This is the fourth in a four-part series on cloud computing for business intelligence (BI) professionals.
Business intelligence in the Cloud is inevitable. In fact, it's already happening. Although Cloud BI hasn't slowed the growth of on-premises BI software, an increasing number of organizations are using Cloud-based BI services and many more are waiting until the time is right.
By Cloud BI, I primarily mean reports and dashboards that run in a multi-tenant, hosted environment and which users access via a Web browser. The reports and applications can be packaged (i.e., Software-as-a-Service or SaaS) or custom-built by the service provider or customer using Platform-as-a-Service (PaaS) or other tools. (See Part II of this series for more detailed explanations of SaaS and PaaS.)
Benefits. The Cloud offers numerous benefits for organizations that want to run reports and dashboards. There is no hardware and software to buy, install, tune, and upgrade. Consequently, there are no IT people to hire, pay, and manage. Applications upgrade automagically and can be scaled seamlessly. Customers pay a monthly subscription based on usage rather than an upfront licensing fee. Essentially, the Cloud speeds delivery and drives down costs. What's not to like?
Impediments. But there are concerns. One of the biggest impediments to Cloud BI today is security, or at least the perception that data in the Cloud is less secure than data housed in a corporate data center. In reality, data is actually safer in the Cloud than in many corporate data centers. The real issue is not security, it's "control." Executives today simply feel safer if their data is housed in a corporate data center. (Ironically, most companies have already outsourced sensitive data, like payroll and sales, to third party providers.) To be fair, some companies, especially those in financial services, must comply with regulations that currently require them to keep data on premise.
E-Commerce. Interestingly, many industry experts raised the same security bogeyman in regards to e-commerce. In the late 1990s, many experts said, "Consumers will never type their credit card number into a Web browser and ship it off to an unknown destination via the public internet because it could be stolen." Of course, we know how this story played out. In 2009, more than 154 million people in the U.S. bought something online, and online sales are growing four times faster than retail sales in general, according to Forrester Research. When it comes to security, convenience trumps fear, especially when fear isn't grounded in reality. The same appears to be happening with the Cloud.
The biggest challenge with running BI in the Cloud involves packaging custom BI development into a cost-effective, online service. By its nature, BI involves creating custom applications that integrate data from unique combinations of data sources. Cloud BI vendors are still figuring out how to deliver BI services without losing their shirts or turning into a custom development shop. (See Part III of this series.)
Finally, some Cloud BI vendors only deliver interactive reports and dashboards (e.g. SAP, Indicee, and GoodData), while only a few offer more in-depth analysis using on-line analytical processing (OLAP) (e.g., Birst) or pivot table functionality against big data (e.g, PivotLink). However, for most organizations getting started with BI, reporting and dashboarding functionality is more than sufficient to satisfy their information appetites.
Despite these obstacles, Cloud BI is gaining ground, according to a recent survey of BI Leadership Forum, a global network of BI Directors and other BI professionals. (See www.bileadership.com.) More than one-third of organizations are currently using the Cloud for some part of their BI program, according to the survey. (See figure 1.)
Organizations that have embraced the Cloud point to "speed of deployment" (30%) and "reduced maintenance" (30%), followed by "flexibility" (19%) and "cost" (11%). (See figure 2.)
Figure 2. Motivating Factors
Momentum. So far, Cloud BI users are happy campers. Almost two-thirds (65%) said they plan to increase their usage of Cloud BI in the next 12 months. Only 3% said they would decrease usage while another 16% will keep their implementation the same and 16% weren't sure. (See figure 3.)
Among respondents who are not using Cloud BI, 16% said they plan to implement Cloud BI in the next 12 months and 32% were not sure. So Cloud BI has momentum. However, it may take a five to 10 years for Cloud BI to reach the tipping point where it becomes a mainstream component of every BI program. Given Cloud BI's benefits, this trajectory is inevitable.
