FOR THE MULTITUDE
A consolidating field of vendors is placing high hopes on Asia as a BI growth market. Are CFOs excited yet?
By Tom Leander

Business intelligence (BI) is getting a mixed reception in Asia.

For one view, talk to Rahul Gupta, the CFO of Shinsei Bank based in Tokyo. Living without is like “driving blind,” he says. “Few banks in Asia are doing this, and if we start now, we’ll be miles ahead.” He launched an Oracle BI implementation at Shinsei in mid-February.

Ajay Kumar Goel, head of finance at Infosys Tech, a division of the business process outsourcing company based in Bangalore, is less enthusiastic. Infosys runs SAP for its ERP applications, and Goel says that he’s “quite satisfied with SAP across all functions,” and does not need anything more than the German software vendor’s popular ERP products. He added that Infosys is “not planning on doing anything for the next 2-3 years” in BI.

The gap between these responses presents a challenge to the BI software vendors, a crowd that is thinner following a wave of mergers in the last 12 months. SAP acquired Business Objects for £4.8 billion (US$7 billion) in January this year. SAP’s arch-rival Oracle purchased BI vendor Hyperion last year, and Sun Microsystems recently agreed to pay US$1 billion for MySQL, a maker of open-source database software that competes with Oracle. The only major independent BI vendor left standing is U.S.-based SAS.

The acquisitions were inevitable in a fragmented and crowded industry and came amid complaints from CFOs and CIOs about standardization and flexibility problems. But there’s universal agreement among vendors that demand is increasing and that major players are consolidating to gain scale. IDC, the technology research group, reckons that the global demand for BI is US$15 billion, and expects BI sales to grow 9 percent to 12 percent a year. Demand may grow faster in Asia. Sharon Tan, IDC research analyst for Asia-Pacific, says that the BI market in the region, excluding Japan, is expected to reach US$469 million in 2008, on the back of a 13 percent annual growth rate. She estimates that the total market in Asia, ex-Japan, will reach US$600 million by 2011.

Talk to CFOs in Asia, and many say that they are only now considering investing in the software. They understand the advantages of BI, but many have gotten along well enough using only Excel. Despite its reputation as the industry’s Model T, the trusty spreadsheet program can still handle some of the functions of BI. Some CFOs even argue that spreadsheets offer better flexibility.

Evidence of this attitude—interest blended with skepticism—can be gleaned in India. A research paper published this month by Microsoft and CFO Asia Research Services, a sister organization of CFO Asia, revealed that some 87 percent of the 133 senior financial executive respondents planned either to invest in BI for the first time, or increase their investment in an existing BI platform. Yet questions about the ultimate value of such investments remained. In the survey, 49 percent of the CFOs said that their companies had exceeded their financial and operating targets in the last year, even though they did not use BI or related tools built on BI packages. For all its benefits, few see BI as a make-or-break proposition for their companies.

Flexibility Matters

A call for flexibility emerges when CFOs in Asia speak of their reluctance to abandon Excel. Enrico Nora, CFO of Singapore-based interTouch, a supplier of broadband connectivity services, argues that for planning purposes sophisticated packages like Hyperion can, counter-intuitively, end up being less flexible than Excel. “A company’s organizational setup changes potentially every year, so you need a system which is very flexible—in other words, spreadsheets.”

Nora adds, “More complex systems could be useful if your planning exercise is based on the analysis and simulation of a large number of transactions.” Logistics, insurance, and financial companies, he says, may find BI useful for this reason.

One situation where Excel may be preferable—at least for now—is when a CFO is comparing two structurally different scenarios, says Nora. For example, running the numbers on a 2008 budget with and without a prospective acquisition included in the data is simple when you can create separate spreadsheets. This would also be true for a profit-and-loss statement with and without a proposed outsourcing arrangement for a large function. Given the rising frequency of buyouts and outsourcing in Asia, the critique goes a long way in explaining CFO skepticism.

What CFOs seem to need is a more Asia-friendly version of BI, which was originally developed for the ‘mature’ corporate environments of Europe and North America, where companies are preoccupied with compliance.

Compliance is less of a priority for the small- to medium-sized enterprises that are driving demand in Asia, says IDC’s Tan. Such companies need tools to grapple with the problems of scale—sustaining margins as revenue grows. David Axson, president of the Sonax Group, a U.S. consulting firm, says that BI vendors may not have grasped the speed at which Asian companies are gaining in size and becoming multinationals.

Many of Asia’s businesses are seeking to engage in what Axson calls “dynamic forecasting” [rolling forecasts based on updated data]. He recalls meeting the finance team of an Indian shoe manufacturer late last year. “This is a business that hasn’t changed much in 50 years,” he says. “You would expect a 12 month, fixed annual budget, but this company is growing at such a rapid rate that it needs something far more dynamic.” He claims Indian companies in the manufacturing sectors are beginning to search for technologies that will help them assess when to move from one sourcing partner to another more quickly—a task that would, in theory, be greatly aided by BI.

What the Vendors Say

BI vendors seem keen to respond to the call for flexibility. Sebastien Marotte, vice president, enterprise performance management and business intelligence of Oracle, admits that CFOs now regard BI as a situation of “too many technologies in the house.” Less choice as a result of the current consolidation, he argues, will be a good thing. The remaining vendors will make the current hodge-podge of software packages more compatible and more flexible.

“We’re undergoing a democratization of business intelligence within the enterprise,” says Marotte. “At one time, BI only applied to the heads of units—to CFOs and CEOs,” he adds. “Now the demand is to drive the business with competitive information on the departmental level.” He says that the challenge for Oracle will be to create a BI platform “for the multitudes.”

Rebecca Norton, vice president, finance, APJ, for Business Objects, also believes that Asian companies are seeking better flexibility in BI products. “If you look at the way companies work today, it’s a matter of empowerment to the business,” she says. Technology is evolving toward the entrepreneurial user. “Lots of different people in the organization dictate how the data should be used,” Norton says.

This conforms to Gupta’s vision of what BI can do at Shinsei Bank, where he relates BI to the evolving role of the CFO. A more strategic CFO must, he says, oversee the process of “earning economic return on capital on all customer and product segments, and then linking that to bonuses.” This can only be done by getting the right information—and by allowing BI to reach all corners of the business.

Early this year, private-equity investor Christopher Flowers, who once ran financial services and investment banking for Goldman Sachs, invested US$1 billion in Shinsei. Establishing the right incentives to drive the business is thus very much on Gupta’s agenda. That he embraces BI as much more than a software add-on to ERP and CRM should be music to vendors’ ears. But whether they’re able to deliver the flexibility that Gupta and his colleagues envision remains to be seen.

Tom Leander is Editor-in-Chief of CFO Asia.