Business Intelligence In Smes

DISSERTATION PAPER

Project Coordinator:

S. L. Dr. Ing. Cristian POPESCU

Student:

RADESCU Malina

Bucharest

2016

Business Intelligence in SMEs

Project Coordinator:

S. L. Dr. Ing. Cristian POPESCU

Student:

RADESCU Malina

Bucharest

2016

Abstract

The purpose of this paper is to analyze to which extent Romanian SMEs are using BI tools within the daily development of their professional activities. It explores the concepts of BI, its components, the emergence of BI, the benefits of BI, as well as the BI tools used by Romanian SMEs.

Figure 1 : Questions Business Intelligence helps finding the necessary answers 5

Figure 2: Layers of Business Intelligence 7

Figure 3: A Business Intelligence system in pictures 12

Figure 4: BI’s incorporation within levels of decision-making 17

Figure 5: Business Intelligence Users 18

Figure 6: Graph illustrating the use of BI at European level 23

Figure 7: Business Intelligence in Romanian SMEs 25

Figure 8: An ERP system 32

Figure 9: TPS Turnover 34

Figure 10: TPS Gross Profit 35

Introduction

This research paper focuses on the concept of Business Intelligence and its relations with SMEs.

It is structured in three main chapters, each one of them containing sub-chapters divided in such a way that they provide a better understanding of the concepts and ideas treated within the chapters. The first main chapter tries to provide the readers with a deeper understanding of Business Intelligence and the tools this one involves, by providing a short history since the introduction of BI terms. The second main chapter digs even deeper, by introducing and emphasizing the practice of using BI in companies, as well as in SMEs, which is the subject of interest of the following case study. The third main chapter, the most practical one of the paper, tries to analyze to which extent Romanian SMEs are familiarized with BI tools and seeks to find out whether these are using it. A specific company is being analyzed, TPS, a Romanian SME providing transfer pricing consulting services.The paper is further followed by conclusions and recommendations gathered while conducting the study, ending with a References chapter, which presents the research sources consulted when preparing this paper.

Throughout this paper, the concept of Business Intelligence is being explored, including its components, the benefits of using BI, factors influencing BI, technology requirements, the means of design and implementation of business intelligence and various BI techniques.

This paper has been designed as a literature review, summarizing existing knowledge of the topic, while at the same time providing the reader with a more detailed view of the subject in terms of its relevbancve ion the Romanian context. In this way, it contains a qualitative analysis, too.

Chapter 1: A theoretical approach

Definitions and Purpose of Business Intelligence (BI)

What is Business Intelligence?

The concept of Business Intelligence was initially used and explained in 1865 by Richard Millar Devens in the “Cyclopaedia of Commercial and Business Anecdotes”. There, Devens has illustrated it in an anecdonte, describing how the banker Sir Henry Furnese managed to gain profit by receiving and acting upon information about his professional environment. Nowadays, BI represents all tools and systems that allow a company to gather, store, access and analyze corporate data to aid in decision-making and strategic planning processes.

Across the years, several definitions have been given to BI, among which the most relevant, in the researcher’s opinion, are the following ones: „Business Intelligence is a set of methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information used to enable more effective strategic, tactical, and operational insights and decision-making.”, „Business intelligence is defined as getting the right information to the right people at the right time. The term encompasses all the capabilities required to turn data into intelligence that everyone in an organization can trust and use for more effective decision making.”, „Business intelligence (BI) is a concept which refers to a managerial philosophy and a tool that is used in order to help organisations to manage and refine information and to make more effective business decisions.”, or „Business Intelligence (BI) is a term that defines a set of informatics applications with economical background, used into companies to analyze data in order to transform them into information that will be the base of decisions taken by managers.”. These are of course not the only definitions given so far, but they are the most suitable ones for gathering enough information in order for the first-time reader to create an impression of the subject and its implications.

The purpose of Business Intelligence is to allow an easy interpretation of large volumes of data businesses are confronted with in their daily professional activitites. The identification of new development and investment opportunities, as well as the implementation of an effective strategy based on insights, can result in providing businesses with a highly competitive market advantage and a beneficial stability in the long run.

The technologies employed by Business Intelligence are providing old, current and predictive views of business operations, which allow decision-makers of businesses to get a full and clear idea of their business environment. Among common functions of business intelligence technologies, the following ones are worth being mentioned: reporting, online analytical processing, business analytics, data mining, process mining, complex event processing, business performance management, benchmarking, text mining, predictive analytics and prescriptive analytics.

Business Intelligence can be used as a support tool for a wide range of business decisions, from operational to strategic decisions. For example, basic operating decisions can be either product positioning or pricing, while strategic business decisions may involve priorities, goals and directions at the broadest level. In all situations and whichever decision might be concerned, Business Intelligence is acheiving its highest level of effectiveness when it combines data derived from the market in which the specific company operates (perceived as external data) with data from the company’s internal sources, such as financial and operational data (perceived as internal data). The combination of these external and internal data can provide a more detailed and complete picture which can create in effect an "intelligence" that cannot be derived by any singular set of data.

Based on its enormous potential, Business Intelligence has the ability of empowering organisations to gain insight into new markets, assess demand for and suitability of products and services for different market segments, as well as to measure the impact of marketing efforts.

Business Intelligence renders possible to possess a comprehensive knowledge of all the factors that influence and have a direct impact on the business. It is therefore compulsory that firms have an in-depth knowledge of factors such as the customers, competitors, business partners, economic environment, and internal operations to take effective and good-quality business decisions. It offers businesses the required conditions to take these kinds of decisions.

