Print Edition
      September 2009

Making sense of IT all

It is a struggle for companies to turn the huge amounts of data they produce into the sort of information that is useful at the right time

By Nat D’Ercole
Illustration: Ryan Snook

We live in an age when vast seas of information can drown any enterprise. Lost revenue, poorly managed expenses, lost confidence, compliance problems and customer dissatisfaction are some of the outcomes of this information overload. In the face of such pressures, governance over enterprise information assets is no longer a luxury — it is a necessity. To support decision-making, companies today need to produce relevant, flexible and insightful information.

Over the past four decades, businesses have invested heavily in enterprise resource planning (ERP) systems to improve many aspects of their operations. These systems help companies operate more efficiently, but they generate enormous amounts of information along the way and companies are struggling to harness it in meaningful ways. In “Look closer, look further,” a 2007 global Deloitte study on the business case for improving information quality, only 41% of the 443 senior finance and IT executives surveyed reported that their company “consistently produces the desired quality of information needed to support management decisions.”

Despite investments in ERP software, companies find it difficult to get consistent performance-oriented information at the right time and at the right level of detail to support fact-based and timely decision-making across the organization.

Why do companies struggle to utilize the vast amounts of data within their source systems to generate enterprise-wide performance management information? Is this just a technology problem? What are the business implications of not having a common strategy and technology platform to support performance management processes such as budgeting, forecasting, financial consolidation and reporting, management reporting and analysis and performance measurement? How are organizations addressing these issues and what lessons have they learned?

The traditional approach to information management relies on spreadsheets and number-crunching, which makes it unreliable, time-consuming and expensive. A professional services firm with 50 regional accountants provides a good example of this. Each accountant has his or her way of extracting information from the firm’s systems in order to produce a variety of reports including financial statements, budgets and forecasts in Excel. In total, 50 accountants produce and maintain more than 50 spreadsheet workbooks that are stored in private e-rooms, file servers and even notebooks. To compound the situation, more than 40 business development managers report on their sales pipeline using their own Excel templates; more than 20 part-time scheduling coordinators pull information from the firm’s ERP and scheduling systems to produce weekly utilization results and forecasts; and many other reporting stewards produce Excel and PowerPoint industry and client revenue reports from the firm’s business intelligence information warehouse.

The lack of high-quality and organizationally integrated performance management information to support decision-making is not isolated to an industry, a size of business or the commercial or public sector. Organizations need to improve the utility of performance management information to enable greater transparency and flexibility; they need a common business language to measure, analyze and communicate business results, complete forecasts, perform sensitivity analysis and to manage risks throughout the organization in an efficient and effective manner.

A mid-market company in the pharmaceutical industry uses access databases and spreadsheets for budgeting. When the spreadsheets are aggregated for plan review, however, the firm loses sight of the drivers and assumptions used for planning purposes. The company has no ability to compare budget inputs across the enterprise to assess the reasonableness of the plan, the alignment of the plan with strategic initiatives or even to make adjustments to the plan without having to go back to the source spreadsheet and planner.

A mid-market automotive supplier can’t easily produce a financial and management consolidation with the ability to analyze and reconcile results by region, cost centre and detail GL account.

A large public media and entertainment company struggles to attract and retain top talent in its finance department because the majority of the staff’s time is spent compiling in-formation rather than analyzing it. Consider an organization that needs to report its financial statements using IFRS and Canadian or US GAAP. Collecting all the information to produce statements and notes can be a daunting and inefficient process prone to version control, workflow and keying errors if handled through spreadsheets. Furthermore, the transparency of the information is limited, which decreases its usefulness for analysis and audit purposes.

Not only does the cost of handling all this information add up, but in a marketplace where significant change occurs, the ability to make decisions based on the latest marketplace and organizational information rather than by gut feel will differentiate the best-in-class from the average and below-average performers. Whether we are in a bullish economy or in a downturn, organizations need just-in-time enterprise information to continuously optimize their economic model and business practices.

Today, designated accountants and business professionals want friendly tools and improved processes to do their job efficiently and effectively. They want seamless access to data and the ability to model the data without relying on IT. In a world where the Internet provides us with immediate gratification, people, especially future business leaders, have become accustomed to getting responses to questions with the click of a mouse. The tolerance for manual handling of data through disconnected spreadsheets and databases (and their long cycle times to piece data together accurately, completely and according to organizational data standards) will get lower as business velocity increases and competitive forces change. A company that has inventoried its disconnected spreadsheets and SQL and Access databases more than once has done it one time too many. How are organizations solving the information access, quality and utility problem? What support do organizations need to solve the problem right the first time? This is not a new problem: organizations have tackled it over and over in the past decade. The only difference is that they have tackled the problem in silos, with a focus on functional/departmental information quality and utility as opposed to enterprise-level quality, with a focus on enterprise performance management information utility.

