The on-demand approach for delivering business applications has already made its mark on the software industry. By providing the solution as a service delivered over the Web, the on-demand approach promises to remove the headaches associated with purchasing, deploying, maintaining and upgrading traditional enterprise software.
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.
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.
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.
The prebuilt nature of on-demand BI solutions means they are a great fit for companies that want visibility into common business processes and want to answer the most common types of questions asked by employees about those areas of business. For example, one prebuilt solution could provide visibility into marketing campaign effectiveness, another into all aspects of the lead-to-cash business process and another into suppliers and inventory.
On-demand BI solutions deliver prebuilt solutions, not just some of the components. This includes connectors to data sources, prebuilt ETL scripts, predefined data warehouse schemas and OLAP cubes, and a set of prebuilt reports around analyzing key metrics. That is, the focus is on providing a complete, end-to-end solution to truly simplify the setup experience.
The prebuilt nature of on-demand BI doesn't mean that you get a set of reports or dashboards that are rigid and fixed. Different companies have different needs, so the prebuilt elements are modifiable. For example, you can start with an existing report and change it, or you can create a new report from scratch.
An Engaged and Active User Base
The on-demand approach to BI makes the solution simple to set up and maintain. But, the success of BI in your company is by no means guaranteed just because you've successfully set it up. BI is only valuable if people actually use it, and that depends on two factors. First, the content has to be valuable, meaning that people must feel that the visibility they are getting is helping them succeed in their jobs. Prebuilt solutions can be helpful here because they can represent the feedback from hundreds of different companies about best practices regarding which types of reports, charts and KPIs are most valuable.
The second key factor is usability - if a solution is confusing or hard to use, internal adoption will drop, and therefore, the value you gain from that solution drops. For many traditional BI vendors, the approach to increasing the value that companies receive from their solutions is to deliver an ever-expanding list of more powerful features. But, experience has shown that this strategy backfires. It makes the solution more complex to use, and the result is that most BI solutions now require knowledge workers to attend long training classes to be able to use them.
Usability and user adoption are core necessities built into the on-demand business model - if users find the solution too hard to use, they'll stop using it. And, if users stop using it, customers will stop paying for the service. This direct link between the usability of an on-demand BI solution and the revenues received by the on-demand BI service provider has a strong impact on how on-demand solutions are designed and built.
A Simple Buying Process
In addition to simplifying the setup process and the end-user experience, a third key aspect of on-demand BI solutions is making them simple to buy, both from a price perspective as well as the purchasing process perspective. Regarding the price, traditional solutions can cost several hundreds of thousands of dollars or more. This introduces risk because you have to make significant investments long before you get to see what value you'll get in return. Also, the high cost acts as a barrier for many companies who just can't afford the up-front investment.
On-demand BI solutions don't require you to make any capital expenditures up front because there's no hardware or software to buy. Instead, you pay a monthly subscription fee. Prices vary, but a true on-demand BI solution can have an annual cost that's between five to 10 percent of the up-front hardware, software and implementation costs of a traditional BI solution. Also, because an on-demand BI solution should be easily configurable, there should be no need to pay significant up-front implementation fees.
Not only can on-demand BI solutions lower your up-front costs, but they can also help simplify the purchasing process. Before buying any solution, customers want to be sure that it will meet their needs. The best way to know if a solution will meet your needs it to try it yourself. Traditionally, this means a proof of concept (POC), where you have to build and deploy a scaled-down version of the intended solution, which can take weeks or months.
With on-demand BI, the solution is already built and running as a service that you connect to over the Web. In many cases this "try before you buy" process for on demand is simple enough that on-demand BI vendors can offer any customer a free trial instead of the traditional resource-intensive POC.
The BI industry has a lot to be proud of. Over the past two decades, it has helped many commercial, educational and government organizations gain insight into their operations and improve their overall effectiveness. The introduction of the on-demand model to this industry will have far-reaching effects, opening up BI to a far broader population of companies and individuals. Many successful on-demand solutions for transactional applications have paved the way. It will be fascinating to see what on-demand BI will enable in the next two decades.
- Robert P. Desisto, Ben Pring, Benoit J. Lheureux and Frances Karamouzis. "SaaS Delivery Challenges On-Premise Software." Gartner Inc., 26 September 2006.
- Mark P. McDonald, Marcus Blosch, Trish Jaffarian, Lily Mok and Sandra Stevens. "Growing IT's Contribution: The 2006 CIO Agenda." Gartner Inc., 1 January 2006.
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