DMReview.com welcomes Mehmet Oguz as our newest online columnist. His monthly column Strategic Intelligence will focus on critical issues such the impact of information technology in any business to maximize efficiencies, the role of BI in the networked organization and the relationship between IT and decision making.
The strategic impact of the information technology in any business is to maximize efficiencies. There is an indefinite need for speed in business. When the evolution of information technology is reviewed in the past three decades, we see that the technology certainly added great value to many business processes such as manufacturing, sales, accounting, finance, supply chain management and many other areas. The subtle uncertainty of quantifying the added business benefit to the existing process was not very important until the dot-com crash. In the new millennium, aggressive sales and marketing efforts by technology vendors is not paying off as well as anticipated, and Wall Street is ever punishing. Although the market values of the technology firms decreased substantially, technology development did not stop. We owe this growth to new ways of thinking: the paradigm shifts.
The traditional IT approach has three components: buy the hardware, buy the software and hire the IT staff. Requests for proposals (RFPs) are sent out, vendors are evaluated and candidates are rigorously interviewed. Personality match plays a big role in deciding which vendor to choose or whom to hire. That is pretty much how IT was (and is) viewed in most organizations. The IT staff works in a remote building and speaks a different language. When there is a need for a new functionality, analysts prepare the specs and send it to the IT department. Then the functionality is built and sent to QA and finally back to the originator. Often times, the end result is not exactly what the business users envisioned. When there is a need for a new functionality that cannot be handled by the existing technology, RFPs are sent to technology vendors. Vendors present their products and generally a gut feeling decision is made. Often times, the end result is not exactly what the senior team envisioned. Now that we are in a stagnant economy, we can easily justify the cuts in IT spending: "It just may not do what we want, and we’re not sure if we can show an immediate positive return on investment." Although the stagnation is depressive, times like these are when paradigm shifts occur.
Business intelligence is the combination of information technology with the decision-making process. The help of IT at every level of decision making, i.e., intelligence, design and choice (Herbert Simon), brings efficiencies to the decision-making process. The key is that now, IT is more intimately combined with the business processes than ever. Therefore, business intelligence is the new IT paradigm. The strange thing with new paradigms is that as soon as there appears one, two things take place:
- No old rules apply
- Everyone starts from scratch
The change in the paradigm will, in fact, impact everyone from technology vendors to IT staff. In the old IT world, there was minimum interaction between the IT staff and everyone else. Now, there is maximum interaction. In fact, everyone in the networked organization develops technology to a degree. In the old world, when an analyst needed a new report, she would draft the specs and wait until the report was built only to realize that she actually needed more than she thought she needed. Now, the same analyst creates her own analytical report. All of the facts, dimensions and prebuilt metrics are available to her. Not only does she create a new analytical functionality, she also makes that document available to everyone in the organization regardless of their physical location.
Everyone is a proactive technology developer. Core values of the employees are certainly important, but the organizations will hire the people who are willing to learn and understand their business and be able to use the technology to make better decisions. When the organizations look for IT talent, they will not only scan resumes for words such as UNIX, Windows or ORACLE but also try to identify candidates that possess business knowledge and interpersonal skills. The data architect in charge of building a financial data warehouse must know what credit/debit means. The ETL developer moving data from the financial application to the data mart must understand why organizations may post to different accounts at different times. For the IT gurus, the MBA has never been more important.
The technology vendors will respond immediately to this new mind-set. Maximizing the distributed computing capabilities will be key. When evaluating vendors, the key will be to identify how their product fits in their business model and how successfully it communicates with the existing technology. The key is the ability to measure the strategic impact and the return on investment. Since we’re in a new paradigm, a smaller software firm with a tool that delivers the desired business functionality will have a significant advantage over a much larger technology vendor that fails to deliver the business functionality.
The core IT department will never cease to exist. But integration with the business will be at a maximum. Now, we are closer than ever to the ultimate goal: Maximizing the decision-making capabilities. Still, this will require everyone’s involvement. The success of any IT implementation will boil down to the level of impact on the organizations’ decision-making capabilities. Since business is evolving every day, the IT solutions will have to keep up with that. Overall, business intelligence is the paradigm shift that will define the success of today’s businesses.
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