Is Business Intelligence for Small Business, Too?

Wednesday Jul 14th 2010 by Gerry Blackwell
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Business intelligence software helps you keep a finger on the pulse of your business and make informed decisions. But is it easy and affordable enough for SMBs?

If you don't know everything you'd like to know about what makes your business tick -- what works, what doesn't and how much it all costs -- you need business intelligence or BI. Business intelligence solutions pull data from multiple operational systems (finance, sales, supply chain management, etc.), integrate it, analyze it and present it in easily digestible form as graphs, charts and dials on screen-based "dashboards."

"Business intelligence is about empowering people with the data that will help them make better decisions," said Dyke Hensen, senior vice president of product strategy at Pivotlink, a vendor of software-as-a-service (SaaS) BI solutions.

BI answers questions such as: Which are my best customers? Which are my most profitable products or services? Which are my most efficient locations? How much will it cost to open a new territory? Where am I wasting money?

Rapid ROI

The classic, often-repeated business case for BI revolves around reducing inventory. If business intelligence lets you see up-to-the-minute sales and/or consumption trends and real-time inventory levels, you can delay re-ordering until you actually need items, saving the considerable costs associated with inventory management.

According to Anthony Deighton, senior vice president of products at QlikTech Inc., a maker of QlikView BI software, the benefits of BI software are enormous.

"It's about being able to make smarter business decisions and gain insights into what drives the business: where the costs are, where the costs are leaking, where the opportunities are -- real tactical issues that make a bottom-line difference in how you run your business," Deighton said.

A study commissioned last year by QlikTech from IT analyst firm IDC concluded that the average payback period for a QlikView implementation was an impressively short 198 days. The average return on investment (ROI) reported across all QlikView implementations was 186 percent, and the ROI benefits included an average 16 percent increase in revenue and 20 percent reduction in operating costs.

Business Intelligence in the Cloud

BI is not the type of software solution SMBs have typically been able to afford, but it has been moving down market in the last few years. SaaS offerings from companies such as myDIALS Inc., Birst, Pivotlink and others have helped make it more small-business friendly -- and more affordable.

"I like the whole SaaS model for business intelligence," said analyst and consultant Laurie McCabe, a partner with the SMB Group. "BI is something that would be tough for small businesses to implement on their own."

Buying a SaaS solution will also save small businesses the cost of setting up and then managing servers and network connections. "It really is a change in the paradigm," said Pivotlink's Hensen. "When done correctly, a SaaS solution levels the playing field for the small-to-medium guys."

But SaaS is not the only route to BI for small businesses. Deighton claims his company's product is easy enough for SMBs to implement quickly on their own or with the help of a consultant.

QlikView is available for anyone to download and use for free until they're ready to roll it out to end users. "Small businesses tend to be risk averse," Deighton said. "This helps take some of the risk out of the buying process for them." (QlikView is also available as a hosted solution from QlikTech partners.)

Do You Need Business Intelligence?

Is BI really ready for small-business prime time? The answer depends on the size of your small business, how data-intense it is -- and how much pain your current lack of insight is causing you.

"The place to start," said McCabe, "is to ask yourself what you need to know about your business that you don't know already. What questions do you have that you can't get answers to today? Everything should be driven from that."

There is a real danger, she said, of small businesses spending too much on BI and ending up with something that's overkill and too hard to use for their requirements.

The Price of Business Intelligence

Business intelligence solutions -- even the ones geared to smaller organizations and that take advantage of the economies of scale of cloud computing -- are still expensive by the standards of many, possibly most small businesses.

Pivotlink, for example, mostly targets organizations with revenues in excess of $50 million a year. Prices for its SaaS solution start at $1,500 a month for 50 users. (Most BI solutions, whether SaaS or on premise, are priced per user, with only selected managers and analysts getting direct access to the system's dashboards.)

According to QlikTech's Deighton, it costs somewhere between $20,000 to $200,000 to implement QlikView. It is used by some small businesses, however.

SaaS solutions from vendors such as myDIALS may be somewhat more affordable. myDIALS charges from $25 per user per month for Lite users (who can only view dials and change timelines), and $75 or $90 a month for Standard or Professional users who have more complete access to information and settings.

BI's Additional Costs

But monthly fees are not the only costs involved. SaaS does not entirely eliminate upfront investments. "There is still a big investment of time and energy in learning how to use the solution effectively," said McCabe.

And while SaaS offerings and down-market licensed software solutions such as QlikView simplify the implementation process, there are still some unavoidable preliminary steps to go through -- with associated costs in both time and money.

"This is not an area where you can just slap something in," McCabe said. "You need to do your homework.

Much of the value of BI solutions comes from integrating data from multiple sources into one system. Most business intelligence vendors have "connectors" – small software programs -- for extracting data from commonly used applications such as Salesforce.com and Netsuite.

Business Intelligence Requires Clean, Consistent Data

Some SaaS providers charge separately to use these connectors. Or you might have to hire the vendor or an outside consultant to write a new connector for an application for which one doesn't already exist.

Data from all sources must also be "clean" -- free of errors and inconsistencies -- and it must all use the same conventions. For example, if IBM is a customer and one operational system refers to the company as IBM and the other as International Business Machines, you could end up with duplicate entries that invalidate results.

The process of cleaning and 'normalizing' data to eliminate these and other kinds of problems can be time consuming and labor intensive.

Much of the complexity that remains in BI systems, despite the simplifying efforts of the QlikTechs and myDIALS, stems from this need to integrate and normalize data. If you think the integration effort required makes it too complex, there are second-best alternatives.

Built-in BI

As McCabe pointed out, many if not most small business software solutions already include analytics features that deliver some of the same kind of reporting and "dashboarding" as BI solutions.

"I think a lot of the time, small businesses may not even be taking advantage of what's in the solutions they already have," she said. "So that's a place to start: Can I use the core [programs] I already have running my business? Will that give me the level of visibility I need? Or do I need something that can bring [data] together from a couple of [applications]/"

BI vendors naturally argue that the analytics features built into operational systems such as CRM and accounting solutions are far too limited, providing only a one-dimensional view of your business.

Business Intelligence: Once You Decide

If the answer is that you do need an integrated business intelligence solution, you should first engage with the vendors of the software you use or the value added resellers (VARs) or consultants from whom you buy software and hardware, McCabe said.

Most SaaS-based BI vendors -- and even licensed software vendors, as we saw in the case of QlikTech -- let you try before you buy. McCabe recommends that you take advantage of that.

Some vendors even offer free limited-function BI tools, including enterprise software vendor SAP with its BusinessObjects OnDemand.

A new study from McCabe's company (unpublished and with only preliminary results at the time of writing) suggests that small businesses do see a need for more visibility into their businesses. But few make the leap to implementing a business intelligence solution.

Will that change? Will business intelligence become less complicated -- and less expensive? Our guess is yes. Most of the traditional vendors of BI solutions are looking for ways to attract small businesses -- witness SAP -- and SaaS-based solutions have proliferated.

Business intelligence is not something to enter into lightly, but for some small businesses it could be the key to moving to the next level.

Gerry Blackwell is a freelance technology writer based in London, Canada. Read his blog, AfterByte

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!
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