Business intelligence (BI) tools are hardly new to small and medium-sized businesses (SMBs). However, SMBs do seem to be going after more sophisticated BI. And experts have familiar caveats for SMBs looking for a BI makeover.
United Pipe & Supply Co., a $147 million wholesale distributor in Portland, Ore., needed a user-friendly and relatively inexpensive way for employees to gauge the health of their inventory and obtain ad hoc analytics on everything from sales growth to cost per unit. CIO Mike Green decided the company should cut its BI baby teeth on browser-based software from Santa Clara, Calif.-based FileMaker Inc.
"For many managers, it was their first foray into using BI and analytics," Green said. "It was as easy to learn as Excel. Now our people are more self-sufficient with analytical capabilities."
BI baby steps have been the key to Green's success. He said the small start allowed his department to build a bigger BI and justify investment in more sophisticated and powerful technology. He has since implemented Cary, N.C.-based SAS Institute Inc.'s Activity-Based Management tool and products from Stamford, Conn.-based OutlookSoft Corp.
"We started small and made inexpensive mistakes -- now we have scores of applications delivering real value," Green said. "The low-key, casual approach really helped us."
David Loshin, president of consulting firm Knowledge Integrity Inc. in Silver Spring, Md., also said small is a big idea. "Think small, start small, get the benefits, then expand," he said.
The good, the bad, the BI tools boom
Starting small isn't such a tall order these days. Gone are the days when one needed wads of cash and a big staff to build a BI program. Loshin credits downloadable open source tools and the inclusion of BI capabilities into mainstream productivity suites for making BI more available to the masses.
But there's been another BI boom going on at the same time. Big vendors such as Ottawa, Ontario-based Cognos Inc. and Business Objects S.A. in Levallois-Perret Cedex, France, are now trying to woo SMBs.
It's a blessing and a curse, according to Boris Evelson, an analyst at Forrester Research Inc. in Cambridge, Mass. "There are more choices, but the selection process is much more complex," he said in an email to SearchSMB.com. SMBs might have more than 100 vendors to choose from, Evelson said -- about 10 times the number that large enterprises have.
All vendors great and small see SMBs' need for better BI. Globalization and the complex business-to-business relationships and competition that come with it mean SMBs are looking for more sophisticated tools to give them an edge. "A simple set of reports from QuickBooks is no longer enough," Evelson said.
With such an overwhelming set of choices, what should an SMB CIO or IT manager keep in mind before embarking on a BI adventure?
- Think about business objectives. Loshin suggests educating representatives from the business side about the benefits of BI tools beforehand. "Cool dashboards and such might be interesting to business people, but if they can't do anything with them, there's no point."
- Get the business people involved. Evelson recommends forming a data governance organization sponsored by a C-level business executive that gets feedback from all major divisions and departments.
"Make sure that the data governance organization gets its arms around creating a common corporate data dictionary with clear and agreed-upon definitions of key performance metrics and indicators," Evelson said. "Establish a long-term BI strategy, identify the logical BI processes, architectures and resources required to fulfill that vision, and divide the strategy into manageable tactical phases." He added that only after that has been done should one look at BI tools and technologies.
- Think small. Green said the evolutionary process has been key to the success of his BI initiative. "Crawl, walk, then run," he said. "As the organization gets more sophisticated, you can upgrade, but you can get pretty far with these [less expensive] tools."
- Don't rule out "big." Evelson cautions SMBs against small BI vendors and their seductive whispers of simple and inexpensive. Smaller isn't always wiser.
"A $20,000 dashboard product will still take as much effort, resources and complexity to source, cleanse and integrate the data as a $200,000 fully functional, enterprise level BI tool," he said.
It's best to keep in mind the total economic impact of any BI tool before taking the less expensive route.
- Don't forget the future. Evelson also suggested making sure that a BI vendor will continue to customize its prepackaged tools and offer other growth options. Green's business is growing 15% to 20% annually. "We decided we needed to invest in a BI tool that will carry us for the next decade," he said.
A well-executed BI initiative can really pay off for SMBs. It can make the organization think more strategically. And that can mean more effective management.
"SMBs can be more nimble with a proactive, performance-oriented management style that better positions them for growth and competitiveness," Loshin said. He added that SMBs are in a better position than many large enterprises to take advantage of BI.
"The big firms can be compartmentalized, [but] SMB people know each other," he said. "SMBs have a better chance to exploit discovered knowledge rapidly."
Ed Parry is a freelance writer based in Nashville, Tenn. Let us know what you think about this tip; email email@example.com.