BI tools affect bottom line
With nearly 2,000 stores worldwide, Sunglass Hut is a global purveyor of cool. In this fashion business, putting the right shades in the right store at the right moment is critical. Using business intelligence software from Brio Technology, the retailer has increased visibility into its front-line operations and customer preferences.
"We know were pushing the right lines at the right times," says Colin Drummond, chief information officer at Sunglass Hut, which was recently acquired by eyewear juggernaut Luxottica Group. "Its making a difference."
Drawing from point-of-sale information and other inputs to a data warehouse, the Brio software illuminates opportunities for cross- selling and highlights localized trends. It also provides a succinct analysis of key performance indicators, tailored for different levels of management and color-coded to telegraph the status of stores and districts. Additional performance metrics on the way will give management a dashboard view of the entire company. "Putting information in front of people has dispensed with a substantial amount of wasted time," Drummond says. "If you have a roomful of executives arguing, it costs money."
The technology-driven increase in the amount of data available to companies is making business intelligence tools more useful and more necessary than ever. Broadly defined as the combination of reporting, data mining and online analytical processing applications, business intelligence (BI) brings up-to-the-minute information to centralized repositories to create rich and precisely targeted analytics.
The use of BI software isnt all that new: Companies have been analyzing data as long as there has been data to analyze. But the Internets emergence has given the field new luster and importance. Companies are rolling out BI applications to employees on a mass scale, and providing access to vast data warehouses to suppliers and business partners. As a result, sales of BI software increased 25 percent last year, according to research firm IDC. Despite the bum economy, which brought layoffs and disappointing earnings to the sector in recent months, sales are still expected to grow by about 22 percent this year, and by 27 percent annually over the next five years.
With browser interfaces and a low, six-figure cost of entry, the stuff looks cheap and easy to use when compared to, say, Enterprise Resource Planning (ERP) software. Return on investment (ROI) can be quick and healthy.
A Hot Market
"Its a hot area," says Dan Vesset, a senior analyst at IDC. "With all the data that has been standardized to some extent through ERP implementations and made available via the Internet, gut feeling about a business is not good enough. Companies need weekly, daily and near real-time monitoring of whats going on in their businesses."
Analyzing customer activity is BIs top use, with financial performance, supply chain and other functions also increasingly scrutinized.
The market is a crowded one, with a dozen or more viable players. Among the leading vendors are SAS Institute with about 9 percent of the market, Cognos with 8 percent and Business Objects with about 7.5 percent. Looming on the horizon are the big database vendors, including IBM, Microsoft and Oracle, which are adding some BI to their products and could emerge as threats to the pure-play vendors over time.
But the BI specialists arent standing still. New products continue to expand the user base beyond executives and managers to front-line employees, who can use versions of complex analytical tools via the Web or mobile devices.
"Getting an alert when a threshold of some sort is reached allows you to manage by exception, instead of trying to focus on everything at once," says Peter Urban, a senior research analyst at AMR Research. "An initial look at a portal display can show you a high-level problem, and you can then drill down to get to the source."
The Internet has dramatically increased the ways information can be combined and analyzed, and by whom. "Weve had great hardware and [BI] software for a long time," says Sanju Bansal, chief operating officer at Vienna, Va.-based MicroStrategy. "The real change is that there has been a distribution revolution in the form of the Internet. We can move information with a high throughput over large distances, and we can combine that information with other sources. It used to be that we would deploy our business intelligence software to 50 or 60 users in a company. Now we have customers that are looking to open their systems up to thousands of users."
As an example, Bansal points to Kmart, a MicroStrategy client that is in the midst of a huge project to open its database to its thousands of suppliers. Thats in addition to the more than 1,000 internal users of its browser-based query tools. Sprint, another MicroStrategy customer, has built more than 30 applications to analyze its customer database. One application can determine exactly which customers are Sprints most profitable, based on locations called and the profit margin made on those calls. With that knowledge, Sprint can give those customers more attention and protect its business.
"A historical challenge with business intelligence software has been user adoption," Bansal adds. "One of the best things that could have happened to this industry is the advent of stock trading systems." According to Bansal, stock trading systems have helped train a wide user base in how to query a database via a browser and, more important, to take action based on the results of those queries. "People now have a pretty good sense of what to do with a BI application, and I think we have portals like Yahoo! Finance to thank for it," he says.
At fast-growing home improvement retailer Lowes Home Centers, BI tools are rolling out to more than 1,000 employees in the Wilkesboro, N.C., headquarters, as well as to managers in the field. Lowes maintains a 16-terabyte data warehouse to track product inventories and sales at its more than 680 stores in 40 states.
