As companies gain new customers, expand to new markets and create new products, it can become more difficult to get a clear view of what’s happening across the entire business. That’s typically the case when various departments use different systems and databases, creating isolated data silos. A centralized business intelligence (BI) approach gathers all information into a single location for analysis, which in turn helps companies take advantage of opportunities, neutralize threats and mitigate risks in a dynamic and competitive marketplace.
What Is Centralized BI (Business Intelligence)?
Business intelligence is a set of processes and technology for analyzing information. By analyzing current, historical and even anticipated data, businesses glean insights that support better and faster decision-making. Business intelligence also can help monitor and improve key performance indicators (KPIs), optimize supply chains, refine marketing efforts, develop mergers and acquisitions strategies and building hiring and retention plans.
Centralized BI takes a unifying approach to storing and managing all this business data for analysis. Companies extract data from applications and other sources and store it in a single location, typically using a specialized data management system called a data warehouse. Some are on-premises and others are cloud-based. Some companies have a dedicated BI team that manages the warehouse and creates reports, analytical models and dashboards for the entire business. Business leaders, analysts and many other employees may benefit from the system.
Centralized vs decentralized data
In contrast to centralized BI, decentralized BI is an approach in which individual departments or units within a business manage their own individual data analysis. Each group funds its own BI effort, stores and manages its data for analysis and chooses its own analytics tools.
Both approaches have pros and cons. With a decentralized BI approach, each department can focus on customizing its analysis to meet its own needs. Departments often can deploy analysis tools faster than they can with centralized BI. They may be able to explore new questions more quickly because they don’t need to compete for the resources of a central BI team. This can enable them to respond rapidly to changing business conditions.
However, a decentralized model also has disadvantages. For one thing, it becomes difficult to analyze data from across the entire business. For another, data may be redundant and inconsistent. Also, duplication of BI roles, processes and technologies can occur, leading to a rise in overall costs.
With a centralized BI strategy, the organization creates a single, consistent set of business data that facilitates an up-to-date view of information across the entire company. A centralized approach can reduce the company’s overall expenses because it replaces multiple redundant departmental BI efforts. It also can foster greater communication and collaboration across business groups.
However, organizations may have to spend more money and time up front to build a centralized BI system. It also can be harder to customize BI quickly to meet the needs of each department. In addition, a centralized BI team risks getting backlogged dealing with competing requests from different groups.
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- Centralized business intelligence (BI) funnels information from across the business into a single system for analysis. A centralized BI system typically stores data in a data warehouse, which is a specialized data management system for analysis.
- Analyzing a single, consistent set of data from across the business can help companies make better decisions.
- A centralized BI system can reduce overall cost by replacing redundant departmental BI efforts. It also can be more secure and easier to manage than decentralized BI, and it can improve collaboration among departments.
Centralized BI Explained
A centralized BI system can help everyone in the organization make better-informed decisions. Executives, as well as employees in every department, can run reports, view dashboards and share insights based on a consistent and complete set of information.
Centralized BI also can make it easier to secure and manage data, compared to a decentralized approach. Data is stored in a single, large data warehouse, which tends to be more secure than having data stored in a scattered set of departmental applications and files. Leading BI systems support role-based access to ensure employees have access only to data they’re authorized to view.
How Does Centralized BI Work?
A centralized BI approach typically relies on a data warehouse, which is a data management system that’s specifically designed for analysis. It stores all of the company’s corporate and departmental data related to business intelligence, as well as data gathered from external sources. Leading data warehouse solutions include built-in analysis tools and commonly used data visualizations. A central BI team collects data from various internal systems and external sources, converts the data into a common structure and loads it into the data warehouse.
At many organizations the team manages BI tools and creates tailored reports, visualizations and dashboards for each business unit. Managers, analysts and other employees across the company can view and analyze this information and run ad hoc queries. BI, therefore, becomes available to a broad range of people, including those who lack specialized analytics skills.
Why Centralize Your BI?
Without centralized BI, valuable information can be locked away in departmental systems, making it inaccessible to people outside a given department. These information silos can prevent business leaders from understanding what’s going on across the company and responding quickly to a dynamic marketplace.
Companies may have to painstakingly collect information from different systems and compile it into spreadsheets for analysis. Because this process can take weeks, the information being analyzed is always out of date.
Information silos also can hinder each department’s ability to perform its role. For example, the finance group may find it difficult and time-consuming to compile information from different product groups in order to create accurate financial reports and forecasts.
