aligning it and business in the midmarket enterprise...

ALIGNING IT AND BUSINESS IN THE MIDMARKET ENTERPRISE

CIO

theoutsourcingsurge

IT outsourcing is on the rise,as are options for choosing a provider.

Here, experts and midmarket CIOs alike offertheir advice for partnering, onshore or off.

ezine

August/September

2008Volume 2

plus:ARE YOU ON THEBI BANDWAGON?LATEST APPROACHESAND SUCCESS STORIES P.15OPERATIONAL B.I. SYSTEMS P.18THE REAL NIEL: B.I.’SBUSINESS ADVANTAGE P.21

• 10 Steps to OutsourcingYour Data Center P.7

• Changes Afoot In India:Beware! P.11

• Patriotism, or GoodBusiness Sense? P.12

EDITOR’SLETTER

PART 1:THE

OUTSOURCINGSURGE

PART 2:B.I.: THE

PRACTICALAPPROACH

N THIS, OUR second ezine issue, wecover two topics: outsourcing andbusiness intelligence (BI). Dis-parate topics, to be sure, with onechiefly supporting the bottom line

and the other the top, yet they havesomething in common: unity.

That may not be the most intuitiveconcept, so hear me out. Outsourcingis the quest to offload either com-modity or very specialized activities,so your staff can focus on work thattruly adds value to your business.Meaning: achieve unity with the busi-ness. Oneness.

Business intelligence is often oneof those value-adding activities. Itharnesses your data, often from mul-tiple sources, and with it presents aunified view of what’s happening inthe business. Unity of data, unity withthe business, which can then react orproactively shift resources to improveoperations or become more profitable.

Recently I’ve seen many examplesof both. Using BI, Utz snack foods isnow able to identify which routessalespeople miss during a given day(CIO Ed Smith deployed InformationBuilders’ WebFocus). Forbes Mediahas increased subscription renewalsby targeting its marketing campaignsusing third-party data and a BusinessObjects BI system. If your companyhasn’t tackled BI yet, our coverage onpages 13-21 will give you other case

studies and an overview of the majortypes of tools.

For outsourcing, our package of sto-ries focuses on geographic trends andthe approaches that many midsizedorganizations are taking. One is mostcertainly domestic, for small or spe-cialized projects or organizations with-out the wherewithal to manage com-plex offshore contracts. Another isexploring options beyond India, whichthough still the leader continues to facelabor shortage and other challenges.

Whether you employ IT outsourc-ing and/or BI, there is one moreinstance of unity that I have seen youshare, and that’s with each other, yourmidmarket CIO peers. Recently weheld our fifth annual CIO DecisionsConference, and that was what camethrough loud and clear: As 200 of youmet and helped solve one another’schallenges, you were united in youreffort to learn from one another, usetechnology to meet its potential, andmake the right choices for your busi-ness. That unity is community, andone I hope you’ll join with each issueof our ezine and daily on our web-sites, SearchCIO.com and SearchCIO-Midmarket.com. Isn’t that whatmakes it all worthwhile? �

ANNE MCCRORY

Editorial [email protected]

2 CIO DECISIONS EZINE AUGUST/SEPTEMBER 2008

Editor’s letter

OneWord:Unity

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theoutsourcingsurge

IT outsourcing is on the rise,as are options for choosing a provider.

Here, experts and midmarket CIOs alike offertheir advice for partnering, onshore or off.

inside:WHERE HIGH-TOUCH PROJECTS FARE BEST P.4DOMESTIC BLISS P.510 STEPS TO OUTSOURCING YOUR DATA CENTER P.7CHANGES AFOOT IN INDIA: BEWARE! P.11DO THE AMERICAS HAVE IT? P.12

I


EDITOR’SLETTER

PART 1:THE

OUTSOURCINGSURGE

PART 2:B.I.: THE

PRACTICALAPPROACH

SPECIALIZEDWORK that needsto be done fast is often bestdone close to home. That’swhat Scott Juranek, vicepresident of technology at

Cellnet+Hunt Group, learned when heneeded to get a two-month IT projectoff the ground quickly.

Cellnet, which makes smart meter-ing devices for utility companies, has35 software developers in its IT shop.The job required some specializedexpertise, however—and a fast turn-around. So the Alpharetta, Ga.-basedcompany decided to outsource theproject—to Minnesota.

“It just worked out that way,” saysJuranek, who notes that the companyoutsources a quarter to a third of itsIT jobs at any given time. “We workwith people overseas. But somethings are easier to do with a localworkforce. The ability to hop in a carand work face to face for a while isvery helpful.”

While outsourcing IT work to Indiaand other overseas locations gets alot of attention, many midmarketCIOs are finding what they needcloser to home.

“Some jobs you just can’t send

offshore,” says Kurt Potter, an analystat Stamford, Conn.-based GartnerInc. “When IT is strategic, you needfeet on the ground. Clients wantsome skills onshore, same time zone,American-born language skills, high-touch call centers.”

