Is Business Intelligence Effective?

in Small-business

Business intelligence (BI) is a term we hear frequently in regards to improving corporate decision making. There are numerous software packages available, and vendors seem to be rushing to market their "unique" business intelligence solutions. What exactly is business intelligence? Does it really improve how a company runs its business? Or is it a buzzword that delivers little real value to the enterprise?

Business intelligence is a broad term that covers a variety of IT functions and business practices which taken together are said to enhance enterprise decision making. In theory, it can help businesses determine which activities or investments will drive a company to reach its long and short term goals the quickest. There are really three main components to BI.

The first component is obviously data. However, it is really more than just a simple SQL database. In order to be really useful for making business decisions, business intelligence systems need to have access to historical data and data from various disparate systems. This usually takes the form of some sort of data warehousing. This is essential since reporting and analyzing on such a large volume of data would slow production systems too much.

The second key component is comprised of a series of goals and metrics. To utilize business intelligence systems, companies must identify the metrics that they will base their decisions upon. In practice these are called Key Performance Indicators or KPI. KPIs are typical metrics that a company might measure such as the average dollar amount of a sale, the average number of units per sale or, in the case of call centers, calls per agent per hour.

The final component consists of a reporting module. This component provides the various reports to the enterprise regarding KPIs and how the company is performing in regards to the KPIs. Most BI solutions include a dashboard that gives a simple and quick snapshot of the status of various metrics.

There are two primary problems with most business intelligence systems. The first is that they often do not account for or include data from valuable sources. For example, contact centers often have considerable data about what customers need and want. This is often anecdotal so it is frequently discounted. There is also no way to effectively measure this type of direct feedback using KPIs. However, this can be some of the most valuable data for business decision making. Instead of focusing on this data, most business intelligence systems will use random recorded calls, quality scores and metrics like call length in a call center. Knowledge of this data gives the business the really useful information that is available in a call center - what the customer actually wants.

The other key problem with business intelligence systems is that they are only as good as the defined KPIs. This creates a situation where important trends or information may be missed because the company is measuring the wrong things. Often this is the result of inexperience with such systems. What this means is that in order to really benefit from them, companies often find themselves indefinitely stuck with consultants from the BI software vendor to aid them in identifying these metrics. As is often the case, external contractors do not have enough familiarity with a company's business to determine if the stated business goals are misaligned. If they are, the wrong KPIs will be tracked and the business intelligence system will provide little benefit to the enterprise.

Is business intelligence merely a buzzword? Yes and no. There are definitely benefits to identifying key performance metrics and using data warehouses to provide a "big picture" view of a company's data. Tracking metrics and adjusting the business accordingly, however, is just part of running a smart business. The only thing unique about business intelligence is that it marries IT to the existing business practices of tracking metrics. The ability of business intelligence systems to help a business meet its goals is only as good as the quality of the metric identified. In this case, business intelligence certainly seems to be a buzzword applied to reporting and data warehousing applications and intended to suggest additional benefits that may not be realized.

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Michael Dorf has 1 articles online

Michael Dorf is a professional software architect and instructor with a M.S. in Software Engineering and 12 years of industry experience. He teaches for LearnComputer! (, which offers instructor-led computer training for companies and individuals. Whether you decide to browse our computer training schedule or read an article on best PHP books, you will find many useful resources on our website.

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Is Business Intelligence Effective?

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This article was published on 2011/04/01