Centralizing BI essentially demolishes these data silos. It makes trusted, up-to-date information from across the company available to all employees. One of the most common ways to aggregate your business data is with enterprise resource planning (ERP) software. ERP platforms gather data from areas like your supply chain, warehouse and CRM to help you identify issues, trends and opportunities, along with the ability to then drill down to the underlying data.
Benefits of Centralized BI
Centralized BI offers a broad range of business benefits, from heightened responsiveness to reduced cost and improved security. The fact that everyone is working from the same consistent set of information can also encourage greater alignment and collaboration among departments.
Increased agility: The ability to respond quickly to shifts in customer preferences, new competitors or changing economic conditions can determine the success or failure of a business. With centralized BI, managers and employees acquire a more complete view of information related to the company, so they can respond faster.
Increased productivity: Centralized BI increases productivity because employees no longer have to spend time manually wrangling spreadsheets and juggling multiple sources of information to gain insights from data.
Better knowledge-sharing: Because the centralized BI model creates a common foundation for deriving insights, centralized BI systems can drive knowledge-sharing across departments and business units.
Greater communication and collaboration: Reliable data that can be used across the enterprise can transform the culture of an organization. A central BI solution can bring departments and business units together and pave the way for better communication and collaboration.
Elimination of redundant efforts and costs: Centralization helps control costs by creating economies of scale and eliminating overlapping staff and duplicated technology.
Increased data protection and data management: Centralizing data access and permissions makes it easier to maintain data security and privacy.
Challenges of Centralized BI
While a centralized BI strategy offers many advantages, it’s also important to consider the possible drawbacks. Companies need to avoid potential problems, such as poor responsiveness to the needs of individual departments, which can lead to frustration and internal friction. Here are some of the more common challenges and ways to address them.
Potential BI bottlenecks: A centralized BI team that’s too small or an inadequate BI infrastructure can hinder business groups’ ability to quickly get new reports or analytical models. The team needs enough people to be able to respond promptly to requests from different departments.
Scalability: The data warehouse and BI tools also must be able to scale as the organization’s needs grow. That’s one reason organizations often choose cloud-based data warehouses that can scale on demand, as opposed to on-premises solutions that may require costly and time-consuming upgrades as the organization’s needs grow.
Decreased customization or localization: Business groups accustomed to managing their own BI needs and systems may be frustrated with a centralized BI system that isn’t customized to their specific requirements. Creating custom role-based reports with input from various business units can help them see the value of a centralized system.
Increased set-up time and cost: Centralizing BI can take time and significant up-front investment because it involves building a solution that meets the needs of everyone across the business. Communicating the end goals and some of the benefits of the process and working for early buy-in from leaders can help smooth the transition.
Who Benefits Most From Centralized BI?
Most companies that need to share data across the business can benefit from centralized BI. Leaders make informed decisions with greater confidence because they can rely on consistent, accurate information from across the business. Finance specialists can quickly create forecasts based on up-to-date information. Marketing groups can use details from multiple sales channels and product groups to better target customers. The shared data and insights can also help businesses seeking to increase communication and collaboration among departments.
Companies concerned about data protection and security can benefit from centralized BI. Leading data warehouses and BI tools let companies apply strong security and access controls on all their data, reducing the risk of hacking or leaks. The centralized BI model frees up funds by eliminating redundant investments in people, processes and technology, which tends to proliferate when BI is decentralized.
Myths About Centralized BI
While centralized BI has advantages and disadvantages, there are also common myths that can confuse the issue and make it harder to decide if centralized BI is right for your company. Here are some of the most common myths and realities about centralized BI.
Myth: Centralized BI just a bunch of fancy reports and dashboards.
Reality: A centralized BI system can produce attractive reports and real-time dashboards, but the true value of centralized BI lies in its ability to assimilate data from across the organization. It provides a central repository of data for everyone in the organization to use.
Myth: Centralized BI is too costly and time-consuming to deploy.
Reality: While it’s true that creating a centralized BI function and infrastructure takes time and money, the model can deliver considerable return on investment relatively quickly. Setting up a centralized platform typically takes months, not years. Some data warehouses are integrated with leading business software suites and include pre-built visualizations and reports, so companies can quickly move operational data to the warehouse and analyze it more easily.
Myth: We don’t have the skills to transition to centralized BI.
Reality: Skills are needed for any sizable technology project. But there are many consultants and vendors that can provide expertise to smooth the way, from system selection and implementation to change management and training.
Myth: Centralized BI always creates bottlenecks.
Reality: Poorly designed centralized BI may create bottlenecks, if the central BI team or the technology isn’t adequate to meet the company’s needs — but so can decentralized BI. Effective centralization can make business intelligence much more valuable while eliminating a number of potential problems. It gives users access to consistent data and definitions, ensures consistent data security and access control and provides everyone with a common suite of reporting and analysis capabilities.