Business Intelligence offers the ability of answering questions such as: “”What happened?”, “What is happening?”, “Why did it happen?”, “What will happen?” etc. It helps the user better understand both the past and the future, while properly manage to forecast the future, in a more comprehensive, better argued and structured manner. The below figure is showing the way the answer to these questions are being provided.

Figure 1 : Questions Business Intelligence helps finding the necessary answers

According to Negash, Business Intelligence systems are combining sets of operational data with analytical tools in order to be able to present complex and competitive information to decision-making people within the company, in the intention of improving the timeliness and the quality of the decision-making process.

A Business Intelligence system could be best described as a set of tools, technologies and programmed products that are used to collect, integrate, aggregate and make data available, according to Koronios & Yeoh. They also consider that Business Intelligence systems provide actionable information delivered just in time, when decisions need to be taken.

Business Intelligence plays a crucial role in generating updated information for all levels of management decisions: operational, technical and strategic.

Business Intelligence appeared as a solution to business-related problemsin a more and more globalized world, where the number of businesses operators has diversified and increased enormously, making at the same time transactions and operations of greater importance and number. All these factors, to which we add new standards, innovation technologies and automation, have brought about vast amounts of data which need to be analysed by businesses within their daily activities. Here, business intelligence has arrived as “the master” of sifting through large amounts of data, gathering pertinent information, thus generating knowledge which will facilitate future actions to be taken by the businesses in question.

Business Intelligence implies that a large number of key pieces of knowledge from multiple sources are acquired and aggregated, with the objective of delivering valuable information to customers.

Business Intelligence is basically an umbrella term for all processes, methods and applications used to gather data, provide access to data to analyse and transform them into information to support decision-making processes.

Business Intelligence systems are most of the time confused with a specific "off the shelf" hardware and with a software solution that can easily be purchased by businesses, turned on and utilized to create business intelligence in order to facilitate the decision-making process. However, this is not accurate; therefore, a decomposition of Business Intelligence into layers is required, as can be seen in the figure below.

It can be easily noticed how the first layer on top is represented by the Presentation layer, which basically signifies the final product obtained prior to data analysis, consisting mostly of reports, graphs etc. The more profound layer is the data warehouse one, where basically all information is being processed and analysed, while at the bottom there is the source layer, different raw data storages.

Figure 2: Layers of Business Intelligence

However, reality shows that business intelligence systems are incorporating a vast collection of tools and techniques (as for example dozens of hardware solutions with expensive software). As long as business needs are determining the necessity for different components and the complexity for a Business Intelligence system, all these systems may require a minimum number of specific components, in order to be able to produce business intelligence. This topic will be treated to a larger extent in the next chapter.

The components of Business Intelligence

When referring to Business Intelligence you are implicitely referring to a large number of tools and software support services. This chapter will try to cathegorize the components of Business Intelligence into three most important categories, based on the functions of Business Intelligence. Therefore, among primary components of Business Intelligence, and by primary the researcher means the key components that are most commonly used by all business intelligence „systems”, the following are the most worth being specified. They are grouped under three main pillars:

Components that aid information and knowledge discovery:

OLAP (On-line analytical processing): computer processing that enables a user to extract and view data from different points of view, with ease and selectiveness. As an example, we can consider the situation in which an user can request that analysed data is displayed in a spreadsheet showing all of a company's Christmas decorations products sold in Romania in the month of December, comparing revenue figures with those for the same products in June, and then making a comparison with other product sales in Romania in the same period. In order to facilitate this type of analysis, OLAP data is stored in a multi-dimensional database. Whereas a relational database can be thought of as two-dimensional, a multi-dimensional database considers each data attribute (such as product, geographic sales region and time period) as a separate "dimension." The OLAP software can locate the intersection of dimensions (all products sold in the Western region above a certain price during a certain time period) and display them.

As OLAP provides multi-dimensional, summarized views of business data, it is used for reporting, analysis, modelling and planning for optimizing the business. Its techniques and tools can be used to work with data warehouses or data marts designed for sophisticated enterprise intelligence systems. There are as well other BI tools that are used to store and analyse data, as for example data mining and data warehouses; decision support systems and forecasting tools; knowledge management; mapping, management information systems, Trend Analysis etc.

Data Warehouse: The data warehouse is a significant component of Business Intelligence, being subject oriented and being of an integrated type. It provides support to the physical propagation of data by handling the numerous enterprise records for integration, cleansing, aggregation and query tasks. It can also include the operational data (an updateable set of integrated data used for wide tactical decision-making in a particular subject area), live data, not snapshots, while retaining minimal history. Data sources can be operational databases, historical data, external data, for example from market research companies or from the Internet), or information from the already existing data warehouse environment. The data sources can be relational databases or any other data structure that supports the line of business applications. They also can reside on many different platforms and can contain structured information, such as tables or spreadsheets, or unstructured information, such as plaintext files or pictures and other multimedia information.

A data mart represents a collection of subject areas organized for decision support based on the needs of a given department. For example, finance has their data mart, marketing and sales their own etc., each data mart having its own particularities and specificities. Very important to be mentioned is the fact that the individual departments own the hardware, software, data and programs that constitute the data mart, each one of them having its own interpretation of what a data mart should look like, each department's data mart being specific to its own needs.

Very similar to data warehouses, data marts contain operational data that help business experts to strategize based on analyses of past trends and experiences. The major difference is represented by the fact that the creation of a data mart is predicated on a specific, predefined need for a certain grouping and configuration of selected data. There can be multiple data marts within a company, since a data mart can support a particular business function/process/unit. Inmon describes a data mart as a collection of subject areas organized for decision support, based on the needs of a given department.

