In-Depth

BI Budgets: Up, Up, and Away

Budget increases don’t necessarily translate into increased BI spending—not, at least, in the form of new projects or other initiatives

• By Stephen Swoyer
• 08/25/2004

While we wait for a much-anticipated thawing in overall IT budgets, BI budgets appear to be doing quite well.

In a survey of 100 corporate buyers released in June, for example, Bank of America found that fully 70 percent of respondents anticipated that their application budgets would grow over the next six to 12 months.

Respondents clearly don’t plan to spend their IT budget dollars haphazardly: Bank of America indicated that respondents typically planned to invest their money in any of three areas: BI, compliance, or financial management software.

Similarly, a Nucleus Research survey conducted in February predicted modest or flat IT budget growth for 2004. Respondents expected to invest IT budget dollars in networking-, hardware-, and portal-related expenditures, along with CRM, BI, and supply chain management solutions.

Users confirm that their BI budgets did increase noticeably in both 2003 and 2004, although many note that budget increases don’t necessarily translate into increased BI spending—at least not in the form of new projects or other initiatives.

Take mobile homes specialist Fleetwood Enterprises, which allocated additional IT budget dollars to augment its internal BI staff. “[Our budget] increased [in 2003] as we had money for one other person, but the thinking was that adding of this person will remove expenditures currently going to outsourcing,” notes Dave Bienstock, a systems specialist with Fleetwood.

Has Bienstock’s budget increased in 2004? Not noticeably, he says—although additional budget dollars are always available. “I think the budget is set for the next year, but if there are any BI items needed then they can be addressed as an emergency or borrowing from the next year,” he confirms.

Ditto for Steve Witter, a report developer with a healthcare products company based in the Midwest. “Our budget did increase [in 2003], but a lot of the dollars earmarked strictly for BI were redirected to hardware to better support our existing BI,” he concedes.

For 2004, Witter foresees more of the same. “Obviously maintenance costs on existing systems will be funded. However, I haven't seen anything on the horizon that is sparking much interest with our management,” he comments. “One challenge I think BI software faces is that IT departments in general are not usually well-versed at business, and many times they are the filter through which BI investments are seen—or not seen—by management.”

Other users are rolling out new BI-related projects, but aren’t necessarily spending beaucoup dollars to do so. “[W]e did buy a new SQL Server [in 2003] to run in an Active-Active cluster. Production would take one node and reporting the other,” confirms Peter Schott, a SQL administrator with automotive financing specialist Drive Financial Services. “Our major new project was building a data warehouse based on our new back-end system, [but] we haven't bought any new servers or software.”

Like many users, Schott anticipates that his company’s BI expenditures in 2004 and beyond will be earmarked to support the maintenance or upgrading of its existing BI infrastructure instead of new projects.

“We're using Brio for most of our reporting and will either upgrade or buy a new tool. Upgrading would require a new server and an installation technician due to the complexity of the upgrade. I guess that means that the increase would be primarily upgrade and maintenance fees,” he says, acknowledging that he “didn't know of any major new projects in the works.”

Similarly, Robert Williams, a senior IT manager with MicroChip Technology Inc., says much of his company’s 2003 BI budget increase went to cover the cost of additional licenses for its bread-and-butter TM1 OLAP solution. “Our BI budget did go up as we purchased more TM1 licenses and support. The driver has been the realization by the end users that it’s faster to pull the data from the datamart than compile it themselves,” he notes.

Through 2004 and beyond, however, Williams has big plans. “We hope to spend money on new BI tools to enhance our data warehousing environment,” he explains. “TM1 is a good consolidator of numbers, but more is needed to look at segmented populations of detail data.”

For starters, MicroChip is slated to participate in Microsoft’s SQL Server 2005 beta program, which Williams hopes will solve at least this problem. “We will look at [Microsoft’s] analysis tools as well as Business Object for the end user interface,” Williams says, adding that MicroChip also plans to ramp up its data integration efforts, specifically consolidating transaction processing within one system, as opposed to several, non-aligned systems. “All the arguments for data warehousing hold true. It’s just a matter of convincing executives how good it can get if they make the investment,” he concludes.

For the most part, some users say, this is an argument they don’t have a lot of trouble making. That’s because many executives seem to have accepted the proposition of BI solutions as positive-ROI investments—more so, that is, than other potential expenditures. “We definitely have to cost-justify any new purchases. However, the main purpose of our BI projects is to analyze our data to find problems or make better decisions. [Our executives] understand that the BI investments are important for that,” says Drive Financial’s Schott.

Not all users share Schott’s enthusiasm, however. Fleetwood’s Bienstock, for example, notes that it’s difficult to determine ROI in his environment. “[I]n the cases where departments are not income-producing, the ROI is hard to justify in terms other than efficiency and company goals,” he points out. “I had to put a value to the buying of SQL Licenses per workstation. It's hard to put those items in a matrix and have it make sense to upper management.”

An administrator with a prominent manufacturing firm based in the Southwest agrees, bemoaning the indifference of his company’s executives to the non-tangible ROI of proactive BI investments. “In our company the investments in BI are difficult to justify as having a positive ROI. BI is seen as a necessary admin function but not something that should consume discretionary money,” this user says, adding that he is “hoping to change that perception.”

This user isn’t ready to give up, of course. ”We are about to embark on another round of cost justification for more BI tools this next year. We will be documenting all the time that each of the division marketing experts spend compiling data instead of acting on the results of that data,” he explains, adding that “because everyone is quick to lay claim on sales increases and point fingers on decreases, we are choosing to not include that aspect into our ROI justification.”