Examples of Centralized BI
Companies of any size, in any industry, can use centralized BI to improve business performance. Some companies also provide BI tools to their customers, in addition to using BI internally. Here are some typical examples.
Baylis & Harding, a UK-based wholesale distributor of high-quality toiletries and gift sets, needed to give managers and executives more visibility into business data to help them make more-informed decisions and grow the business. Using a business intelligence solution in combination with NetSuite ERP, the company enabled managers and executives to instantly create reports themselves, instead of having to request them from the company’s IT group. Managers can use dashboards and reports to identify trends in business performance and respond proactively, rather than reacting after the fact.
Swedish industrial manufacturer SKF makes bearings, seals and other products sold in more than 130 countries. With such a wide variety of products and markets, the company requires consistent, precise demand-forecasting so it can adjust manufacturing accordingly. Formerly, the company’s analysts created forecasts by compiling and reconciling data in complex Excel spreadsheets, a frustrating process that often took days to complete. By centralizing BI using a single repository of reliable business information, SFK now quickly aggregates data for forecasting and shares information among departments such as sales, manufacturing planning, application engineering and business development.
Sabre Airline Solutions provides booking, revenue management and other tools for the travel industry. Its travel agency customers needed tools to help them analyze customer behavior and increase revenue in an extremely competitive market. Sabre compiled enormous volumes of data into a travel data warehouse. It provided its customers with reporting capabilities and dashboards that enabled agencies to identify revenue opportunities and cost savings, benchmark their performance and provide their corporate clients with detailed spending reports.
Choosing Between Centralized and Decentralized BI
The choice of BI architecture depends in part on the culture and structure of your organization. For many businesses, centralized BI is the logical choice. In addition to bringing together information from across the organization, a centralized approach can make it easier to manage and secure the data. In addition, it avoids the redundancies in BI software, staff and applications that can occur with a decentralized environment. ERP software can centralize your data and provide built-in, real-time dashboards with insightful reporting and analysis features.
However, organizations that operate as a collection of largely independent business units with little need to share information may find that decentralized BI makes more sense. Companies that frequently acquire other companies or start separate new lines of business may find that a decentralized BI approach can help each unit quickly analyze and take advantage of new potential opportunities.
For some organizations, it makes sense to adopt a hybrid model that combines aspects of both approaches. One strategy is to govern data centrally to ensure data is consistent throughout the organization but give individual business groups more autonomy in analyzing it. Another solution is to collect all of the organization’s data in a central data warehouse, then copy subsets of the data into smaller departmental analytical databases, called data marts. Each department can then analyze the data in its own data mart.
Business intelligence solutions that help companies analyze data can dramatically improve business performance. A centralized BI strategy can increase those benefits exponentially, facilitating organization-wide analysis and collaboration, which helps companies navigate a dynamic business environment.
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Centralized BI FAQs
How do I centralize my business data?
By integrating data sources, engineering data into a consistent format and moving the data into a central data warehouse, your business can create a centralized repository of business data. You can then analyze this data for a comprehensive view of business performance.
What is a centralized and decentralized database?
A centralized BI model involves storing and managing an organization’s business data in a central database known as a data warehouse. A centralized BI model can ensure greater data accuracy, veracity and protection.
With decentralized BI, the storage and management of an organization’s business data is distributed among various departments or business units. Each group usually funds its own BI efforts, takes care of its own data requirements and runs its own analytics applications.
What is a centralized model?
Many organizations reach a point at which it becomes difficult to analyze data that’s distributed across multiple business applications. A centralized business intelligence (BI) model can solve that problem. With this model, a central data warehouse stores all business data for analysis, in order to deliver a single, consistent view of information across the enterprise. Typically, a central BI team develops reports and analytical models for different business groups.
What is an example of BI systems?
A business intelligence (BI) system lets companies analyze business data to gain new insights that help them improve business performance. For example, companies may collect all customer-related information from their internal applications, as well as external sources such as ecommerce websites and market forecasts. They then use BI tools to identify and predict trends in buying behavior. Companies use BI to improve and accelerate decision-making, increase productivity and efficiency, identify new opportunities and risks and track business performance.
What are traditional BI tools?
A BI solution includes various tools that collect and process large amounts of data from internal and external systems. These tools include a data warehouse, reporting and visualization tools and integration software. Together, these tools enable leaders, managers and other employees to view information in dashboards and reports, and to access basic and advanced analytics.