Advantages and disadvantages of Business Intelligence (BI) with relevance to business performance

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Table of contents
1. Introduction 3
1.1 Definition of Business Intelligence (BI) 3
1.2 Tools and features of Business Intelligence (BI) 3
2. Advantages and disadvantages of Business Intelligence (BI) with relevance to business performance 4
2.1 Advantages of Business Intelligence (BI) with relevance to business performance 4
2.1.1 Facilitate the reporting service 4
2.1.2 Budgeting 5
2.1.3 Forecasting 5
2.1.4 Monitoring business 5
2.2 Disadvantages of Business Intelligence (BI) with relevance to business performance 5
3. Concluding remarks 5
List of references 6

1. Introduction

1.1 Definition of Business Intelligence (BI)

Business Intelligence (BI) according to Larissa Terpeluk Moss and S. Atre (2003, p. 4) is neither a product nor a system, it is an architecture and a collection of integrated operational as well as decision-support applications databases that offer the business entities easy access to business data.

1.2 Tools and features of Business Intelligence (BI)

As the term Business Intelligence (BI) mainly refers to the collection of processes, technologies, and tools used to gather, store, access, and analyze data about a company, there are a number of useful tools that a company could approach to build up its Business Intelligence (BI) capabilities. According to Robert J. Thierauf (2001, p. 163) a mixture of Business Intelligence (BI) tools could include data warehouse, data mining, enterprise application integration (EAI), development tools, OLAP (On-line Analytical Processing), pure analytical applications and enterprise resource planning (ERP) and so on. With the provision of Pivot table, Cross Tabs, Custom calculations, Query Wizard Expertise, Layout Comments and analytical features like ranking, filtering, sorting, group and so on (maia-intelligence.com 2011), Business Intelligence (BI) is receiving an enhanced and increased popularity among the business entities and many industries. In the following we will analyze the advantages and disadvantages of Business Intelligence (BI) with relevance to business performance.

2. Advantages and disadvantages of Business Intelligence (BI) with relevance to business performance

2.1 Advantages of Business Intelligence (BI) with relevance to business performance

2.1.1 Facilitate the reporting service

As we just mention, Business Intelligence (BI) would help a company to collection a lot of different information and data to facilitate the business activities such as decision making, and therefore it is necessary to share these useful data with different users such as the CEO (chief executive officer), other senior managers, co-workers, business partners and even the customers and so on. A traditional challenge is to prepare different reports for different users since not all these users would need or could be allowed to get access to all the data because of their interest and relationship with the company. For example, the SQL Server 2000 Reporting Service which is Microsoft’s entry into the web-based reporting arena, the Reporting Services provides an environment for creating a number of different types of reports from a number of different data sources, and the reports are formed and refined using the authorizing tools. And the prepared reports are deployed to a Report Server which enables the reports to be available through the Internet in structured and safe conditions (Larson 2004, p. 4). In particular with the authorizing system, the sharing of Business Intelligence (BI) could be done in the third party reporting environment with much less cost since the systems have already been set up and ready to be used. In the following we will talk about the cost advantages of Business Intelligence (BI).

2.1.2 Facilitate budgeting

Budget is a quantitative plan of activities and programs expressed in term of the assets, equities, revenues, and expenses that will be involved in carrying out the plans, or other quantitative terms. It expresses the business goals in term of specific financial and operational objectives (Rasmussen, Goldy & Solli 2002, p. 253). One of the frequently used BI tools is the OLAP tool. OLAP tools enable users to interactively analyze multidimensional data from multiple perspectives. OLAP consists of three basic analytical operations: consolidation (roll-up), drill-down, and slicing and dicing (olapreport.com 2007). According to Murugan Anandarajan, Asokan Anandarajan and Cadambi A. Srinivasan (2004, p. 106), the use of OLAP tools not only could handle a high level of calculation thus reduce the massive data entry, they also facilitating the budgeting work of the accountants by offering continual month-to-month management accounts and give comprehensive control over costs. Hence, we can see that Business Intelligence (BI) also plays an important role in budget planning and budget control to enhance the business performance of the companies.
2.1.3 Facilitating forecasting

Another benefit of business intelligence to the business performance is its helping with the forecasting of the business. According to Rajiv Sabherwal and Irma Becerra-Fernandez (2011, p. 186), the forecasting components help with both operational and strategic decision making, for instance, the Time Series Forecasting tool integrates time series and econominetric techniques for modeling, forecasting, and simulating business processes. And the Forecast Server could help provide large amount of high quality forecasting which facilitate the efficient and effective business planning.

