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
ZDNet

(2) Sourcing Mag

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?

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."

BI Competency Centers: Do CFOs Help or Hinder?

Intelligent Enterprise Editor-in-Chief Doug Henschen moderated a webinar last week titled “Business Intelligence Competency Centers (BICCs): Many Choices, Many Pitfalls” sponsored by Forrester Research. With BI now considered “table stakes,” panelists Boris Evelson and James Kobielus of Forrester, BI consultant Claudia Imhoff and Capgemini’s Joe Moye discussed how enterprises can drive greater value from their BICC investments.

One recommendation was to cross-pollinate BICCs with other CCs in areas such as Business and IT Governance; Enterprise Architecture; Data Warehousing, Data Quality and Data Integration; ERP, CRM, Supply Chain Management, etc. While this makes perfect sense, doesn’t it seem ironic that we still need to encourage coordination after the costly lessons we (hopefully) learned from propagating BI application stovepipes?

Side note: With many of the CCs above revolving not just around competencies but applications and processes, it was interesting that James suggested BICCs be renamed BISCs (BI Solution Centers). We'll keep an eye on a Forrester report in queue on this topic for October.

The idea of coordinating CCs reminds me of conversations I’ve had with an aerospace and defense company that extended their BICC with specialized data integration technology for key applications. As a result of tapping into finance data, the company is supporting deeper BI analytics based on time-sensitive operational insights.

To boost synergy between CCs, one panelist suggested overlapping them and allowing personnel on the teams to create hybrid roles. This brings to mind the success story of a cosmetics company that adopted a war room approach to unite IT and line of business experts for projects.

The most interesting part of the discussion involved who should own a BICC: IT or line of business. Not surprisingly, opinions varied, with Evelson advocating for ownership by C-level business executives and Imhoff taking a more IT-centered approach. Evelson added that most of the successful BI environments he’s seen have had strong business ownership (for more check out his keynote at the Computerworld BI Perspectives conference Sept. 8th). Imhoff underscored the need for technical acumen beyond the skills of the business analyst – areas such as data integrity, data quality and database performance. (Rajan Chandras takes this a step further on his Intelligent Enterprise blog post, urging readers to explore the qualifications needed to influence BICC success)

Imhoff asserted that CCs should not report to the CEO’s or CFO’s offices, going so far as to suggest that CFOs may infuse too much of a finance or accounting flavor. It’s hard for me to imagine many business decisions that don’t impact profitability, competitive advantage or shareholder value, but since time ran out on the webinar, let’s open up that part of the discussion here.

What do you think? Are CFOs the best stewards of these BI centers?

Thoughts from ODTUG Kaleidoscope 2008

Kaleidoscope 2008 is getting into full swing, and I've already found some nuggets of wisdom from the speakers. Ron Moore, one of the first Essbase certified consultants in the world and founder of Marketing Technologies Group (http://www.mtgny.com/), is a speaker at Kaleidoscope this year. In conversation with him about blending analytic and relational data, he said that you:

"Just can't get by on a hammer or a saw - you need both."

From the perspective of corporate data, that just rings true. Companies can't simply rely upon cube data from their analytic applications in order to make the best business decisions, and they can't rely solely upon relational data – they need both. And to create a central data store requires cooperation between the business owners (of analytic data) and IT owners (of the relational data stores).

Many companies experience a disconnect between the Finance and IT groups, as their goals can appear to be at odds. While Finance teams often implement the business systems, it is IT who inherits the issues of compliance, maintainability, and governance for those systems. But in order to successfully integrate corporate data to provide a holistic information view, the project requires the cooperation of both groups.

In order to harness the value of the content in the cube data, we need to synthesize it within relational data sources. Ultimately, a standard rows and columns relational database is the only common ground to which every application available to the information technology industry can have ubiquitous access. Trying to achieve the bridge in the absence of relational technology creates the potential for a myriad of misinterpretation and eventually the value of the cube data would get lost in translation.

Once the cube data is exported into a relational structure, the infrastructure and data are in place to provide information access to stakeholder groups across the business. A potential next project step, incorporating data from other sources such as ERP or CRM systems or operational data stores, creates a centralized, single version of the truth for all stakeholders to work from, and provides a comprehensive, holistic view of the business that includes both operational and management data.

The benefits of this level of integration to a company are myriad. But as Ron Moore so succinctly put it, it takes both the hammer and the saw to make this kind of effort successful. Finding the tools and technologies that can help bridge the inherent gap between groups is imperative to success.

As Kaleidoscope continues through the week, I'm sure that I'll hear more about opportunities to create mutually beneficial projects between Finance and IT groups and the tools to support them. With technical and thought leaders from across the country here in New Orleans, I'm sure I'll find a few more nuggets of wisdom to share this week.

Insight on the Gartner BI Conference in Chicago

As a long time attendee of the various Gartner events, my favorite has always been the more intimate setting of the BI summit - typically held in Chicago. Boy, was I surprised at the 1200+ attendees of this year's conference and the expectation of bigger growth to fuel a move to Washington, DC in 2009. Last year’s event pales in comparison. BI advocates, typically a cross-over role between Finance and IT, have made a rather dramatic transition into the IT camp for this conference. Many of the sessions were educational and entry-level in scope and oriented to the first time architect and supporter of Business Intelligence environments. The event has clearly moved away from the user of past years.

