Business intelligence and on-demand: The perfect marriage?

Established vendors and upstarts now offer BI applications as on-demand services offering faster deployment and speedier access to reports

Ask Dennis Hernreich, COO and CFO of Casual Male Retail Group, what his life was like before he switched to an on-demand business intelligence reporting application, and he remembers the frustration all too easily.


Part 1: A Technology Category in Tumult
Part 2: Nine BI Vendors to Watch

Part 4: What You Need to Know about BI TCO
Opinion: Don't Make BI Suck for Users

Casual Male Retail Group, a specialty retailer of big and tall men's apparel with $464 million in annual sales, was using a legacy on-premise reporting application for its catalog operations. (The company also has 520 retail outlets and e-commerce operations.) But the reporting features built into the system were "extremely poor," as Hernreich describes them: "Visibility to the business? Terrible. Real-time information? Doesn't exist. How are we doing with certain styles by size? Don't know."

"It was unacceptable," Hernreich says. And viewing those "canned" BI reports (which lacked features such as exception reporting) could happen only with making a trip to the printer for a stack of printouts. "It was hundreds of pages," he recalls. "That's just not how you operate today."

It's not like Casual Male didn't have all this information; it just didn't have an intuitive and easy way to get at its catalog business's sales and inventory trends in real-time. But that changed in 2004, when Casual Male began using a on-demand BI tool from vendor Oco, which takes all of Casual Male's data, builds and maintains a data warehouse for it offsite, and creates "responsive, real-time reporting dashboards that give us and our business users information at their fingertips," Hernreich says.

Today, Hernreich and Casual Male's merchandise planners and buyers have access to easy-to-consume dashboards chock-full of catalog data: "What styles are selling today. How much inventory are we selling today. Where are we short. Where do we need to order. How are we selling by size. What are we out of stock in," he says. "All of these basic questions, in terms of running the business--that's what we're learning every day from these reports."

And those annoying trips to the printer have ended.

On-demand fears linger
Casual Male Retail Group is part of the small (but growing) percentage of businesses using on-demand or software-as-a-service (SaaS) BI tools, which can be deployed at a much faster pace and with much less initial cost than traditional on-premise software installations.

"To go from nothing to a fully automated system in a matter of weeks is an incredible sell for any company--large or small," says Scott Cohenford, a senior analyst at RapidAdvance, a provider of cash advances to small and midsize businesses, who led his company's efforts to purchase Business Object's OnDemand platform.

Note that Cohenford is not an IT person by title or pedigree (he has an accounting background): ease of use (setup, integration, training) is a major selling point to on-demand BI customers. "I was tasked with reviewing the different options out there, seeing how quickly we could move forward with the solutions and do so at a low cost and automate as much as possible," Cohenford says. "And that's what pushed me into the SaaS world's BI tools."

But a nagging majority of companies don't share Cohenford's sentiments, despite loads of hype and the success of SaaS pioneer A Forrester Research survey of 1,017 technology decision makers found that adoption of SaaS and on-demand applications in large enterprises is now at just 16 percent. Aberdeen Group research showed that just 10 percent of all-sized companies used some form of BI analytics tools through third-party service provider, says David Hatch, research director of BI at Aberdeen.

The Forrester survey noted the oft-cited barriers to higher adoption rates, including concerns around integration, customization, security, and total cost of ownership.

Of course, those concerns don't go away for on-demand BI applications, but several recent macro trends have pushed companies to take another look.

One is the long-term effects of software industry consolidation and BI vendor upheaval in 2007, which has affected the plans of more than 100,000 customers of the established BI vendors, according to Hatch's research. "This has opened the door to new, innovative BI technology developers and marketers," Hatch writes in a recent BI report, "who see an opportunity to capture the attention of established BI customers with low-risk offerings that address questions resulting from all of the M&A activity."

The need for speed
Even traditional on-premise vendors, like Business Objects and Cognos (now owned by IBM) are starting to offer on-demand solutions, responding to the rise of several pure-play on-demand BI vendors. "The increasing speed, power and availability of on-demand solutions are narrowing the performance gap between on- and off-premise application implementations," Hatch notes.

Business Objects leads the on-demand BI space, with 70,000 subscribers. But smaller vendors, such as Oco, SeaTab, LucidEra, Dimensional Insight and OnDemandIQ, are nipping at its heels -- offering customers both on-demand suites of reporting and analytic tools, as well as highly targeted applications that solve specific customer needs and are delivered in weeks, not months or years.

Hernreich describes Oco's integration work with Casual Male's systems as "unobtrusive," taking roughly six to eight weeks to complete. "And it worked on day one," he says.