2.1.4 Facilitate the promotional efforts

As we know, though product quality is the major source of core competitiveness of many business, marketing efforts also play an important role in helping the companies to achieve better business performance by increasing the market share and up selling the company’s products and service. Business intelligence software allows firms to leverage customer data to build, refine and modify predictive models that help sales representatives to up-sell and cross-sell products at appropriate customer touch points (enterpriseappstoday.com 2011). For example, a lot of convenience store clerks, the story goes, noticed that men often bought beer at the same time they bought diapers. The store mined its receipts and proved the clerks’ observations correct. Therefore, some stores began stocking diapers next to the beer coolers, and sales skyrocketed (dba-oracle.com 2010). This story is generally considered as a best example that explains the benefits of cross selling. And now many researchers with a number of studies have shown that business intelligence software allows firms to leverage customer data to build, refine and modify predictive models that help sales representatives to up-sell and cross-sell products at appropriate customer touch points (enterpriseappstoday.com 2011). And the computer based business intelligence software could more easily help identify the positive and negative promotional effects by putting some products in a bundle which would be more effective and efficient because such data could more obviously show the relationship between different up selling products and such relationships may take years for the clerks to identify.

2.2 Disadvantages of Business Intelligence (BI) with relevance to business performance

Though with a number of advantages of Business Intelligence (BI), there are also some disadvantages that Business Intelligence (BI) may have caused for the companies which adopt such strategy. First of all, the building up of Business Intelligence (BI) systems could take a lot of costs in term of monetary expenses and human resource. For example, it is costly for small companies to buy or develop the relevant Business Intelligence (BI) tools and even they have the Business Intelligence (BI) tools in hand, the company needs to have the professionals for the training and maintaining purposes. Secondly, the use of Business Intelligence (BI) tools could also expose the company information to various risks. For example, as we have mentioned above, Intelligence (BI) could be done in the third party reporting environment and users with the related authorization could get access to the information that they are empowered to view. On one hand, the storing of the information in the computer server will increase the risks of being accessed by illegal users if there should be any defects of the software systems and on the other hand, even though the company could eliminate the chance of system loose holes and eliminate any illegal access, there is still risks that the important information would be accessed by others unauthorized users if they could get access to the computer or hard disk or pen drive of the users who have such legal access.

3. Concluding remarks

In a word there are advantages and disadvantages of using the business intelligence tool, but obviously that it is more advantageous for companies to consider whether they could use the business intelligence to strengthen the business performance because of the great advantages that we have discussed.

List of references

Anandarajan, M., Anandarajan, A., & Srinivasan, C. A. 2004, New York: Springer-Verlag Berlin Heidelberg, p. 106

dba-oracle.com 2010. All about beer and diapers. Viewed on 23 Jun 2012 [online] http://www.dba-oracle.com/oracle_tips_beer_diapers_data_warehouse.htm

enterpriseappstoday.com 2011. Business Intelligence Benefits. Viewed on 23 Jun 2012 [online] http://www.enterpriseappstoday.com/business-intelligence/ten-benefits-of-business-intelligence-software-1.html

Larson, B. 2004, Microsoft SQL Server 2000 Reporting Services. New York: McGraw Hill Professional. p. 4

Maia-intelligence.com 2011. Features of BI Software. Viewed on 23 Jun 2012 [online] http://www.maia-intelligence.com/articles/Top-Business-Intelligence-Features-and-Glossary-of-BI-Software.html

Moss, L. T. & Atre, S. 2003, Business Intelligence Roadmap: The Complete Project Lifecycle for Decision-Support Applications. Boston, MA: Pearson Educations, Inc. p. 4

olapreport.com 2007. OLAP market share analysis. Viewed on 23 Jun 2012 [online] http://www.olapreport.com/market.htm

Rasmussen, N., Goldy, P. S. & Solli, P. O. 2002, Financial Business Intelligence: Trends, Technology, Software Selection, and Implementation. New York: John Wiley and Sons, Inc. p. 253

Sabherwal, R. & Becerra-Fernandez, I. 2011, Business Intelligence. New Jersey: John Wiley & Sons, Inc. p. 186

Thierauf, R. J. 2001, Effective Business Intelligence Systems. Westport, CT: Greenwood Publishing Group, Inc. p. 163