Though initially these were just promises, the industry has matured over the past several years to the point where on-demand applications are delivering on their initial claims and are now widely used by companies of all sizes and in all industries. In fact, Gartner predicts that 25 percent of new business software will be delivered on demand by 2011, representing a $19.3 billion market (Figure 1).1
Figure 1: Forecasted Market Growth of SaaS (2006-2011)
There's one curious observation about the on-demand industry: it has been almost entirely focused on transactional applications. We see successful on-demand solutions for areas such as processing accounting transactions, providing customer service and managing the supply chain. But, the equivalent types of offerings for business intelligence (BI) have been few and far between. However, this situation is changing. People recognize the benefits that the on-demand approach delivers for transactional applications and are now looking for these same types of advantages to be applied to BI solutions.
The Case for On-Demand BI
The demand for BI solutions continues to grow. According to Gartner, BI ranked as the number-one technology priority for CIOs in 2006. And, the demand is no longer just for traditional BI solutions; it now includes on-demand BI too. Where is this growing interest for on-demand BI coming from? A look at the BI market shows two main factors driving customer demand: complexity and cost.
Complexity Issues
Traditional BI solutions are complicated, requiring people with specialized skills to implement and manage them. You need to deploy an extract, transform and load (ETL) engine, build a data warehouse, have a data cleansing solution in place and implement an OLAP engine. Because of this, the prospect of deploying a BI solution is overwhelming for many. Companies that just don't have the in-house skills needed to build and maintain a traditional BI solution.
Cost Issues
Because of this complexity, BI solutions have also historically been expensive. First, there are many hardware and software components that you need to buy in order to build a complete solution that will give you visibility into your business. Second, once you have all the pieces, you then incur significant additional costs to implement the solution over the next six to 12 months. Employees wanting to use the system not only have to bear the long wait but also face missed opportunities for learnings as the months go by.
Impact of Complexity and Cost
What options are left for companies that don't have large IT resources and deep IT pockets? Most end up in what might be called "Excel hell." Gaining real insight usually requires data from more than one source. They export data from their various systems, cut and paste the data into Excel and do their best to manage their business that way.
By necessity, they end up trying to use Excel as a data warehouse. But the process is highly manual, which means it is resource-intensive and error-prone. Also, there's no way to ensure that the data in a spreadsheet is up to date, so data quality is also a significant issue. These are the types of business pain that are driving interest in on-demand BI solutions.
A Mind-Set, Not a Feature Set
On demand is not just an alternative deployment option or payment option for an otherwise largely identical solution. The goal of an on-demand solution should never be to replicate the same set of features that traditional software has and deliver it as a service. Designing new solutions to mimic old solutions rarely provides real value.
To truly provide meaningful new solutions that address long-standing market issues, you need a different approach to thinking about the problem. The on-demand approach is much less about focusing on a particular feature set and much more about focusing on a mind-set. It's a mind-set that is service-oriented rather than product-oriented, and it has security, simplicity and the end-user experience as the critical focus areas.
A New Approach
One of the most significant differences between traditional BI solutions and on-demand BI solutions is the way the solutions are set up by the customer (see Figure 2). With the traditional approach, you first buy several sophisticated tools that you can use to build your own unique solutions. These tools include an ETL tool to extract the data from its sources, a data cleansing tool to remove duplicate records and to match customer names across systems, a database engine to store the cleansed and integrated data, and reporting and analysis engines to create your reports, charts and dashboards.
Figure 2: Comparing Traditional BI Solution to On-Demand BI
Then you use these tools to design, build and deploy your BI solution. This involves defining ETL scripts, designing star schemas for your data warehouse, creating OLAP cubes and often requires writing custom code as well. The notion of being able to build a solution completely tailored to your every need is certainly attractive. But, it can take nine to 12 months or longer, and it usually requires hiring contractors or consultants with specialized skills to help you customize it.
The on-demand approach to setting up a BI solution is different. The architecture has a generic hosted analytic services platform that performs all the standard data gathering, cleansing, storage, reporting and analysis functions, but you don't have to directly design or modify these components to create your solution. Instead, the focus is on leveraging prebuilt solutions that sit on top of the platform, which are easily configurable.
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