In-Depth
Hosted Business Intelligence -- Why the Time is Right
We explore the changing market dynamics that make now the time for mass adoption of hosted BI.
By David Frankel
Recently, industry analysts are seeing an increase in the adoption of emerging trends and alternative delivery models for BI, including software-as-a-service (SaaS), a software deployment where an application is hosted and provided to customers across the Internet (see Note 1). We will explore the changing market dynamics that make now the time for mass adoption of hosted BI.
IT departments have become burdened by the vast amounts of data businesses need to manage and analyze to stay competitive. In fact, a recent online poll by Deloitte found that nearly two out of every five executives (39.7 percent) felt that data volumes in their organizations are increasing in size and becoming unmanageable (see Note 2).
Using a SaaS model, global enterprises, mid-market companies, and individual business units can leverage outside resources to manage their data. With lower cost and increased value for the business, SaaS BI solutions are becoming more accepted, providing a point solution for vital problems that allow business leaders to get back to managing their business, not their data.
Why Now?
Traditionally, BI solutions have not been viewed as good candidates for a hosted service. Vertical solutions have been offered to tackle industry-specific problems, but the industry has lacked a robust and generic BI capability offered as a service for several reasons. For one, there’s a high degree of customization involved in BI implementations. This level of customization has historically been necessary to account for the particulars of company data and to ensure adequate performance when dealing with large data volumes, especially historical data repositories.
Additionally, companies have experienced difficulties integrating multiple BI solutions in a hosted platform. Most solutions use multiple products sourced from different vendors (presentation layer, database, ETL, etc.) to comprise their holistic BI platform. Hosting one or more components is difficult since they would need to closely interface with other components.
Nevertheless, there are many reasons why the market has recently seen greater acceptance of SaaS BI solutions. As a result of acquisitions and the gradual maturity of vendor product lines, there are more single-source BI solution stacks and partnered solutions allowing for easier customization and simpler integration. With more integrated and mature products, companies are now able to leverage flexible back-end databases with front-end visualization tools in a hosted solution.
Where SaaS BI Is Used Today
There are many scenarios that are particularly well suited to SaaS data management and analytics, including collaborative environments and those using external data sources.
Increasingly, companies want to share data across many organizations. Using the traditional BI approach, this becomes a complex issue in terms of data access, governance, and security. Traditional data warehouses require organizations to keep data within their proprietary systems. To share data with an outside source, companies needed to let that source into their “inner sanctum,” opening it up to countless security and accessibility concerns. By creating a rules-enabled SaaS BI environment, organizations can have a neutral haven for controlled data access and use.
For example, some retailers are hosting point-of-sale (POS) data on SaaS BI platforms to provide access to their suppliers. By allowing these vendors to analyze the housed POS data, they can see how their products are performing versus the rest of the store’s product. Ultimately, this creates a win-win situation where retailers and product vendors can collaborate to build the business and sell more products. In such situations, companies such as retailers can feel safe knowing their data is safely shared within a controlled environment, providing data access on a well-protected system and opening the doors for responsible collaboration with third-party vendors, ultimately, driving up the bottom line.
Additionally, companies are utilizing SaaS BI solutions across a wide range of vertical industries today to analyze data purchased from external data providers or syndicated sources that do not carry the same data security concerns as a company’s proprietary information. SaaS solutions have sometimes been perceived as less secure than traditional in-house systems. For this reason, using a SaaS platform to analyze non-sensitive data is a perfect fit, allowing companies to perform complex, ad hoc queries without the security sensitivities.
For instance, in the compute-intense mortgage-backed securities industry, leading investors are using SaaS BI platforms to analyze third-party syndicated data for a broader view of market dynamics. Using publicly available, non-sensitive data, mortgage investors are able to analyze and link vast amounts of syndicated data so they can analyze the patterns of historical prepayment, default, delinquency, and loss-severity rates for the most granular -- and comprehensive -- industry analysis. By using SaaS BI solutions for granular analysis of syndicated data, financial services firms have greater insight into the mortgage market crisis to manage and protect their investments in the volatile market.
The Critical Success Factor: A Trusted Vendor
While some retail and financial services markets have effectively utilized hosted BI solutions, not all projects are able to attain such success. There is one critical success factor shared in each of these projects: collaboration with a trusted vendor. How can BI professionals identify the best vendor to work with?
One key is to thoroughly review a potential provider’s customer base. The vendor should have established customers willing to discuss their experiences. Review the customer size, market, and project requirements to see if they are similar to your own. Although there’s always a first time for projects, make sure the vendor knows how best to fit your unique, industry-specific needs.
Remember to explore service levels. Based on your project needs, vendors offer many types of support options, from the basic (disaster recovery) to the holistic (business continuity). Review your business needs to ensure you purchase the appropriate levels of service.
In some cases, companies have considered semi-managed data repositories in which they maintain the hardware in their own data centers. That way, companies can outsource the data management to specialists while keeping the data behind their firewall to securely access the data. Although this is not the most popular model, it provides a happy medium for companies evaluating SaaS BI solutions -- keeping secure control without the headaches of managing the data. With the stringent compliance requirements in heavily regulated industries (such as financial services and pharmaceuticals), this can be a key differentiator.
SaaS in the Future -- Where to Grow
Although there are many benefits for hosted BI, it is not a one-size-fits-all solution. For instance, enterprise data warehouse environments siloed by business units are not a good fit for a hosted enterprise solution -- the effort of breaking down the organizational barriers may outweigh the business benefits. As the roles of BI professionals change from data managers to data analyzers, it will be even more important to consider the delivery model best suited for each company -- including the potential risks.
Once you’ve completed a successful SaaS BI project, where do you grow?
For BI professionals, the roles are changing. Gone are the days of managing data warehouses -- now is the time to derive value from the data itself through increased analysis. Data analytic capabilities enable employees by providing a way to test ideas they may have and allow people to generate with new ideas they wouldn’t ordinarily have because of the easy access to analytical capabilities.
In recent years, several high-profile cases of compromised databases have caused companies to be more vigilant about data security. However, as SaaS makes inroads into IT and solidifies itself as a delivery model, hosted BI will benefit from the greater recognition of the benefits and safety of SaaS offerings. Additionally, many have discovered that in analytical BI environments, data can often be cleansed of sensitive elements while still remaining valuable for trend spotting and gaining better business understanding.
Ultimately, the goal of BI solutions is to bring value back to the business. Using such solutions should enable employees and decision makers to do their jobs better and smarter than ever before. To make sure the implementation is as painless as possible, companies and BI professionals must carefully consider new approaches and technologies. As the BI market continues to mature, expect more companies to consider alternative delivery models, including hosted solutions, to address their changing needs.
NOTES:
1. Gartner, "Emerging Technologies Will Marginalize IT’s Role in Business Intelligence," March 18, 2008.
2. Deloitte, "Deloitte Poll: Two Out of Five Executives Say Company Data Volume is Increasing in Size and Becoming Unmanageable," Aug. 4, 2008
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David Frankel is the vice president of business development at 1010data (http://www.1010data.com), a provider of hosted analytics solutions. You can reach the author at [email protected].