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The BI Watch:
2003: Cover-Your-Rear-Year for BI

  Column published in DM Review Magazine
May 2003 Issue
 
  By Richard Hackathorn

During January, I interviewed fifteen colleagues about their thoughts for 2003 relative to the BI marketplace and its technology. My questions revolved around what is different about 2003 as compared to 2002. Will 2003 hold some surprises for us?

There was confirmation that 2003, like 2002, continues to be a tough year for BI vendors.1 There was also confirmation that corporate IT continues to seek tangible ROI payback within a few months (if not days), and there was confirmation that global tensions and the tight economy are having a huge negative impact.

One clear factor that did surface was that many "cover-your-rear" (CYR) fears were driving more interest and even new investment in BI.

CYR fears are fueled by many factors: global uncertainty, terrorism, SEC indictments, stock collapses, labor negotiations, disruptive technologies, massive layoffs and even unusual weather. The aim is no longer competitive advantage; it is business continuity (afflicted by unexpected classes of disasters) and corporate survival (challenged by high and rigid cost structures).

During 2003, corporations are desperately turning to their investments in BI/DW systems, seeking insights to critical questions about their business (or at least covering their rears when things turn sour). These desperation efforts are focused on the following five areas:

First, there is operational cost savings. The usual run-of-the-mill waste has been identified and eliminated. Cost cutting is now cutting deeper. We are reducing costs by changing the way that we do business. The objective is to achieve small cost savings on every transaction by intelligently and quickly performing the business process.

For instance, in a large manufacturing firm, parts flowing from suppliers are reprioritized daily, depending on production variations. When a truck arrives at the loading dock, forklift operators know exactly which pallets to offload first and where to place them so that disruptions to assembly lines are minimized.

Second, there is compliance monitoring. Instilling honesty into post-Enron business has sparked considerable soul-searching among executives. With personal liabilities placed on executives to certify integrity of financial statements, real accountability for this integrity is being pushed to all levels of managers. The data warehouse is providing an invaluable check that verifies the reporting generated by legacy systems.

For instance, retail store managers are more carefully monitoring the balance among inventory, goods received and sales receipts to increase the accuracy of revenue reports. Traditional financial systems do not allow the "drill-down" on the activity for individual items; thus, store managers are now relying on ad hoc queries to the data warehouse to verify traditional reports.

Third, there is risk assessment. For many companies, business liability exposure is not known until weeks or months after the transaction occurs - long after any hope of stopping that transaction expires. There is a shift to a daily or even hourly monitoring of risk assessment, down to the individual transaction.

For instance, risk assessment in derivative trading is often cited because the liability of a current trade is dependent on the successful completion of several previous trades. A failure in a derivative trade could have a cascading impact on risk.

Fourth, there is fraud detection. In prior years, fraud detection was a way to reduce needless overhead (i.e., spillage or shrinkage). Now, fraud detection is an essential part of doing business by protecting corporate integrity and even combating global terrorism.

As required by the Bank Secrecy Act and extended by the U.S. Patriot Act in October of 2001, many financial institutions are strictly required to report detailed customer activities to combat drug trading and terrorism. These regulations now extend beyond traditional banks to any company doing large financial transactions across international boundaries (such as jewelers, telegraph companies and airplane dealers). These companies must report any "suspicious customer activity," which necessitates knowing the normal business patterns of each customer and their legal relationships to other customers. This is much more than examining an individual transaction; this requires the full context of the DW.

Fifth, there is knowledge preservation. The corporate labor force (and the knowledge contained therein) is highly volatile with massive layoffs, job reassignments and early retirements. By embedding specialized knowledge of a job function into BI analytics, new employees with lesser experience can perform that function with reasonable effectiveness (although not necessarily with equivalent understanding).

For instance, analytics that direct the approval processing of insurance claims or bank loans are rapidly becoming the norm, thus enabling lower-paid clerical personnel to perform work previously reserved for experienced managers.

What are the implications for BI/DW systems in this CYR year?

First, there is a need for a new generation of analytical applications using data mining algorithms and pattern visualizations. The old "pivot and drill down" techniques have limited usefulness with these CYR requirements.

Second, data quality and information integration are more important than ever. Negligence in financial reporting feeds on corrupt data. Fraud and terrorism hide within cracks between the fragmented islands of corporate data.

Third, reliability and stability of BI/DW systems are now in the same mission-critical category as legacy OLTP systems. Without BI/DW systems, you are driving your car at night without your headlights. You can do it, but it is not advisable.

For the BI professional, 2003 is certainly not business as usual. Urgent new demands are being placed on BI/DW systems to alleviate CYR fears. I sincerely hope that this edgy attitude will pass quickly and that a more forgiving and constructive attitude prevails in future years. Meanwhile, 2003 is distinguished as a CYR year for BI.

References:
1. See Hackathorn, R. "Selling BI in a Tight Economy," BI Watch, DM Review, April 2003.

...............................................................................

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

Dr. Richard Hackathorn is president and founder of Bolder Technology, Inc., an established consultancy in Boulder, Colorado. Hackathorn has more than 30 years of experience in the IT industry and is a well-known technology innovator and international educator, conducting professional seminars in 18 countries. He has written three textbooks entitled Enterprise Database Connectivity, Using the Data Warehouse (with W.H. Inmon), and Web Farming for the Data Warehouse. He earned his B.S. degree from the California Institute of Technology and his M.S. and Ph.D. degrees from the University of California, Irvine. To contact, send e-mail to richardh@bolder.com.



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