What does best-in-class look like? In two recent surveys by Aberdeen Group, firms enjoying best-in-class performance shared several characteristics:

It is important to note from this chart that best-in-class companies are no longer focused only on business intelligence that supports operations process improvement initiatives; they have started to integrate other strategic areas such as marketing, customer service, sales, financial planning and budgeting. This validates what is happening in companies that have started to integrate performance management information across the enterprise, thereby realizing greater performance management information utility from their enterprise data and business intelligence assets.

When companies try to solve information utility problems in silos, they face higher technology software and support costs and a plethora of information management issues, which include:

By solving the performance management information utility problem at the enterprise level, the firm not only takes hard costs out of the system but also builds a strategic asset and gains competitive advantage through:

Clearly this is not just a technology problem. Looking at three industry examples, we can assert that the most successful path forward is grounded in:

  1. enterprise-wide business and IT sponsorship, culture, business case and vision for improved performance management information utility;
  2. a flexible information platform and underlying data architecture that supports incremental performance management information utility;
  3. an 18-month to three-year enterprise-wide performance management road map with projects that drive incremental business benefits as the program ripples throughout the organization;
  4. internal know-how in the areas of integrated performance management and business intelligence and the ability to partner with trusted service providers to close gaps with internal skills, bandwidth or methodologies; this includes all phases of a project’s life cycle from business case to system selection, conceptual design, implementation, realization and on-going competency development and standards development in incremental/phased roll-outs; and
  5. a strong project management discipline in executing performance management projects and a strong focus on change management including on-going selling of new capabilities and examples of realized business benefits.

First, an organization needs to acknowledge that it has information quality challenges that impede its ability to be agile and responsive to the market and support fact-based decision-making processes. This can be done by surveying the senior finance and business leaders in an organization and asking what their top three challenges are in leading the business (you should be surprised if “connecting and analyzing data” is not one of the issues). Second, an organization needs to develop a cross-functional/cross-divisional business case and vision to improve its performance management information utility. The more senior and the more cross-functional the support for improved enterprise-wide performance management information utility, the stronger the business case and the more successful an organization will be in delivering the vision.

In departmental information management initiatives, organizations do really well in developing a cost-benefit analysis factoring those visible elements such as improved operating efficiencies, improved departmental information, revenue enhancement or improved cost control and the related IT costs for software, hardware, maintenance and implementation. However, few organizations consider a wider array of costs and business benefits when making decisions in information management initiatives. In the “Look closer, look further” survey, 60% of respondents said their organization consistently produced the desired quality of information when making business decisions if five or more of the following factors were considered in the business case:

In the survey, Michael Tao, then Visa USA’s senior vice-president of finance, says, “Internal information systems were an area of under-investment for us for a while. The goal was to leapfrog a lot of the evolutionary steps that some other companies may have gone through and catch up quickly. We put in a data architecture that allows us to get to information very quickly, store one version of our key data, and give people faster access to the information they need. It also allows us to adopt a more forward-looking planning process.”

One of the keys to making all this happen, Tao says, was a directive from Visa USA’s then CFO, R. Neil Williams, that improving the company’s information system had become the organization’s top objective for that year. “There was a small group of us who believed very strongly that this was essential to our future,” Tao recalls. “In the back of our minds we knew we were at risk because we couldn’t see some things that were happening in the business; we didn’t have the information available. That was a great concern to our CFO and several of the people who report to him. We also knew we needed to shore up our budgeting, forecasting and financial planning capabilities and get the right level of internal controls in place, in order to comply with the Sarbanes-Oxley Act. And we knew we needed to do all this quickly.” To overcome internal resistance to the new system, the company lobbied opinion leaders and sought to give key people a role in helping to design how the system would be implemented.

