IT Struggles to Show BI Value

Use of tools grows, but execs still seek hard ROI numbers

LAS VEGAS -- Though business intelligence has become a lifeblood application in many companies, IT executives say they must continue to prove its worth to top management.

For example, Lowe’s Companies Inc. CIO Steve Stone noted that the retailer has been using BI tools for years to identify fraudulent returns, manage its supply chain and monitor corporate performance. Yet Stone said he is still asked by top executives for a specific return on his BI investment.

At the same time, BI has become so critical to Lowe’s that the home improvement retailer is building a new data center in San Antonio, in large part to back up its Teradata data warehouse and BI applications from McLean, Va.-based MicroStrategy Inc., he said.

“In the end, you’re likely to be faced with some form of ‘proof’ question,” Stone said during a keynote presentation at the MicroStrategy World 2007 user conference held here last week. And, he noted, “definitive proof is hard to come by.”

For example, several years ago, Lowe’s used its data warehouse and BI tools to help solve a problem with collecting fees for delivering products to customers. Payments for deliveries increased by $30 million in the year after the company first started using the tools to find out which stores weren’t collecting the fees, Stone said. “This is an example of what BI is adding to the bottom line,” he said.

Still, the CEO at the time asked Stone whether he could definitively link the bump in collections to the use of BI. “There is no silver bullet, [but] if you continue to deliver value, the funding always seems to inch its way back to your budget,” Stone said.

Lowe’s has several new BI projects under way, including one to identify fraudulently returned products. Stone said these initiatives all demonstrate the value that BI brings to the company.

Lowe’s has also started using BI technology to track 50million items in its 1,400 retail stores against billions of transactional records to plan inventory levels and analyze the effectiveness of the 4,000 to 6,000 quantity-discount programs Lowe’s has in place at any one time, Stone said.

Overall, the company uses the BI tools to create 170,000 reports per week for internal users and for personnel at almost 1,000 of its suppliers, he said.

Paul Wolters, technology manager of BI at Kansas City, Mo.-based Hallmark Cards Inc., said the company uses MicroStrategy analytic tools for several critical applications, including one that provides data for automatically replenishing stock in its 460 stores.

Still, Wolters and his team must continue “prospecting” to highlight the value of BI to corporate managers, he said. Prospecting, Wolters said, means dispatching internal BI specialists to all areas of the business to proactively identify pain points in employee processes and come up with BI-based solutions to the problems.

“If I can come up with a solution that helps [an employee] understand where his pain is and what he can do about it, that is powerful,” he said. “We try to use that as a marketing tool internally.”

Even with those efforts, Wolters said he still has to prove the benefits of BI to his CIO and even to other IT employees. “We have spent a lot of time evangelizing BI to the IT folks,” he said. “They still are in the mind-set that BI is just reporting.”

Ted Bross, associate director of administrative information services at Princeton University, said that though he knows that the university’s Cognos BI tools have made life easier and better for users, he can’t easily quantify those benefits for university officials.

“We would like to think that in time, we will be able to demonstrate the value of BI to our university executives, but we’re not there yet,” Bross said. “Positive feedback from faculty and staff make us feel like we are on the right track.”

Proving BI’s tangible value has not been a problem for all companies, however.

For example, after Corporate Express Inc. started using MicroStrategy’s BI tools, it was able to cut costs by eliminating 31 jobs that were dedicated to running Microsoft Access BI reports, said Matt Schwartz, director of business analysis at the Broomfield, Colo.-based office supply company.

Corporate Express also uses MicroStrategy data mining tools to predict potential customer turnover, and this year it will start using BI to provide customers with online access to reports detailing how much they spend with the company.

Schwartz noted that the lack of that capability in the past prompted one client, financial services firm BB&T Corp., to jump ship to a Corporate Express competitor. Therefore, he said, adding the capability “was a very easy sell to our CEO.”

Copyright © 2007 IDG Communications, Inc.

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