Tuesday, April 1, 2008

Evolution of On-Demand BI

So I have been seeing a lot of the “On-Demand Business Intelligence” marketing term being tossed around. Just to validate the infectious nature of the term, right or wrong, try doing a quick Google search on the phrase “On Demand BI”. For me it returned 9,120 results in less then 0.27 seconds. When I looked at the top 50 results, they ranged from written articles to software vendors to some topics inappropriate for the DIG blog space. (As a side note, I think I found a new feature for Google to add, or I have missed it. I would like to be able to go to the end of the search results. I was curious to see what was at the bottom of the list).

So I filtered out the software vendors, since the purpose of my search wasn’t to evaluate the technologies available, although it is something I would like to do in a future post. Instead, I wanted to see what the “experts” were saying about business intelligence on-demand.

The first observation is that less then 15% of the results were from the past year. I can conclude that one of three things occurred. One, the marketing dollars are starting to dry up and there is only so much that can be spent on certain buzz words. Second, the industry has moved on to a different set of marketing terms that will help create hype cycles along with fear, uncertainty and doubt. Or third, and what can only be the real reason in the drop of web content over the past 12 months, we have finally arrived. BI on demand is a reality and there is no reason to discuss it anymore (insert sarcasm here).

So what is “on demand BI”? Simply put, it is hosted business intelligence solutions or “Software as a Service”, SaaS for short. The most successful and well-known SaaS vendor is Salesforce.com and their AppExchange platform.

The first question I asked myself was “So what are the benefits of on-demand business intelligence”? I started back to the earliest Google results I could find from 2006. Here are some of the highlights that I found in different articles selected at random.

In a Computer World posting back in October of 2006, Jerri Ledford made the following points on the topic:

“…it's business intelligence when and where you need it, without all of the difficulties of building the solution yourself, or hosting it yourself, or even maintaining it yourself.”

“on-demand BI is gaining ground, because it's appealing to smaller companies that can't afford to invest in a full-blown BI solution”

“…the benefits become clear (usually). For example, on-demand BI usually means you have the answers to your BI questions when you need them (and where you need them) without having to devote an entire army of IT professionals to pulling those answers from mountains of data.”

Another posting on TechLink by Amit Kesarwani in December 2006 had this to say:

“On-Demand BI provides much more benefits than operational Software as a Service due to the complexity and high cost of BI systems. On-Demand BI providers can easily offer economies of scale and shared cost using multi-tenant architecture but without jeopardizing security”

Mr. Kesarwani goes on to compare “Traditional BI Deployments” to “On-Demand BI Deployments”. Here are a couple of the comparison points.

Traditional BI Deployments: Complex to use and deploy, Expensive Customization, Long Project Life Cycle, Lack BI best practices, High Risk”

Usability for On-Demand BI Deployments: Easy to use and deploy, Low Cost Customization, Rapid time to market, Provides best practices, Low Risk”

And finally, this post from Darren Cunningham on the SuccessForce Community Blog:

“I think the renewed focus on simplicity in the BI market is accelerating the shift from on-premise to on-demand solutions and this will ultimately help drive greater end-user adoption and improve organizational decision making.”

So, let’s jump ahead to some more recent postings in 2007 and 2008. The first was from a research report by the Aberdeen Group on what is driving BI user adoption. Here are a couple of the highlights:

“This benchmark study finds that organizations falling into the ‘Best-in-Class’ category are addressing the skill set shortage by establishing training programs, contracting with 3rd party consultants and solution providers, or implementing On-Demand options such as hosted BI, SaaS (Software as a Service), and BI appliances.”

And finally, I found the following on CIO.com. This article was posted 4 days ago!

“The oft-cited concerns regarding on-demand and SaaS applications (integration, customization, security) typically don't emanate from the business side of an organization. Typically, they come from IT groups already under intense pressure from project backlogs and a lean number of staffers, who most likely don't have BI development skills.”

