Business Intelligence Overview

Business Intelligence (BI) is one of the fastest growing Information Technology (IT) fields today. With globalization and highly competitive market, every company needs more information analysis than ever before. In this fast changing world where the economy varies each day with so many ups and downs, having the right information to make the right decision to meet market needs is a significant competitive factor.

With information technology, company can collect data from both inside as well as outside of the company, analyzes them to create information for management’s decision. For example, product sales data is collected and organized into “views”. Sales or marketing managers can view purchase orders by customer, by geographic region, by country, by market, and by date. From these information or views, they can make the right decision. If most customers who buy the product are young, managers can order more advertises in TV, magazines, newspapers that exclusively focus on young people to increase sales. If most customers came from a particular region or country than they can focus more advertises on that market. If a region has low sales, either they can increase the amount of advertises or shut down stores in that area to reduce costs. By having the right information, a company can reduce costs, increase revenues and maximize profits.

Today with high speed computers and large storage capacity, business intelligence tools can analyze and utilize data in such a way that allows manager to make quick decisions in almost “real time”. The most popular way to deliver this information to manager is a “dashboard”. A dashboard is a visual representation of the data, often in the form of charts, colored metrics, or tables. The common business intelligence dashboard is On-Line Analytical Processing (OLAP) or a method of providing multi-dimensional query capability to the managers. The dashboard allows management to “reorganize” the information to multiple levels to answer specific question. For example, a manager may change certain numbers or factors in a “business formula” to help him to make decision on sales. Based on existing market information, he may want to know what will happen if the sale price is reduced by 5%? Would the sale increases and give better profit? Or since many people like the product, should the price be increased to get more profit? The Business Intelligence tools collect external data, calculate these factors and let him know that if increase the price by 5% the company may lose 10% of the sale and have difficulty to compete because all competitors have lower prices. A 5% more would make about 10% of customers to change their minds. Or it will let him knows that by reduce the price by 5%, the company may be able to increase sales by 20% because one of the competitors has its product is selling at the same price but much more inferior and lower quality.

By colleting external market data, Business Intelligence tools will let managers know about the market trends of certain raw materials so they can buy more or stop purchasing when the market fluctuates so much. With business analytics tools, managers can make decision to raise price or reduce price accordingly that give them the best market position possible. For example when raw material price go below certain level, the company must buy more, store them for future use as the price may go up due to some future events. By collecting customers’ financial data, it can warn managers about certain customers that have exceeded their credit limit allowance or may not be able to pay due to their credit rating.

Before Business Intelligence and Information Technology, managers often made decisions based on their intuition or guesses. Sometime it worked, sometime not and business decision is mostly based on experiences, luck, and other personal factors. Today almost all important decisions are made based on facts and data using complex algorithms and high speed information systems that can process million of information in minutes. Of course, all of these data collection and analytics depend on the knowledge and skills of information technology workers who build these systems and the demand for these people is increasing fast all over the world.

Sources

  • Blogs of Prof. John Vu, Carnegie Mellon University