Wednesday, September 24, 2008

Outsourcing with Integrity

Outsourcing developed a bad reputation straight out of the gate. Few technology process shifts can boast such embarrassing and costly early results as outsourcing did. Companies such as Dell (that outsourced call center operations), experienced such radical declines in customer satisfaction that they were forced to drop their outsource projects (1). Early efforts at outsourcing development operations often resulted in development lag times, missed requirements and ongoing quality issues (2).

The costly lessons of early outsourcing projects have given companies today the knowledge needed to create successful outsource initiatives. As companies work to maintain a balance between streamlined operations and cost-effectiveness, many are choosing to re-evaluate the opportunities offered by outsourcing. According to Gartner Research, "The global outsourcing market continues to grow at a steady pace, with a forecast growth rate of 8.1 percent in 2008. But, healthy growth rates for outsourcing do not necessarily mean that user organizations are without challenges."

Not all outsourcing projects are the same. Project requirements, processes, deliverables, and structures vary greatly with each type of outsourcing project. Whether looking to outsource call center operations, manufacturing, software development, IT services or other operations, there are common success factors that span all outsourcing projects.

Find the right place and people: While one location may offer considerably lower production costs, the talent-base of the workforce must also match your needs. “You must understand the offshore location landscape," states Gartner research vice-president Ian Marriott. Gartner’s Top 30 Offshore Locations for 2008 provides a list of the top countries around the world for IT outsourcing, based upon criteria such as talent availability, environmental stability and cost.

Establish consistent processes: Adherence to corporate processes and procedures by all business teams (whether internal or outsourced), is a fundamental requirement to ensure consistent, quality project results, corporate governance and compliance. This is a difficult goal to maintain when working with external companies across geographies. By automating business and financial processes, companies can ensure consistent, repeatable data movement with integrated control steps. Detailed audit trails from content management, change control, and financial systems provide traceability.

Ensure visibility: Corporate teams must have understanding of outsource project activities and their results at all times. Up-to-date, accurate financial and lifecycle data provide critical insight needed for decision-makers at all project levels. Continuous effort needs to be put to tracking progress and making the best fact-based decisions for the overall business.

Verify integrity: Quality is a major outsourcing concern, and was the downfall of many early projects. Create checks and balances for the outsource project where quality is measured on a number of levels:
  • Data Integrity: Is the data from outsourced systems, (financials or operational data), accurate and complete? Is the data refreshed regularly?
  • Service Integrity: Customer satisfaction surveys, call monitoring and agent coaching provide basic quality management. Operational reporting, scorecards and analytic tools provide more robust service management.
  • Performance Management: Establish a performance management system that tracks performance and measures against expected results. Solutions are available from small-scale tracking and reporting systems (designed for small to mid-size companies), to full Enterprise Performance Management (EPM) systems.
As companies look to outsource a variety of business activities (including manufacturing, contact center, procurement, data management, Software as a Service (SaaS), marketing, etc.), the model for successful outsourcing becomes more complex. A hands-off, contract-signed, out of sight, out of mind approach to outsourced projects will spell disaster. These relationships are extensions of your organization; they rely on the same monitoring, management and integration as other business functions.

Outsourcing with integrity means creating a model that supports people, processes, and data at high quality levels that meet a company’s standards. It also means having the tools and framework in place to seamlessly integrate data from outsource systems into the company’s systems. And finally, it means ensuring that tools are in place to manage and monitor the relationship on an ongoing basis.

Outsourcing done right is good for shareholders, for the company and for the outsource partner. By taking the time to outsource with integrity, companies can experience lowered costs, streamlined operations, and have the opportunity to focus on business growth and corporate innovation rather than on peripheral business tasks.

Some Resources
Gartner Myth vs. The Real Deal Blog
Outsourcing Journal

(1) Dell admits it has "learnt its lesson" after being forced to drop its Indian call centre last year following customer complaints about the quality of service…The call centre operation for the OptiPlex desktops and Latitude laptops was moved back to the United States

(2) Sourcing Mag

Monday, September 22, 2008

Achieving Management Excellence in the face of IFRS

It was interesting to note that at Oracle OpenWorld, John Kopcke (SVP Oracle Enterprise Performance Management Global Business Unit), in his address entitled, “Extending Operational Excellence to Management Excellence – Oracle’s Vision for EPM,” mentioned that the only process that had been fully adopted consistently in the paradigm shift to Operational Excellence was the reporting component at the end of the transition. The reality of this adoption had more to do with Sarbanes-Oxley (SOX) than any management need to solve a reporting challenge. He further cited that the “World-Class” organizations had kept their cost containment programs in check as they passed through the hurdle of Sarbanes-Oxley adoption, while the peer group still struggles with the costs to support the new financial reporting standards eclipsing any innovation that might take place in their Finance department.

