A business
intelligence system is designed to analyze business data and turn it into
information that can be used to benefit the business. There are several
different types of activities that are considered business intelligence,
including data mining, online analytical processing, and reporting. The raw
data is analyzed and can then be used to make decisions, cut costs, and make
predictions for the future of the business. The systems should not only be used
to present the data, but should be able to determine what factors are
influencing the results. (Mulcahy, 2007)
This type of system may
be expensive to implement, with prices ranging from thousands to millions of
dollars. The initial costs usually include the software licenses and the first
year of maintenance. (King, 2009) There are also several factors to consider
when making the decision to purchase this type of system. The company should
first look at their needs and determine what type of information should be
analyzed. Also, when implementing a business intelligence system, the company
should ensure that the data collected is complete and accurate. The system
should be able to produce different types of reporting to meet the changing
needs of the business. Due to the high cost of this type of software, the
company should be clear on the data needed and the objectives for the future of
the company. The return on investment should be clearly defined to ensure that
the company is benefiting from the system. (Desmarais, 2011)
There are several
potential problems associated with business intelligence systems. User
resistance may be an issue; therefore, all employees, ranging from the highest
executives down to the sales team, should be trained properly and encouraged to
‘buy-in’ to the idea of using the new system. Another issue is inaccurate or
incomplete data. If the data is not correct, decisions made using the system
will be based on incorrect information. Business intelligence systems will also
be ineffective if a company doesn’t understand their processes. They should be
very knowledgeable about how each aspect of the business operates so that they
can utilize the system as an effective tool for improving these processes.
(Mulcahy, 2007)
Cultural differences
may also be a factor when implementing business intelligence systems. Data
collection methods, ideas regarding timeliness, and accuracy may all vary
across different cultures. Ethical standards for gathering information may be
different. In addition, the different technologies and language barriers may
also be a factor when operating in different countries.
(Park, Fables, Parker & Nitse, 2010)
There are numerous benefits to business
intelligence systems. These systems can be used to identify new business
opportunities and cost-saving changes in their processes. For example, Welch’s
used software to analyze their transportation expenses. By using the software,
they were able to consolidate their shipments into full loads, which decreased
their shipping costs drastically. Another company used a business intelligence
system to strategically market their product. In response to decreased
bookings, Carnival Cruise Lines used their customer information to determine
which of them would be most likely to book a cruise during a recession. They
then focused their marketing efforts on this segment of their past customers.
(King, 2009)
The systems also
produce informative reports that help companies know how to optimize prices due
to fluctuating product demands. The pharmaceutical manufacturer, Wyeth, used
information from their system to determine that the demand would increase when
they launched the arthritis drug, Enbrel®, to the European market. They were
then able to increase production to keep up with the projected increase in
demand.
(King, 2009)
In
summary, while business intelligence systems have shown to have numerous
benefits for a company, a great deal of thought and research should go into the
decision to purchase a system and what type of system to purchase. The company
should be sure that the software meets their needs and is compatible with their
data collection ability.
References:
Desmarais, C. (2011, September 7). Can Small
Business Benefit from Business Intelligence Software? Inc. Retrieved from www.inc.com
King, R. (2009, March 2). Business Intelligence
Software’s Time is Now. Bloomberg
Business. Retrieved from www.bloomberg.com
Mulcahy, R. (2007, March 6). Business Intelligence
Definition and Solutions. CIO.
Retrieved from http://www.cio.com/article/2439504/business-intelligence/business-intelligence-definition-and-solutions.html
Park, J., Fables, W., Parker, K. & Nitse, P.
(2010). The Role of Culture in Business Intelligence. The International Journal
of Business Intelligence Research, 1.3,
1-14, http://www.irma-international.org/viewtitle/45723/
Greetings,
ReplyDeleteThis is a great post on the purpose of business intelligence systems. We agree that this type of system may be expensive to implement therefore it is important to get the acceptance or buy-in of all the employees prior to using the new system. This collaboration will decide whether or not the new business intelligence system meets the needs of the company and the level of benefit it will ultimately provide.
An article on Forbes shows that very few companies are utilizing business intelligence systems for data analysis. A survey of executives in the finance and energy industries shows that only 20 percent use proactive and investigative techniques or showed an interest in scorecards, dashboards, and analytics techniques. (Groenfeldt 2014) The majority of respondents use reactive and “after the fact” analysis as the primary means of data. This comes as a shock to many who assumed that these large companies used advanced business intelligence techniques such as predictive analytics and alerts.
It appears that many of these business leaders have become accustomed to satisfying their reporting needs through manual extraction and data cleansing tools, feeding the information to spreadsheets or PDF formats. They are more focused on these department-specific initiatives that use various systems and take more time. They don’t want to replace different systems with one single business intelligence system as long as their systems are performing up to par.
Overall, we agree that there can be potential problems and plenty of benefits to using business intelligence systems. Firms who have decided not to use a single business intelligence system to process their analytical data may be missing out new business opportunities and cost- saving changes in their process. It is important to analyze the needs of the business once a year to decide if a business intelligence system will provide a benefit to the company.
Again, great post.
Groenfeldt, T. (2014, July 30). Business Intelligence (BI) Isn't. Very Intelligent. Yet. Retrieved February 14, 2015, from http://www.forbes.com/sites/tomgroenfeldt/2014/07/30/business-intelligence-bi-isnt-very-intelligent-yet/
By Group 2 (Sam Giniger, Stephanie Quist, Stanley Adelson)