Two sides of

Business Intelligence
Format B: short discussion

Name: CUI Xinyue

Student ID: 16096039D
As IT innovation and growth leads business world into big data era, the traditional DBMS
became inadequate for storage or analysis of the massive amounts of data. Hence, an
increasing number of companies have decided to introduce Business Intelligence (BI) to
improve the performance. Zion Market Research (2016) shows that the global BI market is
estimated to grow at a compound annual rate of 8.4% between 2016 and 2021. Although the
rapid evolvement of Big Data technology has become an inevitable trend, debates arguing
about the problems of it have never faded out. As a result, this report would give a brief
discussion of the advantages and disadvantages of BI in the following paragraphs.

I. Benefits analysis

Conceptually, with the help of analytic platform, companies could generate a more precise
prediction based on vast data from all sources, facilitating the decision making. According to
Law of large numbers, which concludes that larger sample is more likely to give a reliable
result (Johnson & Kang, 2013), vast amounts of data stored in data warehouse would
generate more accurate forecast of events and behaviors. The accurate prediction helps
companies earn a higher profit through both additional value creation and cost reduction.

In terms of value creation, BI makes it possible that companies could not only offer
specialized service for each client but also have a keen observation of new market.
Previously, for the lack of information and time, seldom could a company keep track of every
customer with primary IT infrastructure and traditional enterprise data. A case in point is
Netflix, who provides personalized recommendation about content based on data reflecting
preference of each subscriber, including viewed or discarded content type, playback
characteristic and intensity and even access device (Fernández-Manzano, Neira, & Clares-
Gavilán, 2016). Thereby, Netflix manages to reduce the churn rate as well as earn customer
fidelity. Meanwhile, BI also facilitate some operational decision-making procedure for
Netflix, most typically, the remake of House of Cards. Big Data demonstrated the popularity
of the original British series and linked the views with director David Fincher and actor
Kevin Spacey, which directly determined the cast and investment of the show. Despite recent
setback due to scandal, this series proved to be a triumph, attracting world-wide attention.
This success ought to attribute to the capability of BI to spot new promising market, and it is
not limited to audio-visual industry.
Besides, BI also exhibits great potential in cost saving through goods and service innovation
and better managerial decisions. So far, BI has already leaded to innovation across a wide
range of industry. To illustrate, credit-scoring system invented by FICO based on BI
effectively protects banks and other financial institutions from frauds and defaults (Kirchner,
2012). By analysing the spending patterns of customers and comparing them with those of
sanction lists, banks like Citigroup managed to distinguish frauds, dangerous transactions
from regular transactions to decrease unnecessary loss. Meanwhile, BI can also offer possible
solutions to utilize current assets and personnel to cut avoidable cost. For instance, Intel make
use of Big Data to shorten testing time for chips as admitted by Ron Kasabian, Vice president
of Intel (Shacklett, 2015). With the help of BI, it is easier for managers to spot dispensable
expenses and handle them properly.

II. Problems analysis

Despite the unprecedented insights and opportunities offered by Big Data, there are several
problems should not be neglected before managers decide to rush into BI infrastructure. One
of the most realistic concerns is huge expenditure and efforts attached to the implement and
operation of BI systems. Although more and more BI vendors have provided cloud versions
with comprehensive functions to satisfy the needs of small and medium-size corporations, the
purchase fee and miscellaneous costs to fully own the system, for example, training, data-
cleansing, and maintaining, still considerably affect the liquidity and solvency of companies.
Considering it generally takes years before BI investment pays off, it might not be
recommended for companies struggling with a troubling financial situation. In addition,
sources of data could also be problematic. As illustrated by the graph below from McKinsey
Global Institution Analysis (2011), the ease of capturing value from Big Data varies
remarkably from industry to industry. Because legislation regarding privacy and data access
monopoly of larger companies, average companies need to either purchase expensive data
from larger organizations or discover innovative ways of data sharing in order to capture
value from Big Data.
At the same time, ethical criticism blaming Big Data for further intrusion of privacy is also
intensified with the increasingly wide use of it. As the study of Acquisti and Gross (2009)
suggested, society is constantly concerned with possible risks owing to the exposure of
sensitive information. Apart from security, BI are also linked with discrimination problems.
According to Big Data report published by Federal Trade Commission in 2016, low-income
and underserved populations are at a disadvantage with higher insurance and credit rate as
well as less opportunity. To focus on niche markets, BI helps companies identify groups with
high consuming power, thus excluding the vulnerable party. A study also shows that
nowadays companies are able to price the same product by districts accordingly (Valentino-
Devries, Singer-Vine, & Soltani, 2012). To maximize the profit, companies tend to charge
higher prices in relatively poorer neighbourhoods where there is usually less competition
compared to affluent communities. Similar occasions also occur recently that Ctrip, a
Chinese online travel agent, is reported to charge higher for regular customers who are less
likely to compare price with or switch to other platforms. This could never happen without
the help of BI.

In conclusion, while BI or Big Data has problems in terms of high cost and ethics, it is
undeniable that BI also creates great value for business development and has positive
prospects. From my perspective, BI is worthwhile considering when a company maintains a
stable financial situation and looks for the breakthrough, which would benefit it in both
creating additional revenue and cost-saving.
Reference

Acquisti, A., & Gross, R. (2009). Predicting social security numbers from public
data. Proceedings of the National academy of sciences, 106(27), 10975-10980.

Federal Trade Commission. (2016). Big data: A tool for inclusion or exclusion?
Understanding the issues. FTC report. Retrieved from:
https://www.ftc.gov/system/files/documents/reports/big-data-tool-inclusion-or-exclusion-
understanding-issues/160106big-data-rpt.pdf

Fernández-Manzano, E. P., Neira, E., & Clares-Gavilán, J. (2016). Data management in

audiovisual business: Netflix as a case study. Profesional De La Informacion, 25(4), 568-
576.

Johnson, & Kang. (2013). The law of large numbers and beliefs about luck: An asymmetry in
recognition of the risks and benefits of chance. Journal of Experimental Social Psychology,
49(1), 1-9.

Kirchner, B. (2012, May 19). Crunching the numbers. Retrieved from:

https://www.economist.com/node/21554743

McKinsey Global Institution Analysis. (2011). The ease of capturing big data’s value, and the
magnitude of its potential, vary across sectors. Retrieved from:
https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-
insights/are-you-ready-for-the-era-of-big-data#0

Shacklett, M. (2015, March 20). Big data's latest selling point: It's a strategic cost cutter.
Retrieved from: https://www.techrepublic.com/article/big-datas-latest-selling-point-its-a-
strategic-cost-cutter

Valentino-Devries, J., Singer-Vine, J., & Soltani, A. (2012). Websites vary prices, deals
based on users’ information. Wall Street Journal, 10, 60-68.

Zion Market Research. (2016, September 12). Global Business Intelligence Market Is Set for
a Rapid Growth and is Expected to Reach USD 26.50 billion by 2021. Retrieved from:
https://www.zionmarketresearch.com/news/global-business-intelligence-market