Business intelligence (BI) is an umbrella term referring to a variety of software applications used in analyzing an organisation’s raw data. As a discipline, business intelligence is made up of a number of related activities including online analytical processing, data mining, querying and reporting.
Forrester Research defines business intelligence in two ways. According to them, broadly defined, business intelligence is a set of processes, methodologies, technologies and architectures which transform raw data into useful and meaningful information used to enable more operational, tactical, effective and strategic insights in decision making. It includes information management technologies such as data integration, data warehousing, text and content analytics and master data management. In the narrower sense, business intelligence just refers to the top layers of business intelligence architectural stack like analytics, reporting and dashboards.
The phrase business intelligence was first used in 1865 by Richard Millar Devens in The Cyclopedia of Commercial and Business Anecdote. Devens used the term in reference to how Sir Henry Furnese, a banker, made profits by gaining and acting on information before his competitors. He would receive all information that could have a bearing on his business from a wide geographical area including Holland, Flanders, France and Germany. He received news of most battles fought. As a result of having prior information and acting on it, the Fall of Namur led to increased profits for him. The ability to collect information and act on it in the interest of one’s business as Furnese did is even today at the very heart of business intelligence.
Business intelligence as it is understood today evolved from decision support systems that began in the 1960s and developed up to the 1980s. They originated from the computer aided models that were created to help with decision making and planning. It is from the decision support systems that data warehouses, OLAP, executive information systems and business intelligence came into focus.
Business intelligence is made up of several components including:
- Version control and process management
- Key performance indicators and optimization
- Open item management
- Multidimensional aggregation and allocation
- Group consolidation, budgeting and rolling forecasts
- Denormalisation, tagging and standardization
- Statistical inference and probabilistic simulation
- Real-time reporting with analytical alerts
A wide range of business intelligence has helped firms to rack up impressive return on capital figures. It has been used in identification of cost cutting ideas, roll ERP data into accessible reports, uncover business opportunities, react quickly to retail demands and optimize profits.
In addition to making data accessible, business intelligence software can help companies in strategic business negotiations by enabling them to quantify the value of relationships with suppliers and customers.
An organization can save a lot of money by simply optimizing business processes and focusing decisions. Below is a summary of applications of business intelligence in business organisations:
- Enterprise reporting
- Knowledge management