BI vendors are also hearing a lot of pain from current and potential customers who need a quick fix: Inside companies of all sizes, the pressure to aggregate, synchronize, and deliver clean and actionable data to business users has never been more intense. A recent Aberdeen survey of 4,300 companies found that the No. 1 technology that could have the greatest impact on the business during the next two to five years was BI and analytics. (SaaS initiatives grabbed the second spot.)

Not just for small businesses anymore
Vendors offering on-demand and SaaS applications have made names for themselves by serving midsize and smaller companies, which typically don't have the IT resources to dive into a full-fledged on-premise rollout. The partnership makes a lot of sense for both parties, say analysts.

"Midmarket companies lack the sunk costs that large enterprises have already invested in a BI infrastructure. They have similar requirements to integrate, report and analyze data from numerous systems, but they don't have the staff or infrastructure to pull it off," writes Gartner Research Director Kurt Schlegel in a February 2008 report on BI self-service options. "Plus, midmarket companies are often in volatile business cycles where revenues could grow quickly or come crashing down."

But larger companies are also starting to test the on-demand waters with targeted applications. Welch's, the $654 million consumer-packaged goods manufacturer known for its jams, jellies, and juices, recently installed an on-demand BI application from Oco. In January, Welch's rolled out a transportation logistics BI application that serves up analytic insights from Welch's systems and its distribution partners' in a way that its Oracle BI software (installed in 2007) could not.

"We're essentially capturing every element -- from the customer orders we receive, to bills of lading on every shipment we make, as well as every data element on every freight bill we pay," says Bill Coyne, director of purchasing and logistics for Welch's. "We dump them all into one data warehouse [maintained by Oco], and we can mix-and-match and slice-and-dice any way we want."

Coyne says that Welch's tries to ship its products five days a week out of its distribution center. "But we found ourselves just totally overwhelmed on Fridays," he says. "We would complain, 'How come there are so many orders on Friday?'"

It turns out that Coyne's team was doing it to themselves. The data aggregated into Oco's data warehouse and sliced-and-diced by Coyne's team revealed their errors, which they have now fixed. "Just trying to steer away from Fridays provides us a huge benefit," Coyne says. "We can look at the number of orders per day, the number of orders by day per customer and overall customer order patterns."

Welch's spends more than $50 million each year on transportation expenses, and the Oco BI application and reporting features have become critical in a very short period of time, he says. "We literally can't go any amount of time without knowing this stuff," Coyne says.

In addition, training users on the new application is "the equivalent of training someone to use Google," he notes. As to the payback, it's been "almost instantaneous."

On-demand changes IT's role
The oft-cited concerns regarding on-demand and SaaS applications (integration, customization, security) typically don't emanate from the business side of an organization. Typically, they come from IT groups already under intense pressure from project backlogs and a lean number of staffers, who most likely don't have BI development skills. "The IT and BI skill sets that are required to meet this demand are in limited supply," notes Aberdeen's Hatch.

With easy-to-install on-demand applications, IT's role as gatekeeper is minimized, say analysts. By 2012, Gartner's Schlegel predicts that emerging technologies such as on-demand and SaaS BI tools will make users "less dependent on central IT departments to meet their BI requirements."

However, even the most enterprising line-of-business executives have to realize they need IT's buy-in and support for on-demand BI applications. Welch's had just finished the four-year $31 million project installing Oracle's ERP applications in-house, which included a BI application, and IT was understandably "concerned" about Coyne's new external application needs, he says. "They wanted to make sure we were doing the right thing," Coyne says, "but even they said that this particular area of Oracle does not have a solution for it. It wasn't much of a debate at all."

One major sticking point for IT usually involves the security of corporate data as it moves outside of IT's control. But executives and analysts say that the potential business benefits of quicker access to BI data, coupled with the robustness of third-party providers' security mechanisms, may outweigh concerns.

Casual Male's Hernreich says he was initially "nervous about the information being offsite," but that the final analysis showed the business benefits of a SaaS BI solution were too big to ignore.

And for SMB companies like RapidAdvance, well-established vendors' security controls are a benefit -- not a concern. "For a small company to leverage and piggyback off the firewalls and data protections [of a vendor like Business Objects] was a big selling point for us," Cohenford says.

To many companies, the future of on-demand BI applications is already here. Says Hernreich: "It's essential to operating the business."

(For more on CIO's special BI series, see Part 1 "BI: A Technology Category in Tumult"; Part 2 "Nine BI Vendors to Watch"; Part 4 "What You Need to Know About BI TCO"; and Part 5 "Opinion: Don't Make BI Suck for Users.")

This story, "Business intelligence and on-demand: The perfect marriage?" was originally published by CIO.

Copyright © 2011 IDG Communications, Inc.