Steve Stone, vice president of managed information systems operations, says BI tools are used in three primary ways: The first is for executive reporting, where managers are able to look at broad product categories such as gardening, plumbing or lighting to determine where performance is good and where its below par. The second use is in analyzing product performance regions, right down to an individual store. Stone says the tools help managers better understand which products sell in which areas, as well as to which demographics. The tools can also be used to determine which stores are making best use of their labor, so that investigators can be sent to those stores to determine appropriate practices.
Lowes is also using BI tools in a new business-to-business exchange called Lowes Link. The private exchange allows Lowes suppliers to tap into the data warehouse to run their own queries. The exchange is operating in a pilot phase with 10 of Lowes largest suppliers, but will be expanded to 250 suppliers by the fall. The exchange uses digital certificate technology from Entrust, so that suppliers only have access to information related to their products.
"We may open it up to allow our suppliers to see their competitors information, but thats something were still debating," Stone adds.
Stone couldnt say how much Lowes has invested in BI technology to date, but he says the payback has been substantial. Lowes has begun generating direct-mail campaigns based on knowledge it has gained about its customers from MicroStrategys software. In one campaign earlier this year, which offered customers the chance to become a member of the Lowes Racing Team pit crew the company sponsors National Association of Stock Car Auto Racing driver Mike Skinner Lowes stores experienced an incremental profit of $9.7 million from increased sales. The program cost only $530,000, resulting in an ROI of 1,737 percent.
Stone says the company was also able to remove $63 million in slow-selling products from shelves based on BI analysis and, in the lawn and garden category, has been able to gain $7 million to $8 million in revenue by making better stocking decisions. In total, Stone estimates that more than $100 million in savings or revenue gains can be attributed to the BI technology, and its still in its early days. "We believe well be able to dramatically shorten the time from analyzing information to taking action," he says. "Ultimately, if you dont take action with the information, its useless."
The adoption of BI software goes well beyond commercial applications, such as trying to find out which products people are buying. At Vancouver (British Columbia) General Hospital, doctors, nurses and administrators are using software from Cognos to better understand surgery waiting times, the types of emergencies being treated at the hospital and hospital staffing resources, using patient demographics and seasons.
Rupert Bonham-Carter, a director at Ottawa-based Cognos, says the hospitals use of BI software is a prime example of how the technology is being adopted in almost every field imaginable. "Were in the midst of a knowledge revolution," Bonham-Carter says. "If you have any kind of data, you have a use for business intelligence software."
Another Cognos customer, Otis Elevator, has been a pioneer in the use of Internet-powered BI software, rolling out a platform more than a year ago that allows its customers to check on the status of their equipment via a Web site. The companys e*Service Internet site allows building operators to run queries related to how much downtime their elevators have experienced in a given year, cost of operation and what service has been performed.
Otis recently rolled out new applications based on Cognos software, including Otis e*Direct Internet site, which provides architects with tools to configure elevators for buildings being designed. Jeff Anderson, senior manager of e-business at Otis, says that within 15 minutes, architects can obtain complete technical drawings and specifications for elevators, along with pricing. Working with Cognos, Otis has developed a set of applications that allows it to see which types of elevators are being requested most frequently, as well as with which features.
More important, the tools help Otis see which features or specifications architects are requesting that cant currently be met. "Before, we knew what we were selling, but we didnt have as good a handle on what needs werent being met," Anderson says.
For a pure online business such as Microsofts bCentral application services unit, understanding the best ways to acquire and retain customers involves some specialized data mining tools. BCentral is using application services from digiMine a Bellevue, Wash., company that offers its BI software as a service to track visitors to its Web site, as well as traffic generated by marketing partnerships and cobranded portals. "DigiMine lets us get a handle and consolidate our tracking with one company," says Erin Hiraoka, bCentrals marketing director. "Our business is tracking-intensive, and we were adding to our metrics spreadsheet every week. Our finance guys were ready to kill us, so we said, Lets get our arms around the way we track our business."
Gathering the information is a time-consuming job, but the real value comes from the analysis. Hiraoka says: "We need to track so many things: How do people find out about us? How many visits it takes to feel comfortable and to subscribe. How long do they stay? What are the most effective marketing campaigns? Being able to look at performance by channel, to see trends over time and to track back to the source thats essential."
While BI software can help data-hungry managers recoup some of the time they once spent trying to get information on their business, too much of a good thing can also be a problem. "When you live in a business thats done in real-time, you can be reactive to so much data," Hiraoka says. "You need to take a step back and say, One days data doesnt equal a trend."
Nick Besbeas, a digiMine co-founder and vice president, says digiMine is eyeing expansion from Web site analysis into the physical world. "The Web is an intense focus for us, but tying into other areas like point of sale presents a very interesting opportunity," Besbeas says. Like its competitors that have moved in the opposite direction, from brick-and-mortar to the Internet, digiMine is responding to the markets need to understand data from all sources.