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Challenges and Benefits of Business Analytics in Midsized Companies

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IBM recently published an article regarding midsize business and their growing interest in – and need for — business intelligence.  A recent survey of IT managers in midsize companies, conducted by Slashdot, identified the key challenges and incentives midsize businesses face around business analytics and intelligence.  Some of the key findings are identified here.  For complete survey results, visit the following website by clicking here.

Business Analytics has given large companies an edge for years. It helps them be more competitive, make information-based decisions faster and better, improves operational efficiencies, and boosts the bottom line.  Until now, the use of sophisticated analytics by smaller businesses has been limited:  many lack the staff to deploy, customize, or use analytics; for others, the entry price of business intelligence tools and necessary infrastructure was too costly.   Now, a convergence of several important long-term trends has made business analytics (BA) and Business intelligence (BI) critical to the success and survival of midsize organizations.  These include:

•  Customer and market volatility. A combination of lingering tough economic conditions and increased competition makes today’s customers more price-sensitive and less brand-loyal. In years past, midsize businesses could plan for seasonal peaks and identify long–‐term trends. Now, social media can instantly alter market and sales projections. A celebrity making a casual mention of a product or service on Twitter or Facebook can instantly – and unexpectedly — drive up demand; bad reviews on social media sites can quickly send buyers to a competitor. Organizations using data that is weeks (or even hours) old might miss these trends. To be of value, analysis must be completed within the useful lifetime of the data.
•  Rapidly growing volume and variety of data:  Compounding these challenges is the enormous and ever-expanding amount of data that must be quickly, effectively, and securely managed – a costly and time-consuming challenge for a business of any size.  In today’s environment, more sources of data are needed to accurately spot, chart, and evaluate market changes and trends.  Aggregating such data into a BA effort can require great resources. Doing so improperly can easily introduce errors that jeopardize corporate security and regulatory compliance.

 Few midsize companies have had the resources to tackle what they fear might be an involved and expensive undertaking.  Key considerations include:

•  Cost:  More than one-third of respondents cite cost as the biggest concern in adopting BA.  Economic conditions have put many IT projects on hold.  Many companies are extending the life of installed solutions just to avoid capital expenditures.
•  Staffing: Fifteen percent of respondents say they simply do not have the in-house expertise to implement BA.  Adding staff with BA skill sets would incur additional employee expense, including salary, benefits, and other costs.
•  Complexity:  Another 14 percent find BA systems too complex. Huge amounts of IT time cannot be dedicated to managing any project, since much of the staff’s time is needed just to keep basic operations running. Here again, bringing in a complex solution, which many perceive BA to be, would consume valuable IT resources needed elsewhere.
•  Duration:  Twelve percent also feel that BA solutions take too long to deploy.  Companies do not have the staffing to invest in an implementation they fear could take months to yield results.
•  Data:  Four percent say they are overwhelmed with the large amount of raw data needed to get useful results from BA.

So what is the number one BA capability that midsized businesses expressed interest in achieving?

•  Reporting and analysis tops the list of capabilities (30 percent) that midsized businesses desire in a BA solution. Business units, managers, and company executives in midsize businesses need help understanding the data that exists in the organization to spot trends, note changes by comparing current to past records, and show rising or declining demand for products and services.
•  Scorecarding capabilities garnered less interest. In contrast to reports and dashboards, which usually present BA results, scorecards compare results to metrics, a higher level of functionality. For businesses new to BA, capabilities that are more basic might be seen as sufficient to get started.
•  Almost 22 percent want budgeting, planning, and forecasting that goes beyond straight analysis, summarizing information and identifying trends. As noted above, these capabilities in particular help midsize businesses react to changing market conditions – a key competitive advantage.
•  Another 17 percent of respondents want Predictive analytics. In contrast to straight analysis, which looks at historical trends and projects into the future based on these trends, predictive analytics tries to anticipate changes based on additional information.

 What do midsized businesses want most from a business analytics solution?

•  A quarter of the respondents say that the top reason for using BA is getting “faster time to insight”. In today’s marketplace, intelligent decisions must be made quickly.  The first business to spot a market change or new opportunity enjoys great advantage.
•  Closely related: identifying new revenue-generating opportunities. Rolling out a new service or product or seizing an opportunity as it arises requires justification.  BA is frequently used to help make the case to go after new business opportunities.
•  Many companies also recognize the potentially powerful role that BA can play in retaining customers. One way to keep existing customers is to deliver good service.  BA can play a key role here, according to 19 percent of respondents, because it can help identify relationship-threatening problems, like reasons for product returns before they become serious.
•  Another key goal: improving business planning was mentioned by 18 percent of the respondents. Unquestionably rooted in the widespread need to increase business certainty, improved planning also benefits another important objective: reducing business risk.

Which Department would benefit most from the use of business analytics?

•  Operations is seen as the biggest potential gainer, by nearly 30 percent of respondents. Applying the additional rigor of BA gives Ops managers information to make smarter decisions. Better understanding individual worker or group productivity, for example, could lead to more effective allocation of budget and headcount.
•  Sales and Marketing can certainly benefit from BA as well, nearly 20 percent of respondents say. BA identifies sales trends, provides metrics to measure growth or loss, and quantifies customer-buying patterns. All these things can be used to make smarter decisions on inventory, ad spending, and resource usage.

 IT leaders from midsize companies genuine interest in business analytics is tempered by concerns over cost. Many expect challenges undertaking a BA effort. Most concerns, however, are offset by what they see as potential benefits in multiple areas across their businesses. Faster time-to-insight, improved operations, the ability to take advantage of new revenue generating opportunities, and better customer service are seen as compelling reasons for adopting a BA strategy.

FYI Solutions has a thirty-year history of successful business intelligence and business analytics solutions for our clients.  For more information about a business analytics strategy tailored for your business, contact FYI Solutions.

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