Small Companies Lead the Way
A closer look at the data confirms what many pundits have said about the target market for Cloud-BI software: that it's currently ideal for small companies with few IT resources, limited capital to spend on servers and software, and minimal to no BI expertise. Almost half of small companies under $100M in annual revenues (46%) use Cloud BI in some shape or form. In contrast, large companies with over $1B in annual revenues are almost less than half as likely to adopt the cloud (29%), while medium-sized companies with between $100M and $1B in annual revenues lag further behind with less than one-fifth using BI in the Cloud (18%). (See figure 4.)
Small Companies. For small businesses without legacy BI applications, Cloud BI services are a godsend. The economics and convenience are compelling. Instead of passing around spreadsheets, small companies can implement a Cloud BI service to standardize reports and dashboards and make them available to all employees anywhere via a Web browser.
"What's refreshing for me is that I can go in at any time of day and [run a] report on any metric in our organization, such as item received delivered, inspected at the category, personnel, or employee level and track it by any time period," says Wayne Deer, vice president of operations, at Gazelle, an electronics recycler, which uses GoodData's Cloud BI service.
Large Companies. Interestingly, large companies are the next most prevalent users of Cloud BI services. Often, it's a department head who wants to build a BI application quickly without getting corporate IT involved. Like small companies, departments at larger companies often have limited budgets and BI expertise and most don't want the headaches and expense of having to maintain servers and software.
But enterprise BI managers have assessed the potential of Cloud BI and like what they see. Unfortunately, many are hamstrung by legacy BI implementations. "I see us moving very slowly with adoption because of installed base and switching costs," wrote Darrell Piatt, Director and Chief Architect at a large professional services firm based in Virginia, in a BI Leadership Forum discussion thread. "When and if we decide to replace our BI infrastructure, Cloud BI offerings will be seriously considered."
Mid-size Companies. According to figure 2, medium-sized companies are least likely to adopt Cloud BI services. The reason is that most have already implemented an enterprise IT platform, usually Microsoft SQL Server, which bundles BI tools and applications for free. If the organization has assigned an analyst or IT administrator to build and maintain enterprise reports and dashboards using the platform, it likely has little bandwidth, incentive, or capital to change courses and introduce an alternative BI stack, unless it is having difficulty meeting user requirements.
Cloud BI Vendor Perspective
Given that they provide a service that makes them an extension of an organization's IT team, Cloud BI vendors have a good handle on who their customers are and what they are doing with their services.
For example, Sam Boonin, vice president of products and marketing at GoodData, says that his company's customers fall into three camps: 1) fast-growing technology companies that run all their applications in the Cloud, 2) departments in larger companies, many of which have implemented Salesforce.com and are comfortable with the SaaS model, and 3) SaaS vendors who OEM their product.
Boonin also said that 90% of GoodData's customers start by using one of its packaged applications, which generate reports against a single SaaS-based, front-office application, such as Salesforce.com, ZenDesk, and Google Analytics, or an on-premise package, such as Microsoft Dynamics CRM. (GoodData currently offers 20 packaged applications.) These applications, which deploy in hours, start at $1,000 a month and are often bundled into third party, SaaS products.
Many customers then extend their packaged SaaS BI application by customizing data models and adding other data sources. GoodData configures or customizes the application to the customer's specifications. The process takes roughly six weeks and typically raises the monthly subscription price to between $3,000 and $10,000 a month. "For companies used to spending $500,000 on BI and getting virtually nothing, they see us as a godsend," says Boonin.
Today, almost half (43%) of GoodData's customers generate reports that run against multiple applications. These customers generate the majority of GoodData's revenues. Currently, GoodData has about 100 direct customers and 3,000 indirect customers through OEMs. This is comparable to other pureplay Cloud BI vendors. "Business is good," says Boonin. "We have a $25 billion failed market to disrupt."
Some experts see dark clouds in the Cloud BI market. While ramp up of Cloud BI services hasn't been as fast as some anticipated, it's clearly catching on. The BI market poses unique challenges compared to other SaaS market segments that automate operational business processes. That's because BI applications are generally custom built and require companies to integrate data from multiple sources. Cloud BI vendors have taken different approaches to "servitize" a custom application, which is a logical contradiction. Not all have succeeded, but those still in the market are making headway. The value of Cloud computing is high, and the BI industry will eventually find a way to succeed with it.
Posted September 9, 2011 9:34 AM
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