Advanced Analytics: this is referred to as data mining, forecasting or predictive analytics, taking advantage of statistical analysis techniques to predict or provide certainty measures on facts.

Data Sources: they can be operational databases, historical data, external data (as for example data gathered by research companies or data collected from the Internet), or information already available in the data warehouse environment. Data sources can be relational databases or other different types of data structure that supports the line of business applications. They can also inhabit different platforms, being able to contain structured information, as for example tables or spreadsheets, or unstructured information, as for example plaintext files, pictures and other multimedia information.

Components that analyse data and improve decision-making:

CPR (Corporate Performance Management): it can be perceived as a general category, which usually provides a container for several pieces to plug into so that the aggregate tells a story. For example, a balanced scorecard that displays portlets for financial metrics combined with say organizational learning and growth metrics.

Business Analytics: this component represents the process of studying the data using statistical and operations analysis. It is the methodical exploration of the data an organization possesses and needs to analyse, placing special emphasis on statistical analysis. Its definition could easily be summarized as the intersection between the data science and the business.

The success of Business Analytics is highly correlated with the quality of the analysed data, while their performance can contribute to the automatization and optimization of business processes.

Some examples of Business Analytics are as follows: data mining – used for exploring data in order to identify new patterns and relationships, statistical analysis – used to explain the cause of a specific result or predictive modelling/analytics – used to forecast future results.

Whereas at the beginning the concepts of Business Intelligence and Business Analytics were used as individual entities, nowadays they are used interchangeably, Business Analytics having been included by some vendors within the functionalities of Business Intelligence tools.

DSS: it can be defined as a computerized application in charge of analysing large amounts of business data, in order to further present them in a more appropriate manner which will allow users to make business decisions. It can also be presented as an interactive software-based system with the intention to help decision-makers succeed in managing to compile useful information from raw, unprocessed data, in the scope of taking business decisions and solving business problems.

A decision support system provides indeed help in the decision-making process, but it is not compulsory that its use leads to a decision itself. It remains in the responsibility of the decision-maker to analyse the results and to take the decision. Therefore, the decision-maker compiles useful information from raw data, documents, personal knowledge, and/or business models to identify and solve problems and make decisions.

Components for visualizing complex data relationships

Dashboard: a Business Intelligence Dashboard is part of the data visualization tools which help display the on-going status of metrics and key performance indicators for a specific business. Their use is quite diverse, as they can help with consolidating and arranging numbers, metrics and performance score cards, all illustrated on a single screen. A dashboard’s most essential feature would be the fact that it allows the illustration of several real-time data, from different sources, under a customizable interface.

However, dashboards should not be confused with performance scorecards, the main difference among the two being represented by the fact that Business Intelligence dashboards indicate the situation of an indicator at a specific moment of time, while performance scorecards illustrate the progress over a period of time of a specific indicator.

In addition, these two tools can be combined, the result being named „scoreboard”.

Visual Analytics: this approach represents, according to Thomas and Cook, „the science of analytical reasoning facilitated by interactive visual interfaces”.

The visual analytics approach uses advanced technologies of data visualizations in order to support data analysers and decision-makers in the identification of trends, patterns and inter-connections in the data they are processing.

The use of visual analytics is mostly deployed for the situation of a complex and large amount of data.

The above points have provided different definitions for some of the main components of Business Intelligence, with the aim of provding the reader with a deeper understanding of the concept and making him familiarized with their signification.

In our globalized business environment, Business Intelligence tools are most likely to be considered a middleware between transactional applications and decision support applications, while generating an important contribution to the efficient handling of business transactions from systems tailored to an efficient support of business decisions.

Figure 3: A Business Intelligence system in pictures

The above figure is trying to easily exemplify the functioning of Business Intelligence. A Business Intelligence system is in fact a combination of data warehousing and decision support systems.

The figure shows how data from disparate sources can be extracted and stored to be redeemed for analysis.

It also includes basic Business Intelligence functions and reporting. Among the primary activities we can mention gathering, preparing and analysing data. Data coming from various sources is collected, transformed, cleansed, loaded and stored in a warehouse. Then, accurate data is, for the case of each particular business area, extracted from the data warehouse and further worked on.

A Business Intelligence organization exploits data, at maximum capacity, and at every phase of the Business Intelligence architecture. Raw data is gathered from operational environments, while transactional data comes from every source of the enterprise.

This being said, the vision of a Business Intelligent Organization could be summarized into: “A natural flow of data, from genesis to action”. However, as data is fully exploited – in order to assure the increase of information value for the enterprise, the real struggle remains: building the organization’s vision.

The organization’s vision, nowadays, represents an indispensable element for being successful in business. Essentially „an image of the future”, the vision represents something that is not here yet, but which can be defined as the result of somebody’s imagination. The vision has a rather big importance for the employees of the company, for offering them the certainty that the organization is carrying out a relevant mission. It also actively generates a feeling of solidarity among employees, leading to unity and cohesion, helping the organization to be well perceived from outside.

