March 28, 2002

Smart Move

In the next year, analytic functionality will become the primary indicator of packaged enterprise application value

By Sharon Ward

What happened? Suddenly, the biggest thing in enterprise applications is "integrated analytics." Did all the large enterprise application vendors wake up one day and realize that, to business users, information stored inside tables deep within their applications isn't really information at all? Did the message that problems buried on page 163 of a 300-page report are not likely to get addressed sink in all at once? Did analytic technology make a sudden leap forward, enabling information to be presented more quickly, clearly, and usably? Or is this development just the latest skirmish in the battle for market share?

There's no simple answer. Rather, as I'll explain here, there's a little bit of truth to each view. I'll also explain why integrated analytics are now so much more important for enterprise applications customers, and why the ability to integrate and analyze external information is a key differentiator for enterprise software vendors.

A Quick History Lesson

Ever since their introduction, enterprise applications have frustrated end users by burying crucial information inside the pages of reports. Even when applications provide multiple options, with all the "slice 'em and dice 'em" information options users think they want, reports are still rather static. Whether reports are generated on a schedule or on the fly, users want to be confident that needed information can be gleaned from them, but unfortunately, that confidence is often lacking. Even so-called exception reports are often less than helpful; overdue orders reports are hardly what planners need to help set priorities.

These problems are serious enough, but even more trouble arises when the user tries to apply incomplete information in a report to the day-to-day activities of the job. For example, what if they want to know which customer orders are affected by each overdue shop order, or whether any of those orders are for key customers? What effect will changing priorities have on other key customers or key orders? How about on revenue? Unfortunately, finding the answers to those questions often requires additional research and reports — if they're available.

Thus, users keep asking for more and more reports, or more "user-friendly" report writers. However, report writers will never solve the problem: They lack the ability to draw inferences and present data in an easily understood and often previously unused format for the user who needs the information immediately to do his or her job.

Workflow and Standalone Analytics

Workflow applications, which are now nearly ubiquitous, attempt to solve the immediacy problem by constantly monitoring information and alerting users whenever certain parameters are breached. This approach certainly makes it easier to figure out that a problem exists, but workflow can only notify users when business rules are violated.

Some workflow applications can make rudimentary decisions about the corrective action to make, based on rules. But workflow does little or nothing to help determine the best possible course of action for maximizing revenue, customer satisfaction, or whatever the organization deems important in a particular instance. When no rules exist to cover the specific business case, users are once again required to research and run reports or to trust their gut instincts to make the correct decisions.

Fortunately, analytic technology has made great strides in providing useful information to unsophisticated users. As recently as one year ago, customers had to make trade-offs between power and usability when selecting analytic applications. In fact, at the time, Hurwitz Group research revealed that many users' biggest wish for analytic applications was an easier user interface.

In order to answer the types of questions I've referred to, business users either needed detailed knowledge about the application's data model or a close friend in IT willing to drop everything to help out. Data warehouses, while simpler for users to navigate than ever, usually couldn't provide the up-to-the-minute information users need. Then along came customer relationship management (CRM) applications.

CRM Leads the Way

CRM applications were initially divided into two camps: the analytic camp, including vendors such as E.piphany Inc., and the operational camp, which includes companies such as Siebel Systems Inc. and Clarify (since acquired by Nortel Networks and Amdocs Ltd. in succession). Operational applications, similar to enterprise resource planning (ERP) and supply chain management (SCM) systems, focused on transactional functions. Despite a gold mine of information about customers likes and dislikes, pure CRM operational applications still couldn't help users make good decisions quickly because they lacked integration with back-end systems and analytic applications.

Meanwhile, CRM analytics began to excite the imaginations of sales and marketing departments worldwide. Suddenly, marketing could predict which customers would respond to a particular offer and get feedback on responses quickly enough to tweak a campaign midstream. Sales could uncover previously hidden relationships among products and determine a customer's likelihood of buying seemingly unrelated products based on a little history and a smattering of demographic information.

"Special purpose" analytics focusing on sales and marketing concerns made it easier to provide canned or predefined queries that users could easily employ or tweak as necessary. The user interface issue was solved, but the fly in the ointment still was getting the transactional and demographic information together in the first place. As the competition for enterprise CRM dollars heated up, the line between the operational and analytic camps began to blur. Vendors quickly saw the wisdom of offering integrated analytics, tailored to specific users, along with their operational applications.

Enterprise Applications Join the Fray

At this point, SAP, PeopleSoft, and Oracle, the largest and most successful of the enterprise application vendors, had been competing for so long that their applications had effectively reached a state of functional parity. The big dollars weren't flowing to ERP applications, but to CRM, SCM, and other so-called point solutions. The Global 2000, the usual stomping ground for the application behemoths, was becoming saturated, and so the vendors began rounding out their own applications with broader functional footprints and eyeing the midmarket. The combination of these two forces caused the enterprise application vendors to realize almost in unison that integrated applications were the key to success in both cases.

Midmarket customers are well known for avoiding lengthy and time-consuming integration projects. This aversion is one of the key reasons that the best-of-breed approach, so beloved by consultants and vendors of niche applications, never enjoyed much success with small to medium businesses. The enterprise leaders embraced integration as a way of increasing their appeal to this newly important segment.

Pushing integration also served the larger vendors well as they worked to build up their applications to levels approximating the larger niche competitors, such as Siebel in CRM, Agile Software Inc. in product life-cycle management, or I2 Technologies Inc. in SCM. Initially, the enterprise vendors' offerings couldn't match the level of functionality offered by the point solutions, but integration soon became the competitive differentiator — the reason to buy from the ERP vendor instead of the leader in a particular specialty.

Analytics Evolve, Too

Meanwhile, analytics have evolved from complex general-purpose tools into full-blown specialty applications in their own right. Even some of the venerable general-purpose analytic tools from companies such as Applix Inc., Cognos Inc., and Business Objects SA have been trying to recast themselves with a CRM or SCM focus. Applications frequently come packaged with APIs or simple interfaces to the most widely installed enterprise applications, such as SAP or Oracle. Many now provide role-based portal or query screens to help users access information formatted especially to answer popular queries.

Special-purpose analytics. Some applications have evolved into special-purpose analysis tools designed for ease of use and simplifying pressing or common business problems, such as budgeting. An example of this type of application is Adaytum Inc.'s ePlanning, which has been well received by analysts and customers.

EPlanning simplifies the forecasting process and ensures that forecasts are in line with business plans. Collaborating over the Internet, field personnel can quickly and conveniently enter or update information, which is immediately and automatically rolled into forecasts by region, division, department, product, or just about any other parameter.

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