Why IT departments are outsourcing data warehousing

IT departments get blamed for underperforming business intelligence systems. Outsourcing BI puts the issue firmly back in the hands of the line of business and how they use the technology.

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Business intelligence technology is currently notorious for not living up to expectations. This is generally not the IT department’s fault as problems are less about implementation and more about usage by the business.

However, business managers will often ask IT to justify its choice of a complex system and throw a barrage of user complaints at the IT director about this system being difficult to use.

Users will retreat to the safety of Excel spreadsheets to store their customer data and IT will find that a substantial amount of its budget is being spent on collecting and storing data that is gathering dust.

With the economic downturn taking hold and renewed pressure on IT to support the business in its drive to understand its customers, outsourcing to experts is seriously worth considering; when profit margins are squeezed, business intelligence solutions have to deliver or the business will be on the wrong track and headed for the scrap heap.

There is always a need for data analytics, whether times are good or bad, but during the good times companies can get away with a cursory look at customer profiles, and even if understanding is based on sample data or older data, the business will still survive.

During the economic boom, consumers didn’t analyse whether they were buying the cheapest or the best, they just wanted convenience.

A scattergun approach of blanket email marketing to prospective customers ensured that companies made enough sales, for if they sent out enough emails, at least some of them would arrive in the right place at the right time.

The companies that did best were those that worked out what their customers needed, when they needed it and how to convince them to buy immediately. Yet while there was more than enough money to go around, even those with the poorest customer service could keep making a profit.

Sadly for these businesses, in tougher times companies need to know who their best customers are, as well as how to persuade them to buy and stop them defecting to a competitor’s product or service. Suddenly there is a renewed interest in using data the company has collected to its full potential.

However, with smaller budgets and CRM project failures still a fresh memory, IT departments can’t risk spending any more on data warehousing and analytics - which is when the dreaded ‘O’ word starts being used.

With many IT projects outsourcing means losing control and having to manage the performance of a third party which, despite SLAs, is often more of a headache than ensuring an internal team delivers results to the business. SLAs often mean that while the outsourced service is delivering within the terms of the contract, it is still not necessarily meeting users’ needs.

With analytics the proof of the pudding is in the eating. Does your business want to know who your biggest spenders are and what time of day they are most likely to buy or use your service?

Outsourced analytics can provide the answer in seconds, the user doesn’t have to learn how to use complex technology and the IT department doesn’t need to spend months building a data warehouse, maintaining it on a continual basis and supporting the users. Companies can pay for whatever information they use, whether it is to help marketing be more effective or to manage risk.

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