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By Michael Burns
Illustration: John Sapsford
BUSINESS INTELLIGENCE HAS BEEN AROUND FOR YEARS, BUT MANY ACCOUNTANTS DON'T EVEN KNOW WHAT IT IS OR THE POTENTIAL IT HOLDS
Business intelligence (BI) is not about the intelligence of the people gathering the information or analysing the results. It refers to turning data into information that is useful to make decisions.
There is a spectrum of BI solutions. On one end, there are management or production reports, which can be simple to generate. If the information is given on a timely basis and is exactly what is needed, you have BI. On the other end of the spectrum are interactive slicing and dicing tools often referred to as online analytical processing (OLAP).
Some OLAP users do not know what they are looking for — they are "data mining" — that is, looking for hidden treasure in the data that could be very valuable if only known.
OLAP involves extracting data, often lots of it, from multiple sources and putting it into a structure suitable for analysis and into what is called a data warehouse. Just as quality control is important for a distributor or manufacturer, it is vital the data in a data warehouse be cleansed of inconsistency or inaccuracy. As well, just as inventory in a typical warehouse needs to be picked and put on pallets for shipping, so does data need to be picked and placed in "cubes" for analysis by an OLAP tool. Creating these cubes is possible with tools from BI vendors or from such databases as Microsoft SQL Server. With an OLAP cube, you can interactively slice and dice the data across multiple dimensions and drill down for more detail either in a spreadsheet or graphic view of the data.
Many accountants consider Excel the BI tool of choice. However, Excel's flexibility is offset by concerns over accuracy, limitations and inefficiency. It is fairly easy to make a calculation error with Excel, and not know it. Excel will also start to sputter when you need to analyse significant amounts of data. Inefficiencies result from updating your Excel model for different time periods or for other changes. OLAP tools eliminate the problems of Excel. OLAP has been likened to Excel on steroids.
It is not enough that BI creates useful information — it must also be available to those that need it, when they need it. Some vendors have reworked their software to allow users to view reports or run OLAP over the Internet.
BI is everywhere. Any accounting or enterprise resource planning (ERP) system will have elements of BI. Some even include OLAP.
In the exhibit above, we provide a list of some of the BI tools available as well as their websites. We also spoke to
a number of the leading vendors or their partners for insights on BI.
In today's world of cutbacks, investments in new and hyped information technology do not happen as easily as it did a few years ago. Today's CFOs are demanding a return on investment (ROI) before making IT investments, unless there is no choice. For discretionary investments, ROI is appropriate. Too much money is spent on intangible reports.
Donald MacCormick, director of product communications for Crystal Decisions, says every report that is developed should have a tangible ROI. Carl Paluszkiewicz, director of consulting services for SAS Canada, sees three justifications for an investment — ROI, viability (you have no choice) and strategic. The strategic justification is difficult to measure, but the payback can be huge. The strategic justification leads to a discussion of the role of an accountant in an organization. In many organizations, accountants act as the score-keeper in controlling and reporting all financial transactions. OLAP can enable CAs to assist in achieving their organizations' strategic goals.
BI costs for simple production management reports can be low but will be much higher for OLAP analysis. OLAP will vary widely across products but be prepared to spend at least $2,000 to $3,000 per user to implement it, including licence fee, implementation and support. It takes about 10 times the effort to generate an OLAP cube compared to generating a management report.
The benefit of BI is primarily in better decision-making, but how do you measure such a benefit? One BI expert mentioned a client that changed his business model as a result of implementing OLAP. This client realized certain customers were not profitable and that an indirect sales channel would be more appropriate — the client was able to save significant dollars, which more than justified the OLAP investment.
However, you don't need OLAP to generate customer profitability; a simple management report should suffice. Measuring the costs of servicing a customer leads to activity-based costing, which complements BI. Activity-based costing is outside the scope of this article, but suffice it to say it is not easy to implement. For the record, activity-based costing measures the consumption of resources across business processes that span departments within an organization. For example, it could generate customer profitability reporting that included the costs to service the customer from all departments that are within an organization.
In another case, a company was able to save significant dollars by learning it was losing market share in the 905 area code rather than the 416 area code. While a simple management report could have generated sales by area code, BI also puts OLAP tools into the hands of the people who need the information and will spend the time to analyse the data across multiple dimensions.
Another benefit of BI is efficiency and time savings to generate useful information. This is easy to understand with management reports, which include options in summarization, sorting and filtering. OLAP has the potential of saving even more time. A typical OLAP analysis could have hundreds of views of the data, which would be very inefficient to generate with management reports.
The combinations of data dimensions, levels and measurements, cause hundreds of views. An OLAP cube will typically have at least four views or dimensions — who, what, where and when. Each dimension could have four to five levels. For example, the "when" view could have year, quarter, period, week and day, and the "where" view could be country, province, city and customer. And there are about four to five measurements for each dimension/level such as revenue and gross profit. All these dimensions, levels and measurements can be interchanged easily.
If you always want the same information, a management report will do nicely. But if what you need varies depending on the circumstances or if you first need to do a preliminary analysis, then OLAP should help in making better decisions.
Michael Langton, partner at Newcomp Solutions, which specializes in designing and implementing BI using Cognos, says that BI makes sense for companies with revenue greater than $25 million. SAS's Paluszkiewicz suggests a threshold of $50 million. MacCormick says OLAP makes sense for any company with dedicated finance people.
Most accountants for larger organizations in industry are familiar with OLAP; however, accountants in public practice are not. A few firms use OLAP internally. Although OLAP has the potential to give accountants a new revenue stream and provide their clients with a valuable service, it is not used on clients. It's not just lack of knowledge that prevents accountants from offering this service; it is also lack of technology. Working paper programs provide tools to import a customer's trial balance from many of the leading systems. OLAP vendors will have only limited integration with the leading accounting systems.
Another missing OLAP link for accountants is a source for industry standards or benchmarks that are integrated with BI.
Accountants should compare the metrics of their clients to industry standards. Unfortunately, at the time of writing, there was no good source for industry standards for small and medium-sized companies. The CICA's own benchmarking service caters to larger companies.
One day, public accountants will be slicing and dicing their way through clients' data, comparing it to benchmarks for the industry, region or size of company. Strategic decisions will depend on the analysis of the public accountant.
BI has the power to transform the accounting profession from its scorekeeper/referee reputation to becoming the star of the game.
Michael Burns, MBA, CA, is president of 180 Systems (www.180systems.com). He can be reached at 416-963-1296 or at mburns@180systems.com.
Technical Editor: Deryck Williams, CMC, FCA, partner at PKF Hill in Toronto. | 
