What is Business Intelligence?

business intelligenceThe term “Business Intelligence” encompasses a range of tools, software applications, infrastructure and best practices that allow companies to access and analyze raw data for developing effective business strategies. Tools may include data visualization software, reporting applications, database queries and specialized services. Business intelligence reduces speculation and enables companies to make informed decision based on actual business trends.

Due in part to the declining cost of storage hardware, many businesses can now collect and store massive amounts of data. From consumer banking and purchasing transactions to inventory control records, businesses today collect more data at a finer granularity than ever before. Many businesses are awash in data that can provide highly valuable information for maximizing opportunities and minimizing risk. However, this data must be organized in such a way that the user can quickly visualize trends and discern significant changes.

Practical Applications of Business Intelligence

Over the past 20 years, several business intelligence services and applications have emerged that provide decision support to knowledge workers, including C-level executives, managers and analysts. Most successful enterprises invest a significant amount of capital in business intelligence applications and strategic services. Banks and financial institutions may utilize business intelligence software and services to track patterns of fraud and potential theft. Manufacturing businesses may use business intelligence applications to create a dynamic inventory system where products are automatically ordered when the stock level is low. Business Intelligence is implemented in the health care industry to analyze outcomes, and telecommunications companies may use business intelligence to determine why they have high rates of customer turnover.

You may have even experienced the effects of business intelligence at your local grocery store. When you receive targeted coupons at the grocery checkout, you have just witnessed a business intelligence service in action. Grocery stores often use customer profiling, a form of business intelligence, to determine which coupons might appeal to specific individuals.

Business Intelligence Tools

Rudimentary tools of business intelligence include spreadsheets, graphs and SQL queries. For years, businesses have utilized these tools to make sense out of the data they collect. However, several specialized applications now make business intelligence easier than ever before, even for the disengaged CEO.

Data utilized for business intelligence generally flows from several incongruent sources. For example, several departments within the company may contribute data to business intelligence analysis. Data may also originate from external vendors and even competitors. The first objective in business intelligence is to standardize all pertinent data and to store the clean data in one location. The process of cleansing and loading the data is referred to as Extract-Transform-Load, or “ETL.” The data is then loaded into a repository known as a data warehouse. Data warehouse servers store “big data” in raw form, which can then be sorted and analyzed by mid-level OLAP servers to provide multidimensional views of the data. Applications that perform these tasks are known as Complex Event Processing, or CEP, engines.

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Specialized end user applications, such as IBM’s Cognos performance management tools, utilize the clean data to enable analysts and management to drill down into granular levels and make business decisions in near real time. With such applications, decision makers can propose scenarios to explore the effects of changes in the business model and discover new and innovative ways to increase profits. Business intelligence in some form is almost a necessity for companies of all sizes to remain competitive in the marketplace.