“With easy-to-install on-demand applications, IT's role as gatekeeper is minimized, say analysts. By 2012, Gartner's Schlegel predicts that emerging technologies such as on-demand and SaaS BI tools will make users ‘less dependent on central IT departments to meet their BI requirements.’”

“One major sticking point for IT usually involves the security of corporate data as it moves outside of IT's control. But executives and analysts say that the potential business benefits of quicker access to BI data, coupled with the robustness of third-party providers' security mechanisms, may outweigh concerns.”

So what can we glean from these articles? What are some common themes? What has changed over the course of three years?

There are some pretty big promises being made with a lot of the positive rhetoric. Promises like fast deployments, higher user adoption and elimination of your IT organization. Okay, I made that last one up but I was just checking to see if you were paying attention. If you peel away the SaaS vision and happy talk, there are some key themes that should be takeaways, for both on-demand and on-premise BI deployments.

First, user adoption is a significant issue for BI applications. So what is driving low user adoption? The issue that continues to bubble to the top is complexity of the tools. Does SaaS solve this problem? Possibly, but BI systems still comprise of complex tools to answer complex questions. The advantage of SaaS is the total cost of ownership will be significantly less, since the per user license cost is lower and if you only have a handful of people actually using it, then you would hope you only pay for those users. This will be much cheaper then predicting you will have 1000 users for on on-premise solution and paying all of those users before you have the software installed.

Second, the simple and easy deployments seem to popup consistently. I do agree that removing the complexity of hardware and software procurement will reduce some upfront angst, but do we really think that the primary reasons why BI applications go amuck (i.e. poor data, inconsistent agreement to business requirements to name a few) will magically disappear? I am not a pessimist by nature, but instead a realist. These issues need to be address no matter how you physically deploy your BI solutions.

Finally, security of data is a consistent concern associated with hosting a BI application. It was pointed out in 2006 and 2008 and I will predict it will be a concern in 2012. That being said, how many organizations have had data compromised when it was behind their own firewalls? Maybe it will be safer if someone else takes care of it for you.

So who should consider on-demand BI? The quick answer is everyone. It is a viable approach and a majority of the software industry is moving to SaaS architectures. But to be more specific, I would say there are three considerations when selecting the type of BI deployment. The first is the size of your organization. Smaller organizations that currently have no BI solution and the economics make more sense should consider an on-demand deployment. For those firms that have limited business intelligence skills in IT, should also consider BI SaaS. Finding talented BI skills has been a lingering issue for years. And finally, consideration should be made on the security of your data being hosted externally to your organization. As I said earlier, it may be more secure when you don’t host it!

To read some additional thoughts beyond my rants, check out Timo Elliot's BI blog posting on the topic.

What are you thoughts? Are you using or considering on-demand BI? If so, what made your deployment successful versus an on-premise deployment (assuming it was successful)?


bob i said...

I haven't implemented or used "on-demand BI," but I'd also speculate that it is inherently less customizable / more vanilla than an on-premise solution, so another consideration might be the extent to which your analytic requirements are a standard "commodity" set or if you want to do anything "unique." My guess is, the more interesting the analysis you want, the less appropriate on-demand BI becomes. Does that sound right, Pete?

Peter Graham said...

Bob - what you are saying makes sense. In a world where you have nothing, anything becomes valuable as a starting point. If an organization currently provides zero value and can get up and running quickly on a SaaS BI deployment, it can only be a win and add value. Check out these two articles about Casual Male. The first article from CIO.com (http://www.cio.com/article/206551) is about BI on-demand and the second article from DM Review (http://www.dmreview.com/specialreports/2008_70/10001013-1.html?ET=dmreview:e368:1074701a:&st=email) is a bit broader on the results that they have experienced.

One point I will make is I found that a majority of the articles referred to “easy” customization. My guess is that the interpretation of easy is minimal. It's like describing a house as "cozy", which translates to small.

Keith H said...