If the end result of the SOX paradigm shift was a regulation-induced reporting structure that streamlined reporting, then that raises questions about the next wave of reporting changes to take place over the next 24 months. IFRS, the International Financial Reporting Standards which will cause yet another upheaval in all US-based global company’s current reporting introduces a mandate to move to XBRL as well as to a “principal-based” set of standards - as opposed to our current dictated structure under US GAAP. The basic effect of that may be chaotic as it is in fact more interpretive than our current reporting standards and will require some restructuring of the consolidation process and most of the standards reports.

In a fragile economy such as we are experiencing, the idea of mandating such a dramatic change is almost incomprehensible. Most financial reporting structures are manually created in the data extracts and consolidation hierarchies that are the underlying foundation of the applications devoted to creating the book of reports that drives company profitability and fiscal responsibility. By mandating change and removing the strict principles of reporting, the interpretive nature means that costs internal to Finance will increase as companies will seek outside guidance to determine the best course of action. As costs increase in the Finance area, the gains attributed to best practices will be eroded and Finance will yet again be in turmoil and budget-constrained.

To be innovative in Finance you have to have the insight as to how to achieve Management Excellence as John Kopcke stated, from the Operational Excellence which was the previous goal. If, as a Financial Executive I spend the majority of my time trying to determine how to meet the needs of a moving target of regulated financial reporting, I have to wonder how I can be fiscally responsible. It seems that I need an army of consultants available at my beck and call to deliver the reports to which I am held responsible. What I really need is a flexible system that allows me to see my data from multiple perspectives, a cadre of internal experts with whom I can consult, and a book of reports that will meet my internal and external needs. The mandates of how the reports are to be formatted and how I do my consolidations and eliminations should be the easy part. I want to be innovative in my business, not in how I report my profitability and certainly not with additional expense likely in the adoption of IFRS.

Thursday, September 18, 2008

To Automate...or not to Automate

A Deloitte study titled “When CFOs Debate: What Keeps You Up at Night?” finds CFOs agree that “finance should be extending its focus from accumulating information to adding value through insight” and asks what role automation should play. Deloitte's report (part of a pdf workbook with 9 important issues facing CFOs today) cites two reasons LOB managers still make decisions by ‘gut feel’:
  1. they lack tools to unify finance and operational data, or
  2. they rely on homegrown tools that generate numbers which are out-of-synch.

Does this mean companies should go all-in on a fully-automated performance management initiative? Look before you leap, it says, cautioning companies to assess their readiness in 3 key areas: 1) business processes, 2) master data management and 3) business alignment. After shoring-up these areas, it prescribes an 80/20 approach to automation, suggesting companies “shouldn’t have to manually mine multiple systems or conduct a special study for routine decisions and performance reports,” but still need flexibility to accommodate decisions that “require unique, in-depth analysis” or those that warrant a special data repository with “a ‘play room’ for analyzing non-routine decisions.”

Is 80/20 the right mix in an economy when few decisions are routine? Therein lies the question. With technology available to support 24/7 readiness of all data and business logic needed for structured AND unstructured analysis, finance departments no longer need to compromise. Making critical business decisions based on partially automated systems that are almost urgent enough to present data that’s somewhat complete lets technology vendors off the hook. Would you bet your next decision on that?

Wednesday, September 17, 2008

Getting to Useful

Forrester Research's new twist on BI introduces the concept of the `BI workspace' (see BI Without Borders report). The BI workspace offers a use case where "power users, especially power analysts, can explore data without their IT departments imposing any limitations or constraints, such as fixed data models, security, and production environment schedules."

Clearly identified as a supporting, not replacement solution for enterprise-grade BI implementations, options for the BI workspace leverage emerging technologies such as BI and Data Warehouse Software as a Service (SaaS), cloud computing and in-memory analytics as well as more established methods such as desktop analytics.

While solving some of the significant IT restrictions that can hobble an analyst's ability to perform, the BI workspace doesn't address many of the fundamental problems that are endemic in all BI systems – the inability for the business user, whether analyst, power user, or a departmental line manager, to access comprehensive operational and financial data in real-time or near real-time.

Business users must be armed with all of the data needed to make intelligent, accurate and forward-looking decisions. In order to make data truly meaningful, we must be able to export the financial data stored in the BI cube and integrate it into a larger warehouse that includes operational data. With hugely fluctuating external data, updated external data must be accessible in near-real time. If we cannot determine the economic value of a business decision (in this volatile market), how can we accurately forecast our future? As Boris Evelson, Forrester researcher and author of "BI Without Borders" said:

"Reporting and analysis are just the tip of the iceberg - it's getting data to the point where it can be useful is the real trick."