Also notable was the absence of discussions on the relative cost savings in deploying a BI environment for better business planning and analysis. Other than the one rather cheeky session on how to negotiate a good deal with your BI vendor, I expected to hear more about cost cutting and using BI data to enable efficiencies and identify cost-prohibitive inefficiencies. The market picture has been doom and gloom and the "R" word blatantly used. Instead I heard a great deal about enabling integration and the expansion of analytic applications.

I think this is great news! Clearly the message was to expand the BI footprint and make use of the technology that can drive profitability, not focus on doing more with less. I had conversations with luminaries such as Howard Dresner and Ron Powell, but I also spoke with a number of vendors and implementers such as IBM GBS and Palladium, who had similar messaging of exploiting the existing technologies and refining processes to drive revenue and deliver data on a more continual basis to the employees who can make the right decisions in real-time. This to me is a message of expansion and focus, rather than retrenchment and limitations. I heard a great deal about the continual need for data, an almost real-time need to do continuous planning and report on finer levels of granular information in a more automated fashion. The message was clear. BI is tops in priority and destined to gain more mindshare of senior IT executives as the business expands and focuses their growth. To grow and expand you always need Innovators who can do more with less, but also the visionaries who can see the gold amongst the rock.

The Challenge Remains the Same

In the recently published "Cost Cutting in Data Management and Integration, 2008," Gartner emphasizes the need to reduce costs while continuing to support BI initiatives. Sound familiar? The operating motto for CIOs and IT teams for the past several years: Do more with less.

With recent downturns in the US economy, the business needs for the data coming from BI systems have become critical to companies’ maintaining their competitiveness. When there is less money in play, companies have to understand all facets of their business: where they are making money and where they are leaving opportunities for improvement on the table, to plan continuously, and to have the frameworks in place to change directions quickly in order to stay at the forefront of their markets. There is a pressing need for accurate, reliable data from which they can analyze and gain the insight needed to make the best business decisions possible. This source data comes from the same IT team tasked with reducing their costs.

Balancing the business need for insight into the organization and the IT need to reduce costs is where innovation can occur. Gartner’s report provides a number of recommendations for cutting costs within data management initiatives, ranging from the common-sense Optimize Data Integration Tools Licensing to recommendations that are complex and require creativity within the IT teams to successfully achieve: projects like Perform Operational Database Consolidation and Perform Data Mart Consolidation. Gartner estimates the payback from data mart consolidation as a savings of “approximately 50 percent of the total cost allocated to supporting their disparate data marts if they consolidate those marts into an application-neutral data warehouse.”

Easily said, but how to get from here to there? The solution lies in feeding a central application-neutral data warehouse with business critical data from application-specific data marts. To do this requires using intelligent data movement applications to ensure that this feeding of the warehouse is both seamless (does not interfere with the data mart applications), highly dynamic (so the data is refreshed in near real-time), persisted (ensuring a physical copy of calculated or aggregated data is available in the warehouse), and auditable (for data governance and regulatory compliance).

There are myriad opportunities to reduce costs within the IT department. The challenge is to develop innovative solutions that meet the requirements of data governance, security and accuracy, and still provide business users with the data they need to drive the company forward.

The Inside Story of Financial Systems Innovators

In my career I’ve worked with and for many companies and I’ve met many different people, and one thing that I can say about them in general is that there are some who are true innovators in their professions. They view things with fresh ideas, they see solutions where others see only problems, they look at things that exist and instead of just accepting them as they are now, they come up with a better way of doing them. These are the unsung heroes of corporations everywhere. They are the people who are creating the future today, although in many cases nobody even notices what they do – except maybe that a web page loads a little faster, or a report has a little more useful data than it did before.

When it comes to finance systems – a subject near and dear to my professional heart – I see innovations like these all the time. Although a lot of money gets spent on the big, overarching, reengineering projects or enterprise application implementations, in many cases the return on such investments is marginal (or at least takes years to realize). It’s the simple, incremental changes that are often the most effective. Sometimes just a small shift in perception turns an existing concept on its head, and opens up a whole new vista of possibilities. Existing systems can be leveraged and improved in whole new ways perhaps by making just one significant (and often inexpensive) change. Such changes can be introduced to even large, staid organizations by just one visionary individual who sees what is possible and is willing to make it happen.

One example I can recall was a Director of Finance for a major retailer, who as part of his company’s reorganization of their financial systems architecture for Y2K introduced a small, insignificant product called Essbase into the mix. Despite some objections from his IT folks that it was not an approved standard product, and despite some technical challenges in integrating it with some of his legacy systems, he managed to make it the standard for financial reporting throughout the company. The value to his organization was immense, and the incremental cost a drop in the bucket of the overall system, and more than offset by the cost savings in consulting alone. By introducing this one, small innovation, he was able to radically alter his company’s financial systems for the better, and incidentally, became a rising star in both his company and his industry.

This blog is dedicated to those financial systems innovators – the finance system managers, enterprise architects, budget managers and others – who make those incremental changes possible, and to the innovations that they create. We will focus on telling the customer’s and end user’s story, and always anchor our posts with real-world examples. We will include both finance/business and IT/technical perspectives, as we want to help articulate both concrete value and practical implementations. Each month we‘ll select a different topic, and post different thoughts and ideas around it. If there’s a topic you’re passionate about, let us know and we’ll try to include it in future months. Also, if you’re interested in contributing (and we strongly encourage customer contributions), please contact us and let us know what you‘d like to post about. The list of upcoming topics will be constantly updated, so remember to check back often to see what’s coming up. Thanks for reading.