadership Business Process Outsourcing, March 2007 The contents of this issue are listed online and a selection of articles are available to download in full. Available from: http://digbig.com/4ycdh Improving decision making in organisations: the opportunity to transform finance. CIMA Executive Report, September 2007, PDF 122KB Available from: www.cimaglobal.com/executivereports 11
Websites Business Intelligence.com Online resource containing articles, white papers, news and extracts on BI. Available from: http://www.businessintelligence.com Business Intelligence Management best practices reports online. Available from: http://www.business-intelligence.co.uk Business Intelligence Knowledge Base IT toolbox where users share knowledge. Available from: http://businessintelligence.ittoolbox.com Business Intelligence An overview and brief definition of BI and BI tools. Available from: http://www.businessobjects.com/businessintelligence Obis Omni A website for the BI community. Available from: http://obisomni.com/home Copyright CIMA First published in 2009 The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom Printed in Great Britain No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publishers. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means method or device, electronic (whether now or hereafter known or developed), mechanical, photocopying, recorded or otherwise, without the prior 12 permission of the publishers. Permission requests should be submitted to CIMA at tis@cimaglobal.com