SAP DESIGN GUILD

Analytical Applications

By Werner Aigner and Gerd Waloszek, SAP AG – 12/22/2000

Disclaimer: Please note that this edition was written in 2000. Therefore, statements in the articles, particularly those regarding SAP's products, product strategy, branding strategy, and organizational structure, may no longer be valid.

Analytical applications are a new trend in Business Intelligence and reporting, and are arousing quite a lot of interest and even excitement in the field. This is reason enough for us to take a closer look at them and to ask what the characteristics of an analytical application are, what purpose it serves, and what its ingredients are. We conclude this article with an outlook on what SAP plans to offer the market.

 

Introduction

Status Quo - The Issues

Traditional business applications currently have many issues to contend with. Joe Murphy from the US Office of Financial Management lists the following ones based on his experiences in the field of financial reporting:

As the most desirable improvements to current systems he lists (priority goes from top to bottom):

Better user interface and Internet/Intranet support are also among the "top 12" items on his wish list.

According to Mark A. Smith from the META Group, traditional Business Intelligence (BI) applications are report-centric. They are restricted to a reporting framework for monitoring and measuring historical activities based on a business model. Their major drawback is that they "look back" and do not allow for the automated optimization or management of a business process. Thus, they cannot optimize the operational effectiveness of a business process, which surely is a problem in a highly competitive market. This view is shared by Joe Murphy who also characterizes transaction systems as looking back into the past.

The Solution - Analytical Applications

What is needed is a future-directed perspective, which is exactly, what analytical applications are promising to offer. Mark A. Smith recommends that corporations take the restrictions of current systems seriously and decide if a packaged (see below) analytical application can improve their business processes.

Before we present some definitions of analytical applications, let's start with an easy one from Joe Murphy. According to him, analytical applications

He sees analytical applications as independent integrators of data from many sources. But they not only merge data, they also make use of it in many ways, for example, for forecasting. Thus, analytical applications are more than a query and the resulting report - they set out to support a complete business process with a set of appropriate tools.

Analytical applications support the whole business process from analysis to planning and execution

Figure: Analytical applications support the whole business process

But which ingredients characterize analytical applications? Let's take a look at some definitions of analytical applications and then ask which business process they can support.

 

What Are Analytical Applications?

We collected definitions of analytical applications from different sources, namely IDC, the META Group and the Enterprise Group. Let's look at them one by one. Note also that the term analytical applications has already been used in chromatography and spectroscopy for some time. So, don't be surprised if applications from these areas pop up when you search the Web for analytical applications.

Definition by IDC

A short definition given by IDC states that analytical applications comprise application software designed to measure, predict, and optimize business performance. This definition is fairly general, and many application vendors might claim that their software does just this. Therefore, IDC makes its definition more precise and further demands that an analytical application must meet each of the following three conditions:
  1. Process Support
    An analytical application must be packaged application software that structures and automates a group of tasks pertaining to the review and optimization of business operations (i.e. control) or the discovery and development of new business (i.e. opportunity).
  2. Separation of Function
    It can function independently of an organization's core transactional applications, yet it can be dependent on such applications for data and may send results back to these applications.
  3. Time-Oriented, Integrated Data from Multiple Sources
    It extracts, transforms, and integrates data from multiple sources (internal or external to the business), supporting a time-based dimension for analysis of past and future trends, or accesses such a database.
This is much in the same vein as the definition from Joe Murphy that we started our look at analytical applications with - the process support is an additional and important aspect, though.

Definition by the META Group

Mark A. Smith, from the META Group defines analytical applications in a similar way: Analytical applications help maximize information value and enable end users to measure, monitor, and manage business processes for business performance management.

Later in his article (see references) he expands this definition: Analytical applications are applications utilized by business users in measuring, monitoring and managing a business process and are typically aligned horizontally by business area and then into vertical industry. These applications are intended to allow individuals to optimize a business process through operationalizing a decision-making process. This decision-making process includes the capability to perform planning or what-if scenarios and the capability to lead to an automated action as an end result of the process.

