SAP Dives Into A BI Market That's Far Short Of Its PotentialSAP Dives Into A BI Market That's Far Short Of Its Potential

At the rate big software companies are snapping up business intelligence vendors, you'd think BI was a magic elixir for solving today's business problems. But in reality, BI has fallen dramatically short of its full potential. Companies want much more from business intelligence systems, including the ability to predict customer problems and make analysis part of minute-to-minute operations, not merely an after-the-fact report.

That's far from the current experience of most BI users, but the technology is moving in the right direction. BI vendors recognize that businesses want query, reporting, and analysis tools that meld with their operations, not sit off to one side. That's one standard by which SAP is sure to be judged in its planned $6.8 billion acquisition of Business Objects, announced last week, a catch-up move to Oracle's $3.3 billion deal for Hyperion in the spring. And SAS Institute and Teradata last week promised to integrate their products so that businesses can run SAS analytics in Teradata data warehouses without a lot of extra work.

BARRIERS TO ADOPTION

More progress is needed. Business intelligence suffers from a strange dichotomy: It's among the most highly desired business technologies, a roughly $10 billion-a-year market growing at more than 10% a year, yet it has difficulty proving its worth. Cost and complexity remain the leading barriers to BI adoption, according to a recently completed information survey of 388 business technology professionals. One in three respondents cites an inability to demonstrate the benefits of BI to internal stakeholders. Most companies have bought BI software to solve a specific problem in one business unit, says AMR Research's John Hagerty, but few are able to use the resulting data silos to explore cross-company impacts, such as how a 5% drop in market share affects manufacturing, finance, and procurement.

Part of the problem is that no vendor excels in all areas of business intelligence, leaving customers to cobble together what they need from various offerings. Some BI users are on the cutting edge of customer scoring, operational analysis, and predictive analytics, but it often takes heroic efforts to get there--millions of dollars spent on data warehouses and software for moving and analyzing data, plus the specialized IT talent and time it takes to set up and manage it all. Medco CIO Mark Halloran estimates that 40% of the cost involved in developing sophisticated analytics and modeling for the pharmaceutical benefits company's 30-Tbyte Teradata data warehouse comes from moving data between systems.

Warner Home Video runs applications for retail category management, sales forecasting, and product replenishment in a Teradata warehouse. Although Teradata sells analytical apps for forecasting demand, Warner extracts data from the data warehouse and feeds it into SAS analytics, which runs models for that function. "The problem is that SAS is a great analytical tool but not a data warehouse, and Teradata is the best data warehouse around but not a good analytical tool," says Thomas Tileston, VP of business decision support at Warner Home Video. If the two vendors can pull off what they promise and let Warner Home Video run SAS analytics inside its warehouse, it'll be a "huge win," Tileston says.

Businesses also want tools that blur the line between data transactions and decision support; that's the idea behind so-called "operational BI," applications with built-in analytics, and performance management software. And it's the reason a joining of SAP and Business Objects makes sense. SAP CEO Henning Kagermann last week talked of blending Business Objects' data crunching capabilities with SAP's industry knowledge for "end-to-end business processes with embedded analytics." Yet the level of integration they'll achieve remains unclear, and SAP is promising to keep Business Objects a separate unit.

SAP has tinkered in business intelligence before, without great success. Tileston at Warner Home Video isn't impressed with SAP's BI tools and data warehouse. Instead, he transports operational data from SAP into a Teradata warehouse, then digs in with Business Objects tools. "Right now, our reporting out of SAP is not very good," he says.

'ACTIONABLE' BI

Apart from the deal with SAP, Business Objects is working to tie its reports more closely into operations. At its annual user conference this week, the company will announce an upgrade to Crystal Reports, which produces reports from data. Areas of improvement include better support for XML and Adobe Flex, making it easier to create reports from operational data and act on that information. "Reporting becomes part of an operational process," says James Thomas, Business Objects' VP of marketing.

Startups such as SeeWhy Software are making a business of enabling "actionable BI." SeeWhy constantly compares incoming data with historical information and trends, flags anomalies--such as a regular customer not making a booking at the usual time--and sends alerts to customer service reps.

Oracle hasn't provided specific details on how it might integrate its ERP applications and data warehouse with its BI portfolio, which includes the performance management tools gained from the Hyperion acquisition and analytics software from Siebel. One technology to watch is Oracle Real-Time Decisions, based on software from Sigma Dynamics, a company it acquired last year. Oracle describes it as a transactional server that combines rules and predictive analytics to deliver real-time data into business processes and customer interactions.

Teradata's making its own play in operational analytics, which it markets as Active Enterprise Intelligence. CTO Stephen Brobst says the pressure's particularly high in retail, where companies are constantly tracking inventory levels and assessing short-term promotions to drive sales. While the trend toward real-time analysis gets a lot of attention, companies still comb slowly through very large data sets, such as customer segmentation analysis, to choose the right prospects for marketing campaigns. "Real time is just a small piece of it," SAS CEO Jim Goodnight said during an interview at Teradata's user conference. "Businesses not involved in heavy use of modeling and analytics will fall behind," he warns.

LIFE-CHANGING POSSIBILITIES

Medco's Halloran is typical of the high ambitions some CIOs have for their business analytics. For BI in health care, the goal is to "go very quickly from cost containment to prevention," he says.

Medco uses BI for such things as tracking pharmaceutical transactions for signs of abuse and fraud. Next it will try to develop analytics to determine, and even forecast and predict, which patients are most at risk of getting sicker. To do that, it will have to integrate prescription, lab, medical history, and demographic data to develop a "longitudinal" view of individuals' therapies, plus use clustering models to look at patients across different types of therapy. By analyzing a cluster of people with complex diabetes, Medco hopes to identify trends that can predict who among a population of patients without those complications are at risk enough to suggest an intervention. "This is how we'll practice pharmacy going forward," he says.

How would BI be brought to bear? It might go something like this: A patient previously treated for high cholesterol comes to the pharmacy for insulin. At the point of transaction, Medco could instantly run the patient's data through SAS analytical models and determine how to reclassify that patient and whether any type of intervention might be recommended. The increased use of Web services, Halloran believes, will make such links between operational systems and analytics models more feasible.

Real-time BI could have huge implications in customer service. Overstock.com uses a Teradata data warehouse, GoldenGate's transactional data management software, Oracle's data integrator, and Business Objects' reports and dashboards for a customer e-mail initiative that has increased sales significantly, according to Paul Longhurst, the company's director for data warehousing, who made a presentation at the Teradata conference. Overstock, which distributes more than 33 million e-mails a week in marketing campaigns, segments customers in 55 different ways in the data warehouse based on their purchase histories. The online retailer scores each customer after every purchase based on how profitable he or she is to the company, and that information is used for its e-mail blasts and other customer interactions. If a valued customer clicks on iPod accessories, for example, Overstock might send a coupon the next day.

Medco and Overstock are examples of where business intelligence is headed. They show the potential for masterfully applying BI for greater business impact, in part by embedding analytical capabilities right into everyday operations for here-and-now decision making. Given the costs and complexity, however, few companies are that far along. The BI vendors--and you can now count SAP among them--are scrambling to get it right.