Written by Paula Klein, TechWeb

Business intelligence has reemerged as a critical strategy for the enterprise. No longer considered a resource-intensive, high-cost IT problem, BI tools and their analytics offspring are providing answers for departmental users in every industry.

“BI is back,” says Ben Harden, a director in the Data Management and Business Intelligence practice of consulting firm CapTech in Richmond, Va. Businesses realize they need to invest in BI for growth and agility, he says. As a result, BI-related projects are moving to the front burner once again.

What’s different now compared to a decade ago when huge data warehouses and corporatewide BI efforts were struggling to show ROI, Harden says, is that smaller, department-level implementations are common now and show immediate results. Integration among these one-off applications is still important, but tackling BI in “small chunks”— even at large companies — makes it more affordable and easier to adapt to changing business needs. Moreover, it prevents the kind of “project stall” that was common with previous iterations. “Businesses are typically approaching one subject area at a time and then building analytics on top of that,” according to Harden. “That means results get out to users faster” for better decision making and competitive advantage.

New Entry Points

Small and midsize businesses are capitalizing on the lower cost of entry, too. For example, women’s fashion designer and wholesaler Elie Tahari was among the top three companies recognized for BI excellence recently by Gartner Inc. The midsize, privately held company went up against giants such as United Parcel Service and Yahoo.

Nihad Aytaman, director of business applications at Elie Tahari in New York, says that what began with an internally developed data warehouse and BI capabilities six years ago has grown into a core capability for the global company. Once its 22 stores and 150-plus users started seeing the benefits of standard reports and real-time updates, workflow improved, as did sales, he says. With several successful rollouts under its belt, Aytaman last year introduced some predictive analytics “to manage demand and to minimize exposure on inventory and production.”

Harden, who blogged from Gartner’s recent BI conference, noted that UPS analyzes location and delivery data for drivers and suggests the most efficient route — even on the fly as new orders and packages come into the pipeline. The logistics capability has cut millions of dollars in expenses and has helped speed deliveries.

In another case, Southeast Texas Medical Associates, also recognized by Gartner, has improved post-hospital care as a result of data analysis. In the first six months of the project, SETMA — which records about 160,000 patient visits a year — reduced unnecessary hospital readmissions by 22 percent, thereby saving time and money for itself as well as for patients.

The Need for Predictive Analysis

Financial services firms also want to reap the rewards of new BI tools and strategies. At a recent meeting hosted by the Fairfield/Westchester chapter of the Society for Information Managers, BI was a hot topic, and it remains high on the agenda of CIOs, according to the group. As raw data proliferates and more users have access, businesses need to transform it into meaningful and useful trends and forecasts that can lead to more effective insights and decisions.

Panel chairwoman Sigal Zarmi, CIO of GE Capital, Americas, says that fast data access is not an option anymore — it’s now expected by users as well as by business leaders. Additionally, unstructured data is growing, although there are some challenges: Notably, many source systems and BI tools still look backward at events while future-looking, predictive analytics are only in the early stages.

Zarmi acknowledges that it is probably easier to justify large BI investments in business-to-consumer environments than in business-to-business enterprises such as financial services firms. Many companies are still working to clean their data so that it is accurate and reliable, and they are focused on developing strong BI governance and management policies.

Gartner predicts continued spending in the BI market and says that including analytics and performance management, BI software hit $10.5 billion in 2010, a double-digit jump from 2009. 

Broad Business Value

Better decision making has long been the aspiration of BI and analytics, but new research proves that the terabytes of detailed data collected about operations, suppliers, customers and other aspects of the business today actually lead to better overall corporate performance — not just better decision making.

A team of economics and IT scholars — Erik Brynjolfsson and Heekyung Kim at MIT, and Lorin Hitt at the University of Pennsylvania — examined the business practices and IT investments of 179 publicly traded large firms in the U.S. and concluded that “data-driven decision making can explain a 5 to 6 percent increase in output and productivity beyond what can be explained by traditional inputs and IT usage. It is also associated with significantly higher profitability and market value.” And that seems to be BI at its best.