This definition stresses the decision-making process, including simulations and what-if-scenarios, and its operationalization. Another important aspect of this definition is the automated action as an outcome of the business process.

Definition by the Enterprise Group

Douglas Hackney, President of Enterprise Group, Ltd. provides a fairly elaborated definition of analytical applications. According to him, a true, high-business-impact, analytical application is defined by the following characteristics:

  1. Architected, integrated data from multiple sources (internal and external)
    Sources can be native OLTP applications and external information from heterogeneous OLTP systems or third party vendors
  2. Flexible, multidimensional analysis, drill (up, down, across) and reporting
    View business metrics and measures, provide drilldown facilities and flexible and easy movements through dimensions and measures; view and report information in all forms.
  3. Turnkey package / short time to market
    Rapid deployment, with easy data extraction and/or integration into OLTP packages and data sets; indigenous OLAP or native support for industry standard OLAP engines; pre-formatted, predefined relevant business metrics, etc.
  4. Integrated business processes
    Domain-specific solutions to specific business challenges; provide an interactive environment to interact with the business process.
  5. Self measuring (internally monitored ROI, etc.)
    Internal value measurement of the relevant business processes and of the analytical application itself: monitor the ongoing utilization of the analytical application and its effects on the business process (provide ongoing ROI analysis of the business process, monitor the utilization of the analytical application, and provide an active monitor into the propagation of the tool throughout the organization, the relative sophistication of the usage of the system, optimization of the system and identification of best practices regarding usage of the system).
  6. Closed loop system
    Feeding new inputs back into the host OLTP or data warehouse / data mart system.
 

Taxonomy of Analytical Applications

Analytical applications have a wide spectrum of uses. Below we present two usage taxonomies for analytical applications, one by IDC and one by the META Group.

Taxonomy from IDC

IDC provides the following taxonomy of analytical applications:

Taxonomy from META Group

The META Group, in a similar vein, identifies the following segments for analytical applications:

 

Components of Analytical Applications

Analytical applications consist of several components, the basic ones being (1) the data sources, (2) the functionality and (3) the user interface.

Data Sources

Data can be drawn from many sources - internal as well as external; it may range from highly structured data, which has primarily been used in the past, to totally unstructured data, which provides new challenges for the software:

Functionality

Analytical applications combine very different functionalities in one package:

User Interface

The user interface of analytical applications is typically completely Web-based and role-oriented; it may include cockpits and MiniApps. MiniApps may be of a wide range of types, ranging from alerts, through news and gateways to more complex applications.

Personalization will be an important feature of analytical applications. Users should be able to change the look and feel, but more importantly, should be able to select those MiniApps that suit their purposes best. Selection screens will be a thing of the past.

Modern analytical applications will include advanced visualization tools, such as charts, maps, hierarchies, etc. as well as third-party tools for special purposes. See also the articles on data visualization in this edition of the SAP Design Guild for innovative ways of presenting data.

 

New Analytical Functions Within mySAP Business Intelligence

SAP recently announced a new offering in the analytical applications market. The key message of this announcement is: Analytical applications within mySAP Business Intelligence not only integrate business processes and depict predefined closed-loop business scenarios, they also offer predefined metrics to measure the effectiveness of business operations and allow companies to take immediate corrective action when necessary.

Unique business area-based applications include the following:

mySAP Business Intelligence also allows users to analyze which revenue streams per customer came through which channels - such as e-commerce, marketplaces or traditional sales - to significantly optimize the mixture of those channels in the business strategy.

Summary

Analytical applications offer a new approach to managing business processes. They are a move away from the traditional report-centric view based on past activities and on business models. Instead, they offer a holistic, future-directed approach combining packaged applications to measure, predict, and optimize business performance. While there are currently only a few contenders on the market, many companies are reacting to the current excitement and entering the market. Time will tell whether this excitement is justified and what the market will look like in the next few years.

 

References

There is also a book on analytical applications available:

 

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