Cellnet, for instance, took its projectto Saturn Systems Inc., an outsourceprovider in Duluth, Minn. (population:87,000). Saturn, which caters to mid-market companies, says its rural-

based IT workforce is significantlymore affordable than tech talent in alarge city.

“We’re targeting companies thatcan’t afford to set up a real offshoreoperation or don’t want to manageone,” says Scott Risdal, vice president


“We work withpeople overseas.But some thingsare easier to do witha local workforce.”—SCOTT JURANEK, VICE PRESIDENTOF TECHNOLOGY, CELLNET+HUNT GROUP

High-Touch ProjectsCan Fare Better Onshore

For quick, short-term or specialized work, midmarketCIOs find local partners an easy choice.

BY MICHAEL YBARRA

EDITOR’SLETTER

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PART 2:B.I.: THE

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of business development at the com-pany, which is expecting a record yearof growth. Business has been growingby a quarter to a third every year forthe last four years, Risdal says.

COST NOT THE ISSUE

But CIOs say it’s not so much the costas the ability to ramp up quickly andlaunch short-term projects efficientlythat makes domestic outsourcing animportant tool.

“When we don’t need higher-endskills, we can save money by off-shoring it,” Juranek says. “But we havesome pretty specialized needs. A

project that needs to be done in lessthan two months is very difficult totake overseas.”

Increasingly, overseas-based out-sourcing providers are setting up shopin the U.S. to meet these needs. Thesearen’t just sales or project manage-ment offices, but real developmentcenters hiring local American work-ers. In May, for example, Brazil’sPolitec SA announced that it wasgoing to increase its number of U.S.employees from 50 to as many as800 over the next two years, openingdevelopment centers in Atlanta, NewYork and Miami.

And in the last year, two major Indi-


Domestic BlissAT THE Linc Group LLC, a privately held facilities service and maintenance com-pany in Irvine, Calif., the CIO is a bit of a zealot when it comes to outsourcing.The Linc Group outsources most of its IT functions—application development,the data center and first-level calls—to the help desk domestically. The helpdesk work goes to TekSystems Inc. in Hanover, Md., and the data center istended by Savvis Inc., also in Irvine.CIO Greg Lush says it’s worth it. “Dollar to dollar, it’s probably a little bit

more, but what you’ve done is shift responsibility. If you’ve got good partnersand you do your research, you’ll be fine,” he says.Lush’s deep-rooted belief in the practicality of outsourcing centers on the

value of making mistakes. “I believe that everyone makes mistakes; however,the person who has made more mistakes is probably wiser. In the case of out-sourcing companies, they’ve made the same 15 on another customer. I want touse that experience.”There are other advantages as well. “If we need more throughput, I don’t

have to gear up. And if there’s a decrease in capital spending and we don’thave enough money, I don’t have to fire people,” he adds.As to why The Linc Group doesn’t outsource globally? It’s simple: patriotism.

“We’re an American company, and we believe in the American way,” Lushsays. —SARAH VARNEY

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an providers have announced similarplans. Tata Consultancy Services Ltd.is establishing a development centerin Milford, Ohio, while Wipro Ltd. isexpanding into Atlanta and threeother cities. Each company expects toemploy 1,000 Americans.

“You want your best people workingyour same time zone,” Gartner’s Pot-ter says. “The A-team in India isn’tgoing to work the graveyard shift tostay on your time zone. All the majorproviders are here now.”

Domestic outsourcing rates, ofcourse, aren’t as cheap as sending thework offshore, but they can be cheap-er than recruiting and hiring a full-time person for a short-term projector finding a specialized skill set.

That’s what Pete Segar, vice presi-dent of technology at Ergotron Inc.in St. Paul, Minn., has learned.

“For us, outsourcing is necessary,”he says, “but if we were just to ship aproject over to India we’d have to pro-vide project management, and that’salmost as difficult as doing the whole[thing] ourselves.

“We can’t just hand off a project toIndia and expect it to go well.”

The company, which makes com-puter display stands, often has short-term projects that it needs to fire offquickly.

“It saves us money vs. in-house

because we’d have a guy working hisbutt off for three months, then sittingaround for three months,” Segar says.“You really can’t attract top-notch tal-ent for a half-time job. The guys doingthis work I probably couldn’t hire atErgotron.” �

Michael Ybarra is a monthly columnist forSearchCIO-Midmarket.com and a former seniorwriter at CIO Decisionsmagazine. Write to himat [email protected].


UP NEXT TOOUTSOURCE? APPS

Companies that plan to outsourcewithin the next six months are look-ing to a number of areas for sav-ings. In order of potential, here arethe areas most likely to move out:

qApplications: Custom and legal

qApplications: ERP

qNetwork (WAN)

qNetwork (LAN)

qData center

q Technical help desk

qDesktop

NOTE: RESPONDENT BASE INCLUDES ORGANIZATIONSTHAT CURRENTLY OUTSOURCE ONE ORMORE IT SERVIC-ES OR HAVE PLANS TO OUTSOURCE IN THE COMINGYEAR; SOURCE: GARTNER INC. SURVEYWITH 353RESPONSES FROMCOMPANIESWITH 1,000 OR FEWEREMPLOYEES.