Take a look at Barnaby Donlon’s piece in DM Review, "The
Strategy-Focused IT Organization, Part I" (http://www.dmreview.com/issues/20070601/1085920-1.html) and consider the quoted CIO.com article. Since I interact with IT organizations frequently, one of the first things I do is place them in one of the “Evolutionary Stages of IT Organizations”. I think that IT shops that are in the “I. Defensive” or “II. Reactive” stages would surely respond as a “gatekeeper” for the reasons mentioned. However, I feel as though the IT org that is either “III. Responsive” or “IV. Strategy Focused” probably sees the business value of SaaS and On-Demand BI because they know their house is already in order (projects are under control, budgets are driven by go to market and competitive advantage) and they have the time and means to adequately assess the security an outsourcing partner.

The solutions available today are probably targeted at the overworked and out-of-control Defensive and Reactive IT shops, but they probably work much better for those in the Responsive and Strategy Focused stages. So am I crazy or does it seem On-Demand BI is ironically out of reach for those who could benefit from it most?

As an aside, the blogger asks about seeing the 9120th result in his search but he’ll have to wait until Google actually returns more than 1000 results.

Darren Cunningham said...

A thoughtful post on a topic that I see getting more attention this year, not less. After lots of initial hype, now it’s up to the vendors to showcase real customer success in terms of ROI and TCO, overall adoption, and business improvement.
What we've found at LucidEra is that when you're delivering focused analytic applications to specific roles and industries you’re able to concentrate on the specific best practice metrics that people should be tracking and analyzing in order to compete effectively in a difficult economy. I think this is the real opportunity for the SaaS model in the BI market. Instead of spending 90% of a sales cycle talking about a data warehouse and analytics are going to be implemented and by whom, you're actually able to quickly show business decision makers their own data in ways that they didn't think possible.
As for customization, unless the SaaS vendor is selling a BI tool, instead of an analytic application, I think you'll find that the term configuration is more commonly used. And don't forget that a key benefit of the SaaS model is that the burden of upgrades is on the vendor. That's something the BI market has never experienced!
It's definitely early days for business analytics as a service, but stay tuned for innovation from the more agile, newer vendors who are building applications and platforms from the ground up to be delivered on demand. While the traditional BI vendors integrate and struggle with the subscription business model, these vendors will need to prove that they can deliver business value to people who have never had access to relevant and actionable information.

Peter Graham said...

Darren - welcome to the discussion. And I agree, the SaaS space for BI is certainly not going away. I was being a bit tongue and cheek when I made that statement.

I was hoping to attract some more customer success stories with the post and also some failures. My opinion is that we can all learn from the failures of the past.

The vertical approach that you have described at LucidEra is one that seems to be highly effective. Bringing a focused BI application that provides 80-90% of an industry problem within an attractive economic model will help grow adoption quickly. It seems to have worked in the on-premise space with vendors like Spotfire.

Thanks for the clarification on the customization and distinguishing between a BI platform versus an analytic application. All signs point towards customization being difficult or limited, so it is good clarify. My point in my original post was that the industry articles were not being that clear in my opinion, stating that customization was “easy”.

The upgrades and uptime are both points that should be promoted more aggressively. This is something that in an on-premise BI deployment are some of the biggest headaches. Keeping up with software patches and major/minor releases can cause stability issues and end user frustration, along with IT pulling their hair out as they are pounded with requests to move to the latest version.

And your last point about agility of the upstart vendors is one that I wanted to mention in my original post but did not. I believe it is a fair point and you see it in all technology areas. Let's hope some of the key players in the SaaS BI space are successful and hold out as long as possible before they are gobbled up by a large vendor in the space and crush the innovation that is happening in these upstarts.

On Demand BI said...

The word customization seems a variable from vendor to vendor among the on demand bi products. But one can't avoid these solutions as the flexibility it gives in terms of upgrades, licensing, implementations etc.

Obviously these terms along with the price tags gonna differ from vendors to vendors. The success depends on selecting the right vendor and solution for your saas bi quest who can show truthfulness to words flexibility, customization and affordability.