Now that the big shift has occurred in the business intelligence and corporate performance management market with IBM, Microsoft, Oracle and SAP controlling two-thirds of the market, one might think that consolidation is a purely vendor-driven game. But reality checks in the field show that the supply side is not a constraint, but rather is leading the dynamics. Meanwhile, consolidation scope goes well beyond technology consolidation. Now that initiatives are federated under the same umbrella, BI and performance management are finally positioned to become a core IT component rather than a value-added option.
It took more than 30 years for BI to reach maturity, a little longer than it took for other key components like enterprise resource management and customer relationship managment. But whilst the latter have seen the creation and redesign of entire information system landscapes in a big-bang mode, BI investments have taken place in a gradual and often ad hoc manner. In spite of unifying concepts such as the data warehouse, each decision support project often generated its own tools and selection of service providers, architectures, data models and standards. As a result, despite the fact that BI and performance management represent more than 10 percent of the typical IT budget, it can be compared to a giant with clay feet: strong footprint, but sparse foundations.
As long as the key BI objective was to improve the business, this lack of foundation was not an issue. But its mandate has evolved dramatically. First, it has a significantly extended reach: reporting is not only being targeted for internal use, but also being requested and driven by customers and mandated by regulatory bodies. Decision support systems have become pillars for compliance with regulations such as Basel II in banking or Solvency 2 in insurance. For human resource management or partner relationship management, it is tending toward an arbitrator role in incentive and commission management, while in industries that are sensitive to the fluctuation in price of their raw materials, BI is critical in helping to determine just in time pricing. Meanwhile, as entire processes are being outsourced, enterprises differentiate by their governance excellence, not execution. All those examples clearly illustrate that the decision support system has become mission critical, i.e., a core IT component instead of a sideline application.
Practices are evolving, too, and the focus is on process performance rather than on individual activities, justifying increased cross-functionality and, therefore, a federated decision support system for the company. Lines between planning, analytics and operational reporting are blurring. Even though there is still a long way to go with perceived holy grails like integrated business planning or end-to-end strategy execution monitoring, the journey has started, nurturing stronger business cases for a holistic and consolidated approach to BI.
Finally, BI budgets, like any other budgets, are under scrutiny. Every opportunity to cut costs are welcome in times like these. Now that BI budgets have grown year after year, it has become a serious candidate to consider for cost cutting. The fact that consolidation efforts have seldom been driven in the BI arena makes it low-hanging fruit for improvement. Consolidation is then considered at the organization level: Aggregating all the BI initiatives under a common umbrella may help to reach critical mass, opening the organization up to new delivery models such as shared services, off-site development and off-shore delivery models.
The most obvious way to consider consolidation is to approach it through the eyes of technology. Of course, this point of view typically attracts attention from the software vendor, and drives most of their marketing efforts. From the supply side perspective, platform consolidation is a sound approach to consider: BI used to be a tools market, where companies were selecting their multidimensional databases, ad hoc analysis tools, report writers, data integration tools, budget planning software one by one.
Companies are now shifting from best-of-breed toward more complete platforms capable of handling at least 80%, if not all of their decision support needs. Major software publishers anticipated that fact and launched these types of platforms on the market two or three years ago. However, for their respective installed base, the adoption of these platforms required a significant migration project that many of them have still not initiated. Moreover, companies found themselves having to choose a platform when, more often than not, their existing decision support system was made up of best-of-breed components. Today, as software vendors progress on their roadmap to a holistic BI and performance management platform, enterprises are realizing that their current landscape needs to be revisited.
Today it is advisable for most companies to review and streamline their decision support architecture. The battle for a share of the BI market seems to be heading closer to the major companies. For once, this concentration encourages competition rather than hinders it, with no dominant position being enjoyed by any of the market leaders, and thus the platform battle is raging. At the same time, innovation still lights up the BI markets: companies like Teradata, MicroStrategy and Informatica still differentiate on the high end, while new players appear with attractive value propositions in terms of delivery models (appliances, open source, software as a service, etc.), technology (in-memory databases, integration of unstructured data, visualization, just-in-time data access), or applications (analytics, integrated business planning, business process intelligence, information management and governance).