IT outsourcing totaledabout $120 billion in 2007.SOURCE: FORRESTER RESEARCH INC.

EDITOR’SLETTER

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PART 2:B.I.: THE

PRACTICALAPPROACH

IF YOUR INTERNAL IT ops are costingyou an arm and a leg or your staffjust doesn’t have the juice to makethe data center sing, consider out-sourcing.

You certainly wouldn’t be alone. Arecent Gartner Inc. survey found that42% of companies with a thousandemployees or fewer had either fullyor partially outsourced their datacenters, while 28% are planning todo so within the next 12 months.

If this is an option for you, read onfor 10 steps to outsourcing your datacenter—defined here as undertakingan ongoing contractual relationshipin which an outside party takes oversome portion of your day-to-day man-agement of servers and responsibilityfor meeting service-level agreements(SLAs).

1. DRAW UP A SOLID GAME PLAN.

Determine up front what you want tooutsource and why. Determine whichsystems and processes are strategicand what your company’s core com-petencies are. “If something is astrategic competency and also a corecapability, then it should probablystay in-house,” advises Kurt Potter, a

research director at Stamford, Conn.-based Gartner. If it is neither, it shouldprobably be outsourced. If it is onebut not the other, determine whetheryou can support it economically in-house, and whether you can find theright outside service provider.

2. BENCHMARK YOUR I.T.

INFRASTRUCTURE.

Every major outsourcing provider hasa benchmark that will help you seewhat your cost structure is versus itsdatabase, Potter notes. Gartner, TheHackett Group Inc., RampRate Inc.,Compass Ltd. and Forrester ResearchInc. are among the firms that willcome in and assess how your datacenter’s level of complexity and costefficiencies stack up against the mar-ketplace. They may also recommendcost-cutting strategies, such as virtu-alization, and help you decide whetheroutsourcing is the best strategy.

3. DETERMINE HOW SERIOUS

YOUR DATA CENTER PROBLEMS ARE.

If you need a quick fix in critical areaslike uptime, availability and cost effi-ciencies, outsourcing typically will getyou there within months to a year,


Outsourcing YourData Center, Step by Step

This list of considerations will help youstart building an action plan.

BY ELISABETH HORWITT

EDITOR’SLETTER

PART 1:THE

OUTSOURCINGSURGE

PART 2:B.I.: THE

PRACTICALAPPROACH

Potter says. In contrast, an internalbuildout can take two or three years,particularly if it involves new realestate.

4. CONSIDER RELOCATION.

If a data center resides in a big city,you're probably paying top dollar forspace. Out in the sticks, IT expertsand network service providers tend tobe in short supply, and thereforeexpensive. Outsourcing enables youto pick an optimal location. “Many ofthe savings we find come from mov-ing five or 10 miles out of New York,to New Jersey,” says Alex Veytsel,principal analyst at Santa Monica,Calif.-based RampRate.

5. TAKE PROVIDER SIZE

INTO CONSIDERATION.

For a midrange company, a bigprovider makes sense if what youwant is basic commodity outsourcingservices and guaranteed SLAs, Pottersays.

However, if you want customizedservices and a lot of individual atten-tion, “go with a second- or third-tierprovider because your business ismore important to them.” Be aware,however, that smaller providers aremore likely to disappear or getacquired. Do a thorough check of theirfinancials, and make sure to providefor such contingencies in your con-tract. And, of course, check financialstatus carefully and talk to customerswho hired the company for the typesof services you need.

6. DON’T DISCOUNT MULTIPLE

PROVIDERS.

If your systems and processes requireexpertise in a variety of businessareas and technologies, hiring thebest of breed in each area may makethe most sense.

“If you want to change somethingdown the road you're less trappedthan if you're with one provider, plusyou can get better pricing if there'scompetition,” Potter says. The down-side is that managing multiple suppli-ers can be tricky. You need good gov-ernance and vendor-managementskills, he warns. “Someone needs toact as a traffic cop and integrator.”You may want to hire a third party toplay this role, or appoint one vendoras primary contractor.


Data Center TrendsAmajority of midsized organizationsplan to outsource some or all datacenter operations within the next12 months.

q Do you outsource your datacenter, either fully or partially?

42%Yes

23%No

28%Planning todo so withinthe next 12months

5%Not sure/NA

SOURCE: GARTNER INC. SURVEYWITH 353 RESPONSES FROMCOMPANIESWITH 1,000 OR FEWER EMPLOYEES.DOES NOT TOTAL 100% DUE TO ROUNDING.

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7. CONSIDER THE OFFSHORE OPTION.

“You don't need a highly paid systemsengineer to monitor your systems orprovide support on the graveyardshift,” Potter says. More and morecompanies are turning to India orMexico, where they can get “theright staff at the right time and price,”he adds.

8. DON'T FORGET THE

GREEN FACTOR.