The use of Business Intelligence

Pros and Cons to Business Intelligence use:

Pros to Business Intelligence use:

Providing organizations with the opportunity of taking well informed and structured business decisions – a real source of competitive advantages; used proactively, business intelligence effectively gathered by companies can helpfully contribute to the decision- making processes;

Contributing to improving the timeliness and quality of information, which are the two main factors that could help companies to successfully „predicting their future”;

Helping companies determine their possition in respect to competitors;

Making visible for companies which are their capabilities, the market conditions, future needs and required courses of action etc.;

Improving the company’s efficiency, by emphasizing more easily means for cost savings and idenifying new business opportunties;

Improving the accuracy and efficiency (by being able to access information on a faster basis) of the analyzed information and reducing the risk of taking decisions based on guesses;

Getting faster answers to highly important decisions and questions;

Allowing a faster and more efficient way of streamlining operations, by being able to observe with more easiness the insights of their business performance;

Allowing companies to use information gathered to quickly and constantly respond to changes, which can take place in either the competitive business environment or the internal business environment;

Getting a full overview of the past, current and future situation, more specifically, see where the business was, where it is and most importantly, where is it going;

Helping with the optimization of the product portfolio, depending on the speed of rotation and coverage of the stock;

Offering better control over what happens in the company, due to almost instant access to detailed reports on all internal operations of the business;

Helping to better understand the relation with clients, while at the same time offering a more solid position for negotiations with suppliers;

Providing full and easy access to data;

Cons to Business Intelligence use:

The increased costs for companies for purchasing Business Intelligence solutions;

Important investments in very expensive software licences;

Most of the time, purchasers have to deal with software providers, while at the same time being forced to purchase additional training or support packages for the Business Intelligence solutions they have chosen;

Since cost can be considered as a cons factor when referring to Business Intelligence for large companies, this subject becomes even more sensitive in the case of SMEs, for which financial resources are even more restrictive;

Not well-prepared employee handelling of Business Intelligence tools within the company can lead to the reverse result of success: failure;

Usually Business Intelligence applications for companies are difficult to deploy, mantain and administer,very ofter requiring too many tools and less personnel involved;

Could lower the workforce demand, as the technological processes could lower the number of persons employed within the processes, thus leading to unemployment.

After having analyzed the above pro and contra factors for Business Intelligence use within a company, it can easily be observed that the advantages highly exceed the disadvantages, which can only lead to the conclusion that Business Intelligence solutions for companies represent the optimized solution for the future. A solution which, if properly implemented, will for sure transform in a competitive advantage for its user.

1.5 Business Intelligence and the companies

Given the current competitive business environment in which, on a global level, companies are required to operate, maintaining direct contact with a large numbers of customers, a growing number of channel-oriented applications (as for example e-commerce support, call centre support etc.) is creating a new data management challenge: the effective way of integrating enterprise applications in real time.

In order to be able to be guided by the old quote: “learn from the past and forecast the future”, many companies are adopting Business Intelligence tools and systems. Businesses have understood the importance of enforcing achievements of the goals defined by their business strategies through Business Intelligence concepts.

Therefore, Business Intelligence solutions and companies (talking mostly about large volume companies) are strongly bound through a co-existence and interconnection. If companies hadn’t used it, Business Intelligence would not have to be talked about, and companies wouldn’t manage to achieve success to such a high rate as in the case of using Business Intelligence.

During the last period, a larger and larger number of companies have shown interest in investing their resources in Business Intelligence software, as these help them centralize, access with more easiness and get a better overview of business tools and operations. Therefore, companies have manifested an even more increased need to profit at the most of their resources and manage to turn large amounts of data into commercial opportunities.

Given the fact that how a business manages to take advantage of all its available information and resources represents a key factor for its success, Business Intelligence use has recently increased among corporations, which are using it mostly for reporting, planning, decision- making support and monitoring business activities.

The figure overleaf shows the way Business Intelligence is used within all three levels of decision -making within a company, starting from operational, continuing with tactical and finalizing with strategic issues, the most important and relevant ones.

In terms of the top strategic level, Business Intelligence provides performance metrics to management and executives. At this level, it is also called Performance Management.

Tactical Business Intelligence, also known as traditional/analytical intelligence in some industry research articles, represents the application of Business Intelligence tools with the aim of analysing business trends, comparing several metrics etc.

At the operational level, Business Intelligence provides information about the point of business – at the lowest level within the operational business (for example, a customer service representative, seeking information for a client throughout a large database containing historical information about that client).

Figure 4: BI’s incorporation within levels of decision-making

Even if nowadays Business Intelligence tools are starting to get more and more used by large-sized companies, the research about the topic is rather limited compared to its importance. Considering Business Intelligence’s implications within all levels of management (operational, technical and strategic), in order to properly manage to take advantage of its benefits, companies need to understand the importance of Business Intelligence.

After having observed the levels within a company which can directly interact with Business Intelligence, it is time for moving further to the users of it. As it most probably can be deducted from the above, all employees of a company using Business Intelligence tools can be users of Business Intelligence.

The researcher has structured the classification of users into four categories, as presented below:

Figure 5: Business Intelligence Users

Chapter 2: BI in SMEs

SMEs (or by the entire name small and medium-sized enterprises) are representing the great majority of all enterprises, at a worldwide level. As the researcher A van Stel was stating, “SMEs contribute to economic growth, job creation and innovation of a country”. Also, according to Van Gils, SMEs could be associated to the engines that contribute to the stimulation of the economic development of a country. Therefore, SMEs play a major role in terms of both social and economic development.

These aspects represent the motives that have influenced the researcher to focus the research on the impact that Business Intelligence has on SMEs, as well as on the proportion of SMEs using Business Intelligence.

As briefly treated in the above chapter, Business Intelligence can also represent a solution for SMEs, which most of the time are feeling threatened by huge powerful corporations which have access to a higher amount of financial resources that could be used to gain the benefit of Business Intelligence.

