Business intelligence may be defined as the set of applications and technology which are involved in the collection, processing and designing access to information to the company’s business process. Business intelligence helps organizations to have a deeper idea of the different influences on their business such as the quantity of sales, the resources of production, the competition and information on suppliers and consumer preferences. It is imperative that the management of a company has a good knowledge of the external and internal factors that govern the company’s performance. Business intelligence is necessary as it enables the company to make decisions after fully understanding the context and need for those decisions.

A greater advantage of business intelligence lies in the field of forecasting. A sound business intelligence program helps the management forecast conditions in the market by studying the indicators in the external environment such as economic policy, new technology, changing customer preferences etc. It also give managers a better understanding of where their company stands vis-à-vis other competitors. Based on this understanding of change, the management can design its response well in advance. In addition to prediction of future needs and conditions, business intelligence enables better coordination between the different department and enables them to work together more effectively as each department is able to better understand its position in the larger picture.

The importance of business intelligence is all the more apparent in the customer-service sector, where changes have to be made at very short notice in response to change in the customer’s expectations. An effective business intelligence system that provides precise and updated information is indispensable in these sectors. In addition, business intelligence systems can also be integrated with suppliers to share information regarding inventory levels and other information pertaining to the supply chain.

To construct an efficient business intelligence system, companies need to have a secure computer system that enables different levels of access depending on the grade of the employee such as supervisor, manager or executive. The computer system needs to be designed with sufficient memory as storage of data will be required for long periods. The business intelligence systems are individually made keeping in mind the specific requirements of the customer. They may be required to process large quantity of raw data such as the details of productions, the sales statistics, reports of attendance and reports on customer fluctuations.