Green IT pays these days, both froma public relations and budget perspec-tive. Good outsourcing vendors havethe know-how and technologies tomaximize computer output and avail-ability with minimum amounts ofspace, cooling and power. Just makesure they pass on those economiesto you.

9. NEGOTIATE SLAs UP FRONT.

Make them part of your evaluationcriteria. And make sure you agree onthe definition of uptime. Some ven-dors will promise five-nines uptimebut count only downtime that’s due toa power failure, RampRate’s Veytselwarns. “If your cooling structure over-heats and you have go to offline, oryour network crashes and you can’treach your servers, that’s a failuretoo.” If you are new to outsourcing,consider hiring a third party to helpset up the contract and statement ofwork.

10. SEE NO. 9, THEN GET IT ALL

IN WRITING.

“You need to define what things youwant to source and why,” says Gart-

ner’s Potter, not just to negotiateeffectively with prospective vendors,but also to make sure everyone inyour organization is on the samepage.

Above all, make sure to include rep-resentatives from all the key factionsin the process: upper management,business leaders, IT decision makers.And make sure that someone takesnotes at meetings. “That way if a newCIO comes on board and wants tochange things, you can explain whyyou made the sourcing decision in thefirst place,” Potter says. �

Elisabeth Horwitt is a contributing writerbased inWaban, Mass. Write to her at [email protected].


On the RiseNearly all North American organizationsplan to outsource a moderate or higherlevel of IT operations within two years.

q Howmuch IT outsourcing doesyour organization do or plan to do inthe next 24months?

TODAY IN TWO YEARS

SOURCE: GARTNER INC. SURVEYWITH 191 RESPONSES FROM NORTHAMERICAN COMPANIES. DOES NOT TOTAL 100% DUE TO ROUNDING.

70

60

50

40

30

20

10

0

� HIGH LEVEL� MODERATE LEVEL� LOW LEVEL

Low Employee Turnover

Highly Professional Staff

Local US Project Management

Quality Product Development

... Delivering results that work

R U S S I A

1 Hour South from Moscow

Scalable IT Labor Resources

Reasonable Price

Offices:

US: San Francisco, Chicago, Newark, NJ

Russia: Tula (Moscow region), Voronezh

Ukraine: Kiev

Prices: $27 - 35 per hour

www.solovatsoft.com

Quality Human Resources

Why

Outsource

to Russia?

EDITOR’SLETTER

PART 1:THE

OUTSOURCINGSURGE

PART 2:B.I.: THE

PRACTICALAPPROACH

OR YEARS, INDIAN offshoreproviders have dealt withrising wages, talent warsand the escalating cost ofreal estate on their native soil.

Yet India’s offshoring industry hasmanaged to hold the line on ratesfor its Western customers.

But that’s all changing, accordingto a report from analyst StephanieMoore, who covers the offshoreindustry at Cambridge, Mass.-basedForrester Research Inc.

As the rupee appreciates againstthe dollar, the pound and the Euro,Indian providers are beginning tocharge their customers more, Moorereports in “Understanding IndianProviders’ Margin Defense Tactics,”a report published in February.

While hourly rates have increasedonly minimally, “important priceincreases are often embedded else-where,” Moore contends, advisingCIOs to pay close attention to con-tracts as they come up for renewal.

“Embedded” price hikes show upin redefined workweeks or languageabout inflation and higher cost-of-living adjustments. These adjustments

include clauses that allow for curren-cy inflation, higher travel costs and“substantially” higher on-site rates,which tend to get less scrutiny thanoffshore rates. That last item can addup even when the worker ratio is 80%offshore to 20% onshore. Staff mem-bers sent by a provider to a customersite already command higher paythan the provider’s offshore workers.

A WEEK’S WORTH OF WORK

Kashyap Kompella, advisor, globalservice delivery at Technology Part-ners International Inc. (TPI), an inde-pendent sourcing advisory firm head-quartered in The Woodlands, Texas,says his firm is definitely seeing morebelt-tightening measures among theIndian providers.

Service providers are “trimmingthe fat by eliminating nonperformingemployees,” Kompella says. And heconcurs with Moore that providersare also becoming more consciousof the number of hours an employeeworks. “They want to ensure that theyare not giving away free hours like inthe past.”


Beware These ChangesAfoot in India

Rising costs are leading some Indiancompanies to adjust contract terms or find

other ways to economize. BY LINDA TUCCI

EDITOR’SLETTER

PART 1:THE

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PART 2:B.I.: THE

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So managers are being asked tokeep track of all the unbillable hourstheir teams spend on client work.Some providers have always chargedfor 8.75 or 8.8 hours per day, Kompel-la says. Now, more and more are ask-ing for the 10% extra.

“By the way, it is not just the Indianproviders who are doing this,” Kom-pella said. “The foreign IT servicesfirms operating in India have alsostarted doing the same.”