Therefore, within this chapter, the reasercher will try to make visible which is the situation of the SMEs and to which extent they manage to beneft from Business Intelligence solutions, firstly at a global level, then focusing the target on the market which will later represent the subject of the case study: the Romanian market.

Questions such as „Is Business Intelligence really a solution for SMEs?”, „Do SMEs have the capacity to afford the expensive costs of Business Intelligence tools?”, „Were Business Intelligence solutions developed for large scale companies, so therefore their use within SMEs is slightly perceived and deployed?” will try to be answered by the results of the conducted research. The statistics presented, describing the current situation, will be discussed and analyzed accordingly.

It is a fact that for most SMEs all aspects related to Business Intelligence and the support of management decision-making are perceived in various ways. The majority of the SMEs are run directly by their owners. This very often results in the situation that a performance analysis carried out for the company activities uses not such an elaborated Decision Support System, but mostly the ITC tools available in the company Thus,it is likely that for most of the situations, the performance in the managerial decision support is reduced.

However, although not universaly ackonwledged or scientifically proved, almost all entrepreneurs recognize that it is a necessity for the development of the business to adopt some ICT solutions which come as support to the decision-making processes, as well as to implement Business Intelligence tools. This will imply taking into consideration several aspects, such as the number of personnel prepared to handle these aspects at the operational level, and financial resources as well as, most importantly maybe, the budgetary constraints (the maximum amount of money one is willing to invest) of each particular company.

An additional important step for the SMEs in their „business intelligentification process” is represented by the opening of the Intranet network to the business environment, followed by the use of Extranet for any communication conduted with this business environment.

Additionally, both Internet and mobile technologies development have brought different support services for companies which help facilitating the global communication, making it more easy and accessible. This newly created virtual environment facilitates the modern business infrastructue, allowing SMEs to eliminate the obstacles of traditional infrastructure (which involved physical presence, a higher extent of travelling, time delays etc.).

Therefore, all the above-mentioned factors are encouraging the use of Business Intelligence tools within SMEs, while the more and more globalized and technologized business environment is driving them into the same direction. We will analyze which level this „business intelligentification” of SMEs has already been reached, first at a global level, then at the Romanian level.

In our days, a more and more desperate need to convert raw unprocessed data into intelligence and knowledge can be identified across different industries. Therefore, SMEs need to take advantage of this opportunity and use the benefits Business Intelligence is offering.

According to Nick Bell’s words, in an interview for Business Entrepreneur SA:

“SMEs cannot afford to be reactive because their competitors will step in and take control of the markets they play in. To improve competitiveness, they need to enable their people to make better quality decisions – that is what BI is all about. It makes a business predictive,

proactive and informed. BI deployments enforce revenue growth and foster competitive advantage”.

To sum up the above discussed points, it can be concluded that the need SMEs are facing – the one of using Business Intelligence solutions for the enhancement of their competitiveness – is a normal and completely necessary one in our nowadays business environment.

The use of Business intelligence in SMEs – an International overview

Speaking at a worldwide level, different countries, depending of course on different development indicators and conditions, are presenting differencies in the use of Business Intelligence for SMEs.

Global statistics are showing a rather high rate in the use of Business Intelligence in SMEs, especially in developed countries.

Due to unstructured infomation at a worldwide level regarding the use of Business Intelligence in SMEs, the researcher only managed to take into account the dates for the European continent.

Before presenting the figures, it is important to clarify the definition of a SME, for any confusion to be avoided. According to the European Comission’s definition a SME, „is having less than 250 persons employed, while having an annual turnover of up to EUR 50 million, or a balance sheet total of no more than EUR 43 million”.

Also, as this definition may not be recognized all over the world, having taken into account all SMEs operating on this globe could have distorted the results of this research paper.

Getting back to the dates, these are showing that at the European level (out of the current 22,346,729 European SMEs), only a percentage of 47% are using Business Intelligence solutions, the greatest majority being based in Western European countries (UK, France, Belgium, The Netherlands, and Germany).

SMEs represent an important employment source, while helping to promote innovation and economic growth also. They are basically the „core”, the „backbone” of a country’s economy.

The figure below is providing an overview of the proportion of companies using Business Intelligence solutions at European level, which makes it visible that the SMEs are slowly trying to acknowledge the benefits of Business Intelligence, trying to integrate them within their work.

Figure 6: Graph illustrating the use of BI at European level

Although the numbers have not always followed an increasing trend, given the fact that the cost is not really affordable for all companies, the accelerated rate of these developments and the increase in the number of Business Intelligence services providers, have caused a decrease in the prices of these aquisitions. However, this should not be understood that prices are not still high, but only that some decrease in their levels has been registered within the last few years.

These conditions have made it favourable and more accessible for SMEs to be able to enjoy the benefits of Business Intelligence solutions.

The question remains: why do SMEs need Business Intelligence, since the use of this technology has turned out to be complicated, time and money consuming, involving at the same time a lot of qualified IT employees, as well as a big IT equipment effort.

The answer is rather simple, as Business Intelligence, although indeed not easy to develop and implement within a small organization, provides huge advantages of understanding the business, together with better visibility and insights on data. While it helps convert data from all departments of the company into meaningful information, this can be extremely useful for managers, who are able now to take well and good informed decisions. Business Intelligence helps with providing quick insights into SMEs (and not only) in respect to what is working and what not, to see where and how to act in order to minimize any negative impact on a business.

Additionally, given SMEs’ low capacity to deal with impacts in a negative situation, Business Intelligence helps with predicting such impacts and therefore to avoid or at least mitigate them .