Monday, September 8, 2008

A Gathering of Innovators

The relationship between Finance and IT is often described as disconnected or in opposition. And, why not? These two teams have different priorities, different audiences and different tools. They even speak different languages - profitability, margins, forecasts vs. maintainability, security, performance.

Yet their corporate goals are often identical. One approaches from a business value perspective, while the other from a technical implementation and maintenance perspective. They are often dependant upon each other for their combined project success, and in many organizations, they often work under the same umbrella of the CFO. As the corporate focus shifts from organizational differentiation, the barriers between IT and business groups can be overcome by their common goals.

I expect to see increasing interest and awareness in the value of creating true business and technology partnerships as companies explore ways to increase profits, streamline operations, and explore avenues for innovation within their organizations. This week's CFO Technology Summit in San Francisco brings together executives from around the country to focus on how they can take control of their IT investments. The summit also includes some of the industry's great innovators and thought leaders, such as Faisal Hoque , Founder and CEO of Business Technology Management (BTM) Corporation , who will be exploring the issues and opportunities that arise with the convergence of business and technology. As Mr. Hoque said in a recent CIO Insight podcast interview:

"We have begun to focus on information versus the technology… We are reaching a converge state where there is no difference between business and technology… The information is driving knowledge and knowledge drives innovation."

This blog is dedicated to financial system innovators, and this week we salute those visionaries at companies large and small who are coming together in San Francisco to explore possibilities for innovation within their organizations.

- Trevor Hughes

Wednesday, September 3, 2008

Understanding the Impact of New Technologies on BI

"Rather than relying solely on a rigid metaphor like data warehousing, BI needs the ability to access data anywhere it can be found and to perform integration on the fly, if necessary. Locating the right information to solve problems must be a semantic process, not requiring knowledge of data structures or canonical forms."

Neil Raden, Intelligent Enterprise, Business Intelligence 2.0

A long-standing concern between business teams and IT is the question "Have we spent the past years creating some monolithic solution that is now unmanageable?" Can it come close to addressing the needs of the current and future business? Have the Business Intelligence (BI) systems that we've created become rigid metaphors, as Neil Raden proposes that data warehouses have become?

Implementing a BI system has always been hard and costly. But the value, once up and running, can be enormous. Insight isn't something to be taken lightly; it can change the very nature of how a business is run. It is no wonder, then, that the markets for BI and performance management solutions are expanding rapidly.

The business needs for BI are going far beyond traditional analysis and reporting; companies are now expecting information access in real-time, across global constituencies, and beyond the limitations of financial data, or for that matter, data itself. The BI systems that we built over the past decade simply may not scale to meet today's requirements.

New technologies such as software as a service (SaaS) are impacting the very nature of software development and delivery, and are also helping to shape the future direction of BI. Even large vendors such as SAP and Oracle are testing out the on-demand waters, SAP with its' 'Business by Design' on-demand solution, and Oracle delivering Oracle Hyperion On Demand. While SaaS has yet to experience broad acceptance in the marketplace, niche BI companies such as LucidEra, Adaptive Planning, Host Analytics and PivotLink are gaining customers with their on-demand offerings, and open the market to small and mid-size (SMB) companies.

Open source BI offerings may provide a clue into another alternative direction for BI markets – again with potential business benefit. As the time and cost of implementing and supporting BI solutions are reduced, so too will the bar lower to a level where SMBs can take advantage of BI, while larger companies can customize solutions and extend analytics across the enterprise. BI will broaden from the hands of the few into the hands of many.

While the new technologies broaden the BI market offerings, they exacerbate the issues companies currently face managing financial data across increasingly stratified and expanding markets. We are already dealing with a crisis in data management. Critical financial information is stored in proprietary BI systems and cannot be easily extracted or combined with operational data. Information from all source systems must be auditable and compliant. It must exist in standard structures that will support future development of combined data with other content sources. Before we can truly scale to meet the coming needs of the BI market we must create a reliable and consistent method for moving and managing data across the enterprise.

The increasingly complex business demands on BI systems are a further validation of the success and relevance of the market. We can learn from other rapidly-evolving technologies that have gone through major expansions as a result of their cumulative relevance. The Web, and Web based standards come to mind as an example of a technology that has successfully transitioned into a much higher form of relevance. Standardization, interoperability, and security are core Web concepts. Before we can hope to truly leverage new technologies, we must overcome the limitations that we've built into our existing BI systems, ensuring standardized data access mechanisms, real-time, secure access to data, and a framework that will extend into the next realm of BI technology development, and Radan's vision of "Locating the right information to solve problems must be a semantic process, not requiring knowledge of data structures or canonical forms."