All that said, TPI has not seen aclear trend emerging yet regarding

Consider the AmericasWHILE THE RUPEE rises and competition for local IT talent heats up in India, youmight try looking closer to home for your outsourcing projects. Outsourcing toCanada, South America andMexico may lower costs—and offer a couple ofother advantages.Their smaller, more nimble outsourcing companies, for example, may give

your project more attention. Plus some of the newer outsourcing sites—partic-ularly Canada andMexico—are likely to have IT personnel who are more famil-iar with American markets and have fewer cultural differences with the U.S.Midmarket CIOs can find India a confusing, intimidating spot to outsource

work to, says Ian Marriott, a research vice president at Gartner Inc. in Stam-ford, Conn. Sometimes that confusion stems from cultural differences.“Culturally, particularly in Mexico, the clients feel they understand [and]

are a little more attuned to the business markets in North America,” says PaulSchmidt, partner and managing director at outsourcing consulting firm TPI.“A lot of it is travel time, NAFTA, the free trade,” he says. “And the whole

visa issue is much easier if you’re in Mexico.”Canada, though, may be more expensive now than in the past because of

the declining value of the American dollar.Schmidt says companies based in Brazil and Chile are also worth a look. A

Gartner list of top outsourcing countries released last December also identi-fied Argentina, Canada, Costa Rica and Uruguay as countries to look at in theAmericas.The Gartner report also found, however, that the lack of government support

in some of these countries is restricting offshore development. Only Mexicorated “very good” in this area, followed by Canada and Uruguay. Canada andMexico rated higher than Brazil in the quality of the labor pool. In terms ofinfrastructure, Argentina was the only country to rate lower than “good.”Canada earned excellent marks in most categories, except in the big ratelimiter: cost. —ZACH CHURCH

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rates for Western customers. “Someproviders have been able to get somesmall price increases when the con-tracts come up for renewal, while oth-ers have not been able to get anyincreases,” Kompella says.

The redefinition of the workweekrepresents an interesting shift in howIndian providers are valuing work.In the past, Indian providers custom-arily billed clients for a set numberof hours per week (40-45 hours),regardless of how many hours theirsalaried staff worked, Moore says.Now, however, providers are startingto either increase the number of hourscounted as a week (from 40 to ashigh as 50 hours) or simply chargingfor the actual number of hours thatsalaried staff members work.

INFLATION BECOMES A FACTOR

CIOs need to ask their providerspoint blank how they are dealing withinflationary pressures.

“As sourcing and vendor manage-ment experts attempt to engage andnegotiate with Indian service firms, itis important to make sure that theseproviders are at least trying to mini-mize the impact of inflationary pres-sures,” Moore says.

The tactics used by the most adapt-able of the Indian providers to mini-mize the impact of inflationary pres-sures include using tools to automatetasks that could be done manually bytheir billable employees; streamliningmethodologies in order to delivervalue to the customer more quickly;investing millions of dollars in

employee training to keep the pipelineof capable, efficient staff primed;building “reusable” code to cut devel-opment time; and offering outcome-based contracts, where customershire the provider to deliver a servicefor a price, instead of paying by thehour.

G.K. Prasanna, senior vice presi-dent, technology infrastructure serv-ices at offshore provider Wipro Ltd.,said the impact of the U.S. slowdownwas constrained for most of 2007.That may well change in a recession,but Wipro has taken steps to “ratio-nalize costs,” including finding cus-tomers in new parts of the globe, suchas Europe and Australia, and sendingits work to cheaper cities in its owncountry and cheaper countries. Muchof its business process outsourcing isdone in the Philippines; Romania is astronghold for infrastructure services,and Wipro has sent engineering workto China for a while, he says.

Operating margins are underpressure on both sides of the ocean,Prasanna noted. “It’s not just India;the same applies to everybody else,”he said, which means that Indian pric-ing, even under inflationary pressure,remains an attractive option for com-panies looking to cut costs.

“Pricing is an important point incompanies choosing us, and we haveno illusions about it. So as much aspossible, we try to keep that part ofthe equation stable.” �

Linda Tucci is a senior news writer forSearchCIO.com.Write to her [email protected].


BI:thepractical

approachGet business intelligence right,

and revenue rises fast. But first you need todo your groundwork.

I I

inside:LATEST APPROACHES AND SUCCESS STORIES P.15ONE CIO’S B.I. BLUEPRINT P.16BEST PRACTICES FOR OPERATIONAL B.I. P.18THE REAL NIEL: B.I.’S BUSINESS ADVANTAGE P.21

EDITOR’SLETTER

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PART 2:B.I.: THE

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JEFF KUCKENBAKER became vicepresident of IS and technologyat Star Trac at a watershed timefor the treadmill manufacturer.In fewer than five years, the

company’s revenues had balloonedfrom $70 million to $200 million.With 3 million customers in morethan 70 countries, Star Trac had beengrowing fast—too fast, in fact, forits information decision systems tokeep up.

Like many midmarket companies,Irvine, Calif.-based Star Trac had dataquality issues. Inconsistent and out-of-date versions of data resided invarious applications and informationsilos. Almost 80% of reports werecreated manually and distributed viaemail, Kuckenbaker says. Not surpris-ingly, Star Trac’s president, a formerengineer who’s very detail oriented,mistrusted the data he needed tomake key decisions.