Considering also the lower capacities of an SME to take advantage of the implementation of Business Intelligence, its implementation within an SME should take place in phases, phases which will gradually follow a step-by-step procedure so that it does not come as a direct „bang” on the specific SME, impacting not only its operational structure but its budget also.

Each phase should consist of baby steps and with a careful coordination and supervision from all managing partners/directors, depending on the situation.

Following these steps risks will be reduced; mistakes will get the chance of being corrected in the inception phase, while all this will result in a more successful implementation.

BI in Romanian SMEs

Speaking now in more specific terms (concentrating the research on the Romanian business environment), the situation is slighlty different.

According to INSEE (Institutul National de Statistica), in 2015, only about 1/3 of the Romanian SMEs (registering in 2015 a total number of 426.295) were taking advantage of Business Intelligence solutions, while being capable of implementing these within their business activities and operations. However, this market is expected to grow by 10% in the current year (2016).

Figure 7: Business Intelligence in Romanian SMEs

As per the last study conducted by Relevance Management (Business Intelligence solutions – based on QlikView and QlikSense supplier) regarding the use and satisfaction towards the implementation of Business Intelligence solutions, this management instrument is not yet used on a large scale by Romanian SMEs. Almost two thirds (62%) of the interviewed respondents declared that within their companies , Business Intelligence solutions are not used. The other 38% replied positively, confirming that within their companies Business Intelligence solutions are being used, which demonstrates both the potential of the Romanian SMEs market for Business Intelligence supplier and the need for training business managers in accessing these solutions.

Despite being essential nowadays in the context of a globalized market with extremely high rates of competition, the processes of data collection, centralization, reporting, decision-making etc., Business Intelligence solutions are still little used in Romanian companies compared to developed economies.

It seems, however, that Romanian entrepreneurs are ackowledging the importance of a well developed IT infrasctructure, seeking to lead their businesses towards the Business Intelligence solutions use.

Romanian SMEs are mostly using, as „alternative” to Business Intelligence tools, if we could use this synonym, for monitoring their activity vis-à-vis the proposed objectives, Excel tools, financial reports, sales reports or periodical departmental reports.

However, when it comes to analysis and reporting, the main challenges Romanian SMEs are facing are as follows: huge data volume, the large consumption of human, financial, and time resources , the lack of predictability and incoherences within the decision-making process.

If we analyze the Romanian Business Intelligence environment, we can notice that Romania has not such a long Business culture, but this cannot only be perceived as a disadvantage, but as an opportunity as well. Since Business Intelligence solutions are not yet largely used by Romanian SMEs, this offers SMEs the opportunity of jumping over some basic steps and accessing the latest developed technologies at more affordable prices, which will result in an increasing competitiveness in the market.  

Also, considering the rapidity by which technologies are advancing, and how the supply increases, a decrease in prices can be expected.

However, the same as for the global level, the process of „installing” Business Intelligence in SMEs is quite a complicated and costly one, but this should not affect the implementation of Business Intelligence tools and services, as the benefits are largely exceeding the costs.

Additionally, according to a study conducted by the management consulting company McKinsey, the profitability of companies using Business Intelligence solutions is higher than that of non-using competitors operating in the same field.

Therefore, based on the above presented facts, we can conclude that the Romanian SMEs market is open to Business Intelligence solutions and judging by the results of the study conducted by Relevance, this increasing potential should not be neglected by providers of Business Intelligence solutions providers.

The demand exists, the need also exists, now the solutions need to be available, implicitely at affordable conditions, in order for Romanian SMEs to evelate the number of Business Intelligence solutions users.

The researcher strongly believes that the number of Business Intelligence solutions users among Romanian SMEs will increase, judged by both the potential of the market and by the level of information technology development.

Chapter 3: Case Study: TPS – Romanian SME and its position in relation with Business Intelligence

Founded in Romania in 2009, Solution Transfer Pricing (TPS) is an SME which today is among the best known independent consulting firms in Central and Eastern Europe, a status confirmed by recommendations from partners throughout Europe. The company employs 25 people.

In 2013, TPS has registred a turnover of 7,998 milion RON, data for 2014 not yet being available.

TPS’s partners appreciate innovative solutions primarily supplied by TPS for effective risk management and disputes relating to transfer pricing. Real partnership is established from the outset between the consultants and client, offering the customer the transfer of information and knowledge that is needed to understand how to implement solutions to minimize fiscal risks.

The company provides financial and accounting services to a large number of clients, at both national and international level, while aquisitions and extention of the company have not only took place in Romania.

The company’s growth has made the management of IT resources to be more complex. There was a need for an integrated management plan of IT resources, which should have been based on accurate and updated data and information.

The company has therefore contacted a Business Intelligence solutions provider, which would offer the company a tailored solution, according to their needs, a solution hosted by Romania Data Systems.

In the company’s opinion, Business Intelligence represents „to collect data, analyze them and understand the logic behind the information to obtain a competitive advantage.”

However, the passage from rather limited IT solutions and tools to the use of Business Intelligence within the activity of the company, must be made, in order to provide a rather smooth optimization of the business, with a perfect understanding of what happens in both internal and external environments, after having conducted a realistic analysis, using an immense amount of accurate information and data.

This was the approach took by the company in the process of „Business Intelligentification”.

By using Business Intelligence solutions, managers in charge of establishing each department’s storage have a clearer, relevant and real-time image of the organization’s data. This will lead to convincing and well funded business decisions.

