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Saugatuck Research: User Executives Raise Business Intelligence Prioritization

  Industry Statistics published in DM Direct Special Report
February 21, 2006 Issue
 
  By Saugatuck Technology

What is Happening?

Saugatuck Technology research shows Business Intelligence (BI) now ranks as the third highest IT spending priority for senior business and IT executives in 2006, up from 5th in 2005 (see Figure 1). Reinforcing this trend, BI's more sophisticated cousin, business performance management (BPM) moved up from 19th in the IT spending priority queue last year to 4th on the list in 2006. Software and services vendors are reporting similar increased BI and BPM interest and spending. Many BI-focused vendors such as Business Objects and Cognos are rolling out more sophisticated BPM and CPM (corporate performance management) solutions, based in part on increased user interest in BI.

Figure 1: Top IT Spending Priorities

Why is it Happening?

Saugatuck's research surveys and interviews show strong and c ontinued pressure by CxOs to improve business and IT efficiencies and effectiveness. While there have been some small changes in business priorities over the past few years, efficiency and productivity improvements continue to dominate the top five IT spending priorities. Many of these business efficiency initiatives have been kick-started by compliance initiatives. Firms undergoing Sarbanes-Oxley and similar compliance programs realized just how inefficient and disconnected their business systems (and data) really were.

At the same time, IT investments continue to follow the "tactically strategic" parameters that we recently described in Research Alert "Key Trend for 2006: Tactically Strategic Investments Continue" (see RA-214, 29Dec05). Carefully targeted IT investments that enable tactical (short term) ROI and strategic (long-term) business advantages are the rule.

One of the most obvious areas of both business efficiency improvement and business advantage is in the coordination and integration of data for use in business management. And, as repeated endlessly in TCO management doctrine, investments that improve management (of both technology and business) are among the most cost-effective investments that any firm can make. Such investments also improve firms' abilities to become more agile, as they move toward real-time, on-demand business and IT environments.

Investments in BI - i.e., investments in improving data standardization, reporting, communication and decision making - address all of these parameters. Therefore, we are seeing increases in BI interest, investment and deployment.

Market Impact

Of the "big three" business intelligence/performance management areas (BI, BPM, and CPM), BI will be the area of prime user investment through at least 2010. BPM and CPM are still too complex for all but the simplest, or most sophisticated, IT enterprises. In fact, even enterprise-wide BI is beyond the IT infrastructure capabilities of most user firms.

As a result, BI investments are most likely to begin in what Saugatuck calls "beach-head" deployments, carefully targeted investments that improve a specific business process or LOB. Many of these investments will lead eventually to BPM/CPM and similar data-centric business applications - likewise following a "beach-head" model. In some cases, transformation of the firm's business itself will be required, as firms realize that their underlying structures and processes may be key contributors to BI discontinuities.

Therefore, a services-led approach by vendors will be critical to BI market success. Data and application integration will be key enablers of more (and new) business for software and services vendors, as users tie greater numbers of applications and systems into BI, then slowly move up the ladder to BPM and then CPM.

Vendors should build partner technology and services "ecosystems" that enable not only data sharing and integration, but that will provide the deep and broad range of technologies and services required to enable BI and BPM/ CPM.

Saugatuck sees these ecosystems centered around two types of vendors: SIs (e.g., ACN, BP) and BI Master Brands (e.g., Cognos, Business Objects). Most vendors, including the largest IT Master Brands such as IBM, will need strong ecosystems to sell and fulfill the bifurcated value proposition of BI: Strategic improvement for the C-level; and operational improvement at the M-level.

For more information, please visit www.saugatech.com.

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For more information on related topics visit the following related portals...
Business Intelligence (BI) and Query & Reporting.

Saugatuck Technology is a strategic advisor to senior executives, leading information technology vendors and investors, providing strategy consulting, custom research and (C-level targeted) thought-leadership research programs focused on emerging technologies, key business/IT challenges and effective management strategies. Please visit their Web site at www.saugatech.com.



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