The former director of IS at The Black& Decker Corp., Kuckenbaker recog-nized that an effective business intelli-gence (BI) system was crucial for anyfirm to move forward with its growthstrategy. However, he soon learnedthat a midmarket company like StarTrac had very different BI challenges

than a Fortune 500 enterprise.Star Trac business groups, which

were accustomed to owning theirown data, needed to be trained andreoriented to take advantage of thecross-functional, high-level informa-tion a BI system would provide. Fur-thermore, the treadmill manufacturerdid not have the budget to go with afull-throttle BI deployment.

Star Trac chose Edge Series, a BIsuite from Business Objects, an SAPcompany. The tool provides reportingand ad hoc data querying acrossinformation silos without the need

to deploy a data warehouse up front.Kuckenbaker hired a BI analyst to dodata modeling and data definitionsto ensure that the data was reliable,cleansed and consistent. Some hun-dred reports have been defined. The


Latest BI ApproachesProvide aBottom-LineBoon

CIOs offer tools and tips for quick returnsand doing it right. BY ELISABETH HORWITT

At Star Trac, businessgroups needed to betrained and reorientedto take advantage ofthe information a BIsystemwould provide.

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whole company, including Europeansites, now uses the system.

The payback has already begun.Accurate, up-to-date supplier infor-mation has enabled the purchasingdepartment to save tens of thousandsof dollars per month, “by shorteningtime to receive supplies, holding sup-pliers accountable and keeping thechain tight so we don’t have to payextra freight,” Kuckenbaker says.

Less quantifiable but equally im-portant has been improved visibilityinto the order-ship-billing cycle,which has shortened time to payment

and improved customer satisfaction.Going with Business Objects allowed

Star Trac to buy what it needed whilekeeping within budget and maintaininga good TCO, Kuckenbaker says.

MIDMARKET OPTIONS

Other types of BI products gearedto the midmarket include thefollowing:

q Scaled-down versions of majorenterprise BI platforms, which typicallyprovide wizards, prepackaged reports


A Blueprint for BIWHAT’S IT TAKE to double a company’s revenue in just two years? Reliable data.Just ask George Bock, CIO at Sole Technology Inc., an action apparel companyin Lake Forest, Calif. Excellent upfront planning helps, as well.Here’s Bock’s perspective on how to build BI right:

q Understand your pain points. Figure out where your unreliable data is com-ing from, fast. At Sole Technology, different departments were using differenttools.

q Talk to the business owners—marketing vs. sales, vs. accounting. Eachdepartment has different needs. Get each group to “own” its part of thereporting process. “Otherwise, if something goes wrong, the finger alwayspoints back to IT,” Bock explains.

q See what you already have in-house. Sole Technology had inventory thatwasn’t being harnessed.

q Leverage non-IT resources. Take advantage of the “techie” business own-ers at your company. These are the guys who go home and play with softwarefor the fun of it. Ask them what they think about the tools with which they’replaying. No one person can know everything in IT. —SARAH VARNEY

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and dashboards, and support. Suchproducts help midmarket firms getup and running within weeks. Vendorsinclude IBM, SAP, Oracle Corp. andSAS Institute Inc.

q BI appliances,which typicallyprovide a basic data warehouse andprepackaged applications on topof a customized hardware platform.While a 10 or 100 terabyte (TB) BIplatform typically runs to millions ofdollars, BI appliances generally sup-port at least 100 TB, and run between$100,000 and $700,000, accordingto Claudia Imhoff, president of Intelli-gent Solutions Inc., a BI consultingfirm in Boulder, Colo. Vendors includeVertica Systems Inc., Infobright Inc.and Netezza Corp.

qOpen source BI. Imhoff cautionsit isn’t always free—customers endup paying the vendor or consultantsto set up and design the system.Vendors include JasperSoft Corp.,Pentaho Corp. and Actuate Corp.

q BI on-demand service providers,which take over the work of extract-ing, transforming and loading cus-tomer data into a hosted data ware-house. End users can then access andanalyze data using prebuilt, down-loaded applications. The serviceprovider should offer some kind ofaudit trail to track what happens todata when it leaves the customer’sdomain, Imhoff warns. Otherwise,the customer has no way of resolvingdata inconsistencies and can run intoregulatory compliance issues as well.

Service providers include LucidEraInc., Xactly Corp. and Oco Inc.

qMicrosoft Excel,which remainsthe BI tool of choice for many firms.Combined with SQL Server and agrowing body of BI tools that Micro-soft is integrating into Office, Excelcan fill midmarket BI needs quiteadequately, Imhoff notes. However,it’s crucial that someone be put incharge of auditing and enforcing data-entry policies. “Unfettered use ofExcel results in a spreadsheet hell ofuntrustworthy data,” Imhoff warns.

MOVING TO A HIGHER LEVEL

According to a recent IDC survey,many, if not most, midmarket compa-nies see themselves moving to a datawarehouse-based BI system in thenext few years.