The company’s world has been basically revolving around before the use of Business Intelligence tools. A complete new world has been developed for the company after the implementation of Business Intelligence solutions, as this has substantially facilitated both the work of the employees and the decision-making processes.

After having made an introductory note on TPS’s field of expertise and after having presented in a couple of words how the company uses Business Intelligence solutions, the results achieved by BI will be presented to the reader in the following section.

It has been structured into three parts in order to be able to provide the reader with a clear overview and a deep understanding of the company and the Business Intelligence solution it uses:

Part 1 – short history of the company before using Business Intelligence;

Part 2 – presentation of the software and of its benefits for the company;

Part 3 – development of the company after Business Intelligence.

After having read these parts, it will be more clearer for the reader how the process took place, how Business Intelligence has provided the company with benefits, as well as which was the impact brought about by the implemented Business Intelligence technologies.

1.The company before using Business Intelligence

As mentioned above, TPS was founded in 2009, so it has about 7 years of live by now, years out of which 5 have been lived without access to developed IT solutions, but mostly with basic IT infrastructure and services.

TPS’s most important competitiors within the Romanin market are bigger companies, compared to the size of TPS, as for example PWC, Deloitte, BDO or PKF. However, PKF has always managed to keep a strong position and face competititors with courage and high- quality expertise. The competition’s means and posibilities may have also influenced TPS to invest in the implementation of Business Intelligence services.

Most of the company’s work was being based on rather basic tools, such as for example Word, Power Point, Excel.

Employees would not actually say that these were not of good help in carrying out daily activities, but only that their rudimentary attributes were cumbersome and slowing down their activity.

Also, the large levels of data that were usually treated and worked on needed some place to be stored in a more efficient way, that would allow easy access and no further work on finding already available information.

Since TPS’s employees work involves important parts of research and data analysis, having the raw data available all over the place, did not actually represent an accelerator, but the opposite.

Several over time hours were being spent on different projects, a situation caused by the lack of advanced IT solutions which could have facilitated the employees’ work. Both reporting and decision-making processes were taking more time and sometimes needed double working efforts from both regular employees and managers.

The marketing department was also facing a difficult situation with the data and trends analysis.

Although the company was having a profitable situation, sustained by a good turnover and an increasing number of clients, it was apparently this last element that made the company owners focus towards Business Intelligence solutions.

The company wanted to get another competitive adavntage in the market against its competitors and the orientation to Business Intelligence was perceived as one way in achieving that purpose.

Also, it wanted to be able to streamline its processes and operations in such a way that will allow the company to get an even higher position in the market, among its powerfull competitors, almost all of them big corporations having far more financial investment posibilities than any SME in the market operating in the same sector.

The reason why the company did not appeal to Business Intelligence solutions before was given both by the very expensive prices of these ones, as well as by the rather precarious supply conditions which characterise the Romanian market.

2. What does the company use as Business Intelligence solutions and which are the real benefits?

Having acklowleged the benefits provided by Business Intelligence solutions, the company decided to implement them. Altough the costs were quite elevated compared to the SME’s ressources, the company took the final decision of proceeding with Business Intelligence. According to a cost-benefit analysis conducted by its managers in this respect, the investment implied by the implementation of the Business Intelligence solutions within the company was going to be, in the following 3 years, not only covered, but also profitable.

The implementation started, bringing into the company’s working environment a small business ERP software, allowing employees to access information with more rapidity and easiness.

An ERP (Enterprise Resource Planning) represents a business management software allowing organizations to use a system of integrated applications in order to manage the business propoerly.. It supports the automatization of several back office functions, as for example related to technology, services, finance, human resources etc.

On the other hand, a small business ERP represents almost the same thing as the ERP, having the specific feature of being designed in such a way to meet the needs of a small business.

Figure 8: An ERP system

All Business Intelligence implementation process required careful efforts and thoughts, as well as a constantly insurance that this was not treated as a basic IT Project. Supervising the design of the ERP was one of the key elements that turned it into a success story, since the product needed to be perfectly adapted to the needs and the operations of the company. Otherwise, it would have not qualified as a need fulfilment product.

Product development required a long term strategy, as changes it its structure couldn’t be made on a deep, but only superficial level. Therefore, although essential, Business Intelligence Implementation in this SME could at the very same time be extremely critical.

However, according to all employees, the system implementation turned out being a success for the company, bringing lots of benefits to all departments. Having all previous, current and future information in one place, which can easily be accessed with a couple of clicks, has largely facilitated the employees’ work.

Additionally, the company is taking this change as a competitive advantage, being way ahead of competitors which do not use Business Intelligence solutions and being rather close to large corporative competitors which have been using these solutions for a while now.

In conclusion, since Business Inteligence brings so many benefits to its users, TPS should be an example to other Romanian (and not only) SMEs willing to take the risks and go for the implementation of Business Intelligence.

3.The company after Business Intelligence

As specified above, the most beneficial aspect that resulted from the implementation of Business Intelligence solutions for TPS is represented by the competitive advantage the company has gained within the market.

Also, the system implemented has managed to make information more available and easily accessible to all employees of the company. Even if at the moment the data warehouse is not so huge, it will for sure be in the following years. Before any other revolutionary technologies will be discovered in this field, Business Intelligence remains for sure something any company, regardless its size, needs.

TPS is actively using the Business Intelligence solutions. Considering that Business Intelligence could be expressed as the art of gaining business advantage from data and given the fact that business decisions are as good as the information on which being based, it can be stated that TPS is going in the right direction.

In addition, real-time reporting and detailed accurate analysis based on information easily accessible are two more benefits Business Intelligence has brought to the company.

