Many non-core IT functions and also some non-core business processes are increasingly being outsourced to third parties. The strategy applies to business intelligence as much as any technology related pursuit, though it's not clear how fast the trend will accelerate or how far it will go. Overall, Gartner Inc. estimates that outsourcing will capture 33 percent of all IT spending increases by 2007, mostly at the expense of reductions in internal services. In this category, application development, maintenance and perhaps hosting are seen as non-core work suitable for handing off to third parties.

More interesting is the trend toward business process outsourcing, which often replaces operational duties in the organization. One intersect in business intelligence is the reporting function and roles that lie between the data specialists - who are often application development people themselves - and the business analysts that request and escalate information for reporting purposes. These relationships can be a mix of business and IT skills, as analysts use increasingly complex tools for "self-service" BI, and data specialists are more intuitive about business-sensitive data.

The outsourcing theme will be driven the demand for reporting, the resulting overhead cost, and the resulting commoditization of duties that will open doors to third-party partners. The demand for reporting is certainly growing according to anecdotal reports; more quantitative information recently surfaced from Cognizant, an offshore IT services provider that recently began offering a business process service product called Global Reporting Shop.

Among its own customers, Cognizant found that the average number of reports per data warehouse grew 400 percent in 2004. Larry Gordon, Cognizant's VP of global marketing says the greatest amount of the increase was driven by compliance requirements for Sarbanes-Oxley legislation. "Because companies have to meet regulatory compliance requirements, they have to build new business intelligence systems in order to develop a report to deliver for the regulatory people. It really means there are simply more solutions accessing the data."

Cognizant's new Reporting Shop is an integrated service center made of onsite and offshore personnel to deliver SI and on-demand custom report generation and delivery services. Rather than hand increasingly powerful tools to business analysts, which is the approach of platform providers, the idea is to let analysts analyze and let the heavy lifting occur quickly, somewhere off in the distance.

Of course, large businesses routinely maintain onsite support from system integrators who might have helped install the BI system and then stuck around to provide support. The goal of tiers of onsite and offshore service support is to lower cost and increasingly isolate the strategic BI roles in the organization, though there is a finite line for how far this can go, dependant on the role assigned to the business analyst.

"The business analyst is something enterprises will keep internally as a strategic function unless there is some sort of tactical thing the analyst spending a lot of time executing, like a report," says Theresa Lanowitz, a research director at Gartner Inc. The offshore/onshore model is gaining traction, she says, where the strategic work, identifying requirements, establishing business rules et cetera are done up front and the coding can be done anywhere. "That's where the onsite guy provides value by meeting with the LOB, documenting the requirements, and the construction and test cases happen offshore."

Keith Gile, an analyst with Forrester Research, says offshore ventures for BI reporting are just starting to take hold, though there's nothing mature in the market today. "There are some service organizations that say they have this offering. I don't know if they have a lot of clients at this point, but they are fishing for more long term projects." The problem Gile sees is that so much intellectual property and classified information is involved in reporting that companies will hesitate to send it offshore in the near future.

This is likely the case, though domestic data slips recently profiled in the news - some that fell short of, and some that included reporting relationships - have harmed reputations and shown that theft and fraud are not at all confined to offshore dealings. I'd be glad to hear your comments and experiences regarding this topic, on or off the record. Please send your thoughts to me at james.ericson@sourcemedia.com.

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