Star Trac is entering that phasenow. “My initial goal was to providereliable, on-demand, enterprise-leveloperational reporting, to regain confi-dence in our data,” Kuckenbaker says.“In this next phase, we’ll be moving tohigher levels of complexity with drill-down analysis. Our president under-stands the promise now: He wantsthat multisource, multidimensionalviewpoint.”

Imhoff adds: “The better you under-stand your customers, products andchannels, the better you’ll do in thiseconomically stressful time.” �

Elisabeth Horwitt is a contributing writerbased inWaban, Mass. Write to her [email protected].


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THINGSWERE A bit blurry at1-800 Contacts Inc. Man-agers at the online contactlens retailer didn’t have avery clear vision of how well

customer service reps were doingtheir jobs until well after the fact,when they ran manual reports onweekly numbers and posted thespreadsheets on the wall.

“We didn’t have a real comprehen-sive view of the call center,” says JimHill, data warehouse manager at theDraper, Utah-based company. “Anagent wouldn’t know there was anissue until the following week.”

1-800 Contacts needed a betterview of the business, so the companydeployed a new business intelligence(BI) product that allowed call centeragents to see their performance met-rics—closing ratios, average ordersize, calls in queue—in real time.

“Each call center agent has the abil-ity to see how they’re performing,”Hill says.

Business intelligence is nothing newfor many midsized companies, butwhat’s changing is the way firms areintegrating the tools into their daily,minute-by-minute activities. This

newest flavor is operational BI—asopposed to strategic or tactical, whichmay support launching a new productline or opening a new store.

“Operational business intelligencesupports the day-to-day operations togenerate revenue and increase prof-its,” says Wayne Eckerson, researchdirector at The Data WarehousingInstitute (TDWI) in Hingham, Mass.,who has surveyed companies on how

they use BI. “Historically, that’s notbeen the province of business intelli-gence; traditionally, BI has been usedby analysts to do after-the fact analy-sis. Operational BI opens up a wholenew landscape and drives greatervalue from the investment.”


Operational BI:Beyond Basic Analysis

CIOs are pushing out frequently updated datato generate revenue and increase profits.

BY MICHAEL YBARRA

“You don’t want toprovide the data fasterthan the businesswill consume the data.Fifteenminutes isplenty fast.”—JIM HILL, DATAWAREHOUSE MANAGER,1-800 CONTACTS INC.

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A survey by TDWI found that 53%of 423 companies are deploying BIin an operational capacity. Of those,35% say they are still exploring theconcept; 27% are in development;and 11% have recently deployed.

Another company having some suc-cess with operational BI is EasternMountain Sports Inc., an outdoorretailer based in Peterborough, N.H.A couple of years ago, the companydeployed WebFocus, a BI productfrom Information Builders Inc., tocreate dashboards layered atop itsmidtier AS/400 platform in order tobetter manage inventory.

Then last year the company addeda payroll dashboard that allows man-agers at its 80 stores to track staffingand sales in almost real time andmake adjustments to put moreworkers on the floor at peak hours.

“We put up a set of graphics andmanagement can see very quicklywhere staffing may be out of whack,”CIO Jeff Neville says. “You can seehour by hour. We could have updatedevery 15 minutes. We chose a 24-hour cycle. We wanted floor man-agers on the floor, not slaving overreports. I didn’t want them playinga video game. As part of their dailyroutine, they can review trends andmake plans.” Leveraging its earlier BIdeployment, EMS was able to go live

in six weeks with the new dashboard.“With that information in place we

could add different dashboards forvery small money,” Neville says. “Fora very small investment, we’re gettinga very big payoff.”

There are technical challenges.Operational BI requires a fundamen-tally different design and architecture;more frequent, intraday updating; andlow-latency data.

Operational BI also requires a newway of doing business for some ITmanagers. The data warehouse canno longer be updated in a batchprocess during off hours. That meansnew architecture for data acquisitionand delivery mechanisms and high-availability processes.

Queries must return in real timeand reports must update dynamically,which requires capturing large vol-umes of data without degrading theperformance of existing processes.That puts a premium on buildingresilient systems with good backupand recovery.

“When we created our data ware-house, we processed records early inthe day,” Hill says. “We had to layeron an additional intraday load every15 minutes. We had to write two setsof ETL [extract, transform, load]processes and another layer of moni-toring for SLAs [service-level agree-


53% of companies aredeploying operational BI.SOURCE: THE DATAWAREHOUSING INSTITUTE

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ments]. For the most part, the tool setis working well. It’s a matter of takingthe concepts and building a smallerversion to refresh.”

Nevertheless, Hill says the biggestchallenge wasn’t technical but train-ing: keeping the high-turnover work-ers up to date on the business logicused for incentives.

“The ultimate objective is to makethe presentation of information soclear that it doesn’t take a lot ofunderstanding,” Hill says. “It was achallenge because of the complexityof the incentives. We compare every-one working the same minutes, com-pute their scores so it’s fair across thebusy and quiet times of the day.We’ve achieved a good level of under-standing of how they’re performing

today, but that link of how they’re per-forming to earn their score isn’t there.We’re trying to fix that. All of the per-formance measures will stay thesame—closing ratio, average ordersize—but we’re looking at how tomake the accumulation of scoresmuch easier.”