As a result, defining a cohesive BI roadmap should not be considered as a vendor-driven exercice that companies just buy and implement. Based on their current IT landscape, strategy, priorities and painpoints, many companies need to reinvent the way they approach and architect BI and performance management. They used to manage projects, now they need to manage initiatives: project portfolios rather than individual projects, and the whole lifecycle of each initiative, including continuous improvement and not only initial design. The market disruption we experienced in the past months together with the shift from tools to platforms provide a perfect opportunity to trigger this exercize.
Organizations Consolidation: BI Competency Centers and Center of Services
If Gartner identifies BI as an IT priority for the third consecutive year, it is because it has not been given enough focus in the previous years. BI has often been considered as a icing on the cake, a value-add that illuminates the value of core IT initiatives. More often than not, this approach has failed. Consider ERP projects, for example, BI is always considered in the initial scope, but as the project progresses and has to face unexpected hurdles, choices have to be made. As priorities need to be defined between transactional and decision support components of the project, the BI component is always second. (You just cannot survive with an ERP that doesnt fully ship and bill your orders.) This is one reason why most of the companies with ERP systems finally fall into the very ironic situation of struggling to transform the benefits of their standardized processes and master data repository into a superior business process optimization system. The other reason is that they dont approach transactional systems and analytics as different disciplines, despite the fact that methodologies, project lifecycle, role of business in the design and development of business rules and software components, and frequency of changes all differ radically.
The best way to deal with this situation is to specialize and dedicate the correct resources for BI and performance management and build the suitable organizations to make them available to the business as shared services. This is why companies are now creating BI competency centers constituted of dedicated multidisciplinary teams that handle BI projects priorities, planning, management and coordination.
Organizations with shared services at company level also leverage best practices, expertise, methodologies and standards. Moreover, they supervise the projects' follow-up and progress during their whole lifecycle, even during upgrades, evolution and maintenance periods or when users require support to take on tools and data interpretation, providing assistance to obtain optimal usage. Lastly, they often manage the information to ensure data consistency and quality, as well as the existence of cross-functional data repositories (product, customer, etc.) that include information from all of the companys decision support projects and even transactional applications. (Note: Ive also seen some organizations pioneering so-called integration competency centers, as a full blown shared service fully dedicated to information management and governance.)
The main focus of competency centers is often on the business side: governance, strategy definition, planning, projects, portfolio management, project ownership, standards definition or project supervision. For this reason, they are seldom outsourced, even though the team can include specialists from companies to provide input on the market best practices and methodologies. Although the competency center handles project blueprints and monitors the roll-out of projects, it generally doesnt manage the project delivery per se. This then calls for another organizational group to tackle operational project realization and maintenance.
This is the impetus for the creation of BI service, capable of carrying out those projects at an industrial level. Since BI project delivery is a task that is often subcontracted by companies, these services centers are usually outsourced. Once again, consolidation comes into play since previously, each project used to lead to a specific vendor selection. Companies can better manage their supplier portfolios by focusing on one or two "privileged" service providers. Now that all BI initiatives are handled through a consolidated team, critical mass is reached. This opens up new opportunities that BI hasnt really leveraged until this time. According to a Gartner study published in December 2008, more than 70 percent of BI projects are delivered on site, with limited use of delivery models such as off-site, close-shore, near-shore and off-shore.
As we can see, with platform consolidation, shared services and the right project delivery models, companies now get all the building blocks required to bring BI and performance management to a new level of maturity. As these efforts come together with lower costs of ownership and as a way to enhance the value of existing enterprises assets, BI has all the characteristics to get on top of the CIOs lists in their 2009 strategic initiatives.
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