BI moves to the cloud

Though a relative newcomer to the logistics and supply chain marketplace, business intelligence (BI) software is already making its presence felt. More and more logistics executives are starting to recognize BI's potential for helping them analyze their operations and identify opportunities to cut freight expenditures and warehousing costs. A full 21 percent of respondents to a November 2011 DC Velocity survey said they planned to buy business intelligence applications this year—a finding that's in line with recent trends, says Surya Mukherjee, an analyst with the research firm Ovum. "Supply chain analytics is an area that has seen a significant amount of activity over the last decade," Mukherjee says.

But traditional business intelligence applications may be priced outside the reach of small and medium-sized companies, according to one executive for an on-demand business intelligence software provider. "Traditional BI is very expensive," Steve Layne, chief operating officer for Trendset Information Systems, told the audience at the recent Supply Chain and Logistics Summit North America. "Sometimes, it's a seven-figure capital expenditure for the licensing, implementation, and operation of the software and infrastructure [such as computer hardware]."

On top of that, Layne contended, many traditional BI applications are slow to produce actionable information. All too often, logistics managers are forced to seek assistance from their company's IT specialists for the analysis portion of the project. In fact, it's not unusual to require a "query guru" familiar with computer code to ferret out the relevant information from a database. That's because—in the words of Layne—these applications "take large amounts of data to give you smaller amounts of data, not information."

Now, however, the advent of cloud-based business intelligence programs geared for logistics and supply chain operations is making these solutions available at lower costs. Logistics professionals can usually rent these solutions on a software-as-a-service (SaaS) basis, accessing their capabilities from an application hosted in the "cloud"—pardon the jargon—on the Internet. Some vendors in this area include Birst and E2open. Another vendor, FusionOps, provides business intelligence for companies that use SAP. (An early pioneer in this area, Oco, was acquired last year by the consulting firm Deloitte.)

Despite the emergence of SaaS solutions, companies aren't exactly tripping over one another to sign up for the services. Right now, 85 percent of the companies using business intelligence in the supply chain still use on-premise applications, according to analyst John Hagerty, who follows this market for Gartner Research.

There are a couple of reasons for that. One is that many of the traditional BI vendors—such as IBM, SAP's Business Objects, and Oracle—are simply better known in the marketplace.

Another factor holding back adoption of SaaS BI seems to be corporate concerns over information pilferage. Ovum analyst Mukherjee says that customer aversion to hosting confidential data on "public clouds" is hindering adoption of cloud-based solutions and it may take some time to dispel those fears.

Security concerns notwithstanding, the lower cost of cloud-based BI makes these types of solutions very attractive for logistics managers at smaller enterprises. And it's not just the price tag that makes SaaS BI appealing. Layne says that SaaS solutions allow logistics managers to do the analysis on their own. "By eliminating all of that scrambling around trying to prepare reports for managers higher up the food chain, they [logistics executives] can use true BI to help discover why a shipper's premium spend was up or why things were shipped out of the wrong DC," he says.

So, although the big vendors dominate the business intelligence market for now, that could soon change. "There's a fair amount of interest in SaaS or cloud-based BI," says Hagerty. "As companies try to push the gas pedal on analytics, they'll have to look at non-traditional ways, and cloud software is appropriate for this."