The results have been dramatic.“We saw a lift of $50,000 a month

in revenue; average order and closingsize improved, while maintainingquality scores,” Hill says. “We wereable to increase closing ratio andaverage order size without sacrificingthe customer experience.”�

Michael Ybarra is a monthly columnist forSearchCIO-Midmarket.com. Contact him [email protected].


BI for AllOperational BI is utilized by sales and finance departments most often, according to 225respondents to a recent survey. Marketing and other groups are right behind, however.

q What functional areas does your operational BI environment support?

Sales

Finance

Marketing

Service

Risk and compliance

Logistics

Suppliers/channels

Procurement

Manufacturing

Human resources

E-commerce

SOURCE: THE DATAWAREHOUSING INSTITUTE

0% 10% 20% 30% 40% 50% 60%

47%

46%

39%

36%

23%

21%

21%

16%

14%

12%

12%

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E I.T. TYPES have beenvery successful atautomating transac-tions and gatheringloads of transactional

data. We spend the bulk of our timerunning, revising, monitoring and, ingeneral, supporting transactionalsystems and the data they generate.

With all of this data available, itmakes sense that someone (usuallyone of those pesky business users)wants us to make the data moreusable. But what constitutes usable?In my opinion, data is useful if it canbe turned into knowledge, and thatknowledge is useful if we can use it tomake better decisions. Knowledgethat does not improve decision mak-ing is trivia.

Over the years I have tried differentapproaches for working with the busi-ness functions to pin down what it isexactly that helps people make betterdecisions. I have tried report libraries,self-service reporting, dashboards,consultants and mind reading. Then,one day, it occurred to me. I couldunlock the door if I asked (and gotanswers to) two simple questions:q “What would you like to know?”

q “Knowing this, what decisionscan we make?”In practice, it is not quite this sim-

ple, but these questions start a greatconversation that not only providesdirection to my business intelligencedesigns, but also strengthens IT’srelationship with the business.

For example, I recently helped aspecialty retailer sort out what itwanted to know. This company hadreplaced its legacy business systems


The Real Niel

Defining theBusiness Advantage

You’ve ”captured” the data. But do you knowwhat you’re looking for? BY NIEL NICKOLAISEN

NIELNICKOLAISEN

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and was now swimming in transac-tional data. It had built an entire suiteof custom reports but still did nothave a better grasp on information. Icustomized my questions as follows:qWhat do you want to know aboutyour customers?qYour products?qYour markets?qYour operations?qYour competitors?q If you had really good informationabout your customers, products,markets, etc., how would thatimprove your decision making?

We started from this somewhatidealized point and defined somedecisions the company would like tomake. For example, as a retailer, itwanted to make more targeted mar-keting decisions. It wanted its print,radio, television and Internet ads to bemore effective in getting customers tomake buying decisions. We thenworked backwards to sort throughwhat the company needed to know inorder to make such decisions (inother words, what did it want to knowabout its customers).

As a group, we decided that thecompany needed to know what trig-gered a buying decision. That led us

to brainstorm a customer segmenta-tion survey. After surveying severalthousand customers, we identifiedfour segments, each of whichresponded to a different sales pitch.Some customers bought what wasnew; others bought what was onsale, for example.

With these segments in place,we then figured out ways we couldcapture the data that would identifythese four customer types. This, inturn, back flushed, finally, into thetransaction systems. What transac-tions did we have or did we need toidentify to figure out which segmenta specific customer belonged to?

We started to gather the informa-tion. The company turned the informa-tion into knowledge. This knowledgeled to improved decisions about ads,store layouts, customer loyalty pro-grams and product selection. In short,we got a more intelligent business. Inparallel with that, IT looked like it wasthinking beyond data. The marketingdorks and IT nerds actually found acommon language and purpose. �

Niel Nickolaisen is CIO and vice presidentof strategic planning at Headwaters Inc. in SouthJordan, Utah. Write to him at [email protected].


CIO Decisions Ezine is produced by CIO Decisions Media, © 2008 by TechTarget. Editor: Sarah Varney; Designer:Linda Koury; Managing Editor: Jacqueline Biscobing; ContributingWriters: Zach Church, Elisabeth Horwitt,NielNickolaisen, Linda Tucci,Michael Ybarra. For sales inquiries, please contact Stephanie Corby, Director of ProductManagement, [email protected] (781) 657-1589.

CIO DecisionsMediaEditorial Director: AnneMcCrory; Executive Editor: Kate Evans-Correia; Technology Editor: Sarah Varney; SeniorNewsWriter: Linda Tucci; NewsWriter: Zach Church; Managing Editor: Jacqueline Biscobing; Associate Editors:Rachel Lebeaux and Kristen Caretta; Special Projects Editor: Karen Guglielmo.

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q 10 tips for successful outsourcing

qNext Outsourcing Destination—Russia

qOutsource to a vendor or set up a your own subsidiary?

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