Diagonal Business Intelligence A new category Emerges 25 th May 2008 Source: DM Review

As pressure increases for businesses of all sizes to leverage business intelligence (BI) for competitive advantage, there is a demand for new types of solutions to address the variety of business needs. As a result, a paradigm shift is emerging that opens up new approaches to the delivery and customization of BI solutions. =

The evolving BI market Historically, BI software products have been divided into two categories: highly specialized vertical-market software packages, and industry-independent general software that spans horizontally across virtually all industries These choices for delivering solutions - either horizontally or vertically - are now giving way to a new, third approach: diagonal solutions, which address business-specific functions that are relevant to several industries. Each of these approaches to BI meets the needs of specific markets or applications, so it is important to examine the role of each solution and determine where it might best fit.

Historically, BI software products have been divided into two categories: highly specialized vertical-market software packages, and industry-independent general software that spans horizontally across virtually all industries

These choices for delivering solutions - either horizontally or vertically - are now giving way to a new, third approach: diagonal solutions, which address business-specific functions that are relevant to several industries. Each of these approaches to BI meets the needs of specific markets or applications, so it is important to examine the role of each solution and determine where it might best fit.

The old world approach What’s your industry? Pick your BI Tool!

For example, a BI solution typically required the development of a data warehouse using an RDBMS, and on top of that, applications were developed using BI tools and SQL. This thick layer of application development adds substantially to the cost of any solution developed this way, and makes the deployment cycle long and the risk of project failure quite high.

It’s not the just the license cost, it is the resources that cost a lot too!

BI – It’s worth taking a relook The software industry is responding to business needs to add high value through specialization, and also to lower the risk of extensive, customized application layers. However, basic economics require the business of creating and delivering these software solutions to be organized differently. Consider instead software solutions specialized around common business functions. Quite different businesses often share common functions. If common business functional areas can be identified that have high added value, and also appear across enough industries for a larger marketplace, then those functional areas can be targeted for software development. They will be able to command a higher price point than commoditized horizontal market software yet still be sold in substantial numbers.

The software industry is responding to business needs to add high value through specialization, and also to lower the risk of extensive, customized application layers. However, basic economics require the business of creating and delivering these software solutions to be organized differently.

Consider instead software solutions specialized around common business functions. Quite different businesses often share common functions. If common business functional areas can be identified that have high added value, and also appear across enough industries for a larger marketplace, then those functional areas can be targeted for software development. They will be able to command a higher price point than commoditized horizontal market software yet still be sold in substantial numbers.

Case-in-Point: Transportation Logistics As an example, consider transportation logistics, which includes applications to help companies manage the use of trucking services. Many industries ship goods or equipment by truck, and optimizing the costs of shipping should be a first step in controlling business overhead. In the food segment of the consumer packaged goods industry, shipping costs can be as much as eight to nine percent of total annual revenues.

As an example, consider transportation logistics, which includes applications to help companies manage the use of trucking services. Many industries ship goods or equipment by truck, and optimizing the costs of shipping should be a first step in controlling business overhead. In the food segment of the consumer packaged goods industry, shipping costs can be as much as eight to nine percent of total annual revenues.

The applications across industry is not so distinct

Diagonal BI Apps- Case-in-Point Examples of diagonal BI applications also include sales, margin, and inventory analysis (see Figure). These solutions allow businesses to understand the costs they have based on the inventory they hold and their profit margins on products. A classic analysis that this type of solution allows is the ability to adjust inventory appropriately for high-margin products that are selling well.

Examples of diagonal BI applications also include sales, margin, and inventory analysis (see Figure). These solutions allow businesses to understand the costs they have based on the inventory they hold and their profit margins on products. A classic analysis that this type of solution allows is the ability to adjust inventory appropriately for high-margin products that are selling well.

The big BI Switch!

Democratizing BI across business This SaaS and diagonal BI economy of scale is of particular importance to smaller businesses. While large businesses might be able to achieve good utilization of their data warehouse systems and attendant staff internally, smaller and midsized businesses can’t typically achieve this on their own. However, with diagonal BI applications, smaller and midsized companies can benefit from the cost structure created from a SaaS multitenant deployment, which can achieve the same economies of scale that a large business can. As the marketplace of SaaS providers of diagonal solutions matures, these applications will be available to smaller businesses on a cost-competitive basis.

This SaaS and diagonal BI economy of scale is of particular importance to smaller businesses. While large businesses might be able to achieve good utilization of their data warehouse systems and attendant staff internally, smaller and midsized businesses can’t typically achieve this on their own. However, with diagonal BI applications, smaller and midsized companies can benefit from the cost structure created from a SaaS multitenant deployment, which can achieve the same economies of scale that a large business can. As the marketplace of SaaS providers of diagonal solutions matures, these applications will be available to smaller businesses on a cost-competitive basis.

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