In an example in the professional services industry, the finance, human resources, IT and marketplace leadership sponsored a road map for improved performance management information utility across the firm. The business case for this included greater planning standardization, improved top-down transparency to budget and forecast details across the firm, including control over common assumptions, alignment with HR compensation guidance and greater overall agility and confidence in responding to market conditions. The road map included more than 10 projects spanning three years. The first set of projects included a business requirements document, a conceptual design for each requirement to enable the business to visualize the requirements, a data model, standardization of disparate processes and templates, and the selection and implementation of the new tool for finance and HR to support management reporting, budgeting and forecasting. The firm backfilled critical finance resources, partnered with a trusted service provider and established a project team of 40 IT, HR and finance resources (on a part-time basis) from across the country. The solution was viewed as one developed by the business for the business. This was important to the CFO in order to achieve change management objectives.

In another example, a Canadian casino developed an 18-month road map to improve its performance management information utility. The road map included sponsorship from the finance, IT, slots and tables, non-gaming and marketing departments. The casino did not have experienced internal resources to structure, deliver or manage projects. However, a key mandate from the CFO and CEO was to grow the resources internally and to become best-in-class. As a result, the casino dedicated finance and systems resources to work with external service providers to establish a common information platform and technology infrastructure to deliver slots and tables dashboards to senior management. Once this project was complete, the road map extended to the finance department with a new budgeting solution to replace fragile spreadsheet models. Each subsequent project continued to deliver on the vision of an integrated information foundation across the enterprise.

In each example, the organizations were successful because they were able to get enterprise-wide support or sponsorship for their information management initiatives. They also dedicated resources on a part-time or full-time basis as needed to work with external integrators or service providers. Finally, the business took ownership of the vision, the road map and the resulting solution.

Gartner, a leading information technology advisory and re-search firm, defines corporate performance management as an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage an enterprise’s business performance. Performance management technology applications include the suite of functionality that enables:

These applications leverage or may even be integrated into an organization’s source systems (including ERP, supply chain, customer relationship management systems and other front-office or back-office systems) and provide business leaders and business managers/analysts with valuable insights into business performance and business risks. These capabilities cannot be implemented overnight, however, and require a vision, enterprise-wide sponsorship and a road map.
The chart on page 32 illustrates these capabilities, starting with source systems and moving towards integrated analytics or enterprise-oriented performance management information utility.

If you have recently experienced a performance management technology selection, the experience can be overwhelming and draining. This is especially true if you don’t have a vision and road map of where you want to go and what you are looking for in a technology solution and vendor partnership. The best-in-class vendors attempt to differentiate themselves based on one of several factors:

Although one or more of these differentiators will be important, many companies fail to include critical evaluation functionality that takes into consideration key business process requirements:

These additional requirements apply to businesses of all sizes in any industry in the commercial or public sector. They are fundamental to understanding the overall cost of ownership and end user satisfaction with the tool. It is not enough to put these requirements into a request for proposal. Short-list your two top vendors early and ask them to invest time to prove that their solution meets all material aspects of your business process requirements; don’t focus on application functionality. A critical first step is to understand the business process requirements, the reporting and planning cycle time requirements and the overall data volume and end user system concurrency requirements. Next, enable the business to visualize and confirm its requirements in the tool of choice by completing a conceptual design. From here, you will have enough information to set expectations with your top two vendors competing for your business. Vendors will invest the time if they know they can win your business. Don’t rush into a decision if you have not completed due diligence, even if it is the end of a vendor’s fiscal year or quarter.

Another common setback with organizations that have taken initial steps to deliver their first project is that senior executives ask to deliver the project quickly and at a reasonable cost. Keep in mind this does not necessarily mean “done right the first time.” The first project must establish a foundation of flexible data and technology that can support incremental initiatives. Understand the pros and cons and the risk and value equation of your design decisions. A focus on implementing functionality can easily result in a solution that does not perform or a solution that cannot be easily maintained (please see chart on page 35). Understand the impact to the business processes that your business community defined as part of the requirements phase and the impact to downstream projects in your road map that need to leverage your information and technology platform.

Managing information to drive competitive advantage and to become more nimble in the market is a top priority for organizations. A road map, strong cross-functional/divisional sponsorship and a solid set of business process requirements focused on enterprise-wide performance management information utility are essential components of your performance management journey. These three essential elements should set you off in the right direction, give you a way to communicate expectations to key stakeholders and get you asking the right questions as you prepare for the challenges ahead.

Nat D’Ercole, CA•IT, CPA, is an associate partner with Deloitte Inc. in Toronto, specializing in advisory and delivery of business-focused and technology-enabled performance management solutions

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