Managers can more easily and rapidly predicate any negative impact which may impact badly on the company, since being an SME implies a lower capability of sustaining losses.

The company has become more competitive, having gained a better capacity of managing its position within its business environment.

More efficient processes, an improved decision-making system, better access to information, better strategies are at the same time some additional new features that the implementation of the Business Intelligence system made TPS benefit of.

Figure 9: TPS Turnover

Figure 10: TPS Gross Profit

The above graphics are showing the evolution (in figures) that the company has experienced over the years. As the financial situation for 2015 is not yet closed, the tables are only expressing the situation of TPS between 2009 and 2014.

It can be observed, within the Turnover graph that for the year 2013, the company registered a slightly decrease, however this did not impact the gross profit, which is the indicator that counts. The explanation behind the Turnover decrease comes from the fact that the company delivered services during 2013 but did not invoiced (and received the payment for the invoices) within the same year.

The above figures may not exactly show the benefits that Business Intelligence brought to TPS, as unfortunately no more updated financial information is available. However, company’s representatives are confident with respect to the benefits caused by Business Intelligence.

Therefore, there are no relevant minuses generated by this entire “Business Inteligentification” process the company has endured. It seems that the investment made has generated good benefits.

Moreover, TPS’s future strategy with respect to Business Intelligence involves a permanent and dedicated involvement in the proper implementation of these services, while looking at the same time to extend its IT possibilities. In case the benefits will continue to rise at the same level, TPS will most probably continue investing in these tools, maybe even apply for a more diversified package.

Contributions and limitations of the research

In terms of contributions, these could be easily identified as:

In-depth research on Business Intelligence tools and SMEs on both theoretical and practical level, in order to make more information on the topic available as a basis for further research, and

Deep analysis of the SMEs situation and their relation to BI, on both European and Romanian level.

At the same time, the limitations would concern:

In terms of research facilities, there was rather limited information available in respect to the use of Business Intelligence in SMEs (as a result of the fact that Business Intelligence solutions are not yet used at a large extent);

The access to information in relation to the studied companies – as not many Romanian SMEs use Business Intelligence and since the concept is not yet very popular – there are some restrictions raised by the companies themselves, which turned out being quite restrictive speaking of information shared;

The conclusions and observations are rather personal assumptions than the results of an empirical study.

Conclusions

Given the current global Businesss environment, with a rapidly changing tendency, consumers are asking for more and more efficient services and solutions from businesses. A „natural” law within business environment says that in order to maintain competitiveness, you need to at least exceed consumers’ expectations. With respect to this, it comes as a natural conclusion to say that companies will have to invest more in Business Intelligence solutions, in order to be both more efficient and more competitive in the market.

Globally speaking, the tendancy is currently leaning towards a higher use of Business Intelligence within SMEs. However, futher and deeper research will be needed in order to be able to sustain the validity of this affirmation.

Given, however, the latest information that can be found online, in either news websites, statistical reports, research articles, suggests that the direction is the one oriented towards Business Intelligence use, the researcher’s conclusion would be the same.

Now narrowing down the focus to the Romanian business environment, it can be concluded that although Business Intelligence technologies have so far reached a certain level of maturity, they are quite far away from being used on a broad scale within Romanian SMEs.

The spread of the ERP systems within Romanian SMEs can currently be found in a rather incipient phase, although the supply available in the Romanian market for Business Solutions providers is rather large and diversified.

As a general conclusion, until another revolutionary set of tools and services for enterprises will be discovered and available for use, Business Intelligence clearly represents a solution most of the companies, not only SMEs, should implement.

In the situation of the SMEs, some constraints have been indeed identified, but the overall conclusion is that more SMEs should play the Business Intelligence card. Therefore, the introduction of Business Intelligence solutions is a must for SMEs which are fighting against stiff competition in the national and first of all international markets. This conclusion is as well valid for Romanian SMEs.

Additionally, in a good number of cases some additional external assistance may be required when introducing the BI technologies. Besides some financial support, non-financial support may as well be needed. The solution to this latter one can be found within the Recommendations section, where “BI Cluster” notions are introduced.

Recommendations

In continuation of conclusions and findings, the researcher is providing some recommandations, which will serve as an additional point for the more rapid developpment of Business Intelligence solutions within SMEs.

The recommandations support the creation of a „Business Intelligence Cluster”, whose basic idea would be gathering together as many SMEs as possible, in order to tackle a certain issue or problem together.

This means that the SMEs having the intention to introduce Business Intelligence technologies would get the opportunity of cooperating with each other, thus facilitating the otherwise more difficult process of introduction of these technologies.

The main benefit is that the needs of the entire group can best be satisfied by cluster activities and mutual support actions. At the same time, the participation in the cluster seeks to generate added value for the SMEs willing to implement Business Intelligence solutions, while helping other cluster members get access to lessons learned, which can be clearly shared among the members.

The clustering approach is quite popular in many countries when it comes down to the introduction and dissemination of innovative systems.

References

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Rud, Olivia. Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy. Hoboken, N.J: Wiley & Sons, 2009.

Jayanthi, Ranjan. Business intelligence: concepts, components, techniques and benefits. Journal of Theoretical and Applied Information Technology. 2005-2009.

John, Lloyd. Identifying Key Components of Business Intelligence Systems and Their Role in Managerial Decision making, University of Oregon, 2011.

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Olszak, C.M., & Ziemba, Business intelligence systems in the holistic infrastructure development supporting decision-making in organizations. Interdisciplinary Journal of Information, Knowledge and Management, 2006.

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