Living in the information age has its advantages and disadvantages. Although so much data has never before been so accessible and so affordable to so many people, many of us feel as if we are being bombarded by more data than we know what to do with (both personally and professionally). Historically, many organisations were better at collecting data than they were at turning it into knowledge or ‘actionable information’, but recent harsh economic conditions have forced many to extract the maximum value from the data they have at their disposal, says Lesley Meall, FSN contributing editor.
For the global software company Misys, this means giving its business and financial analysts flexible access to the very latest information, so that they can run forecasts whenever and wherever they want to, and as quickly as possible. “Accurate financial planning is critical for business performance, and at Misys we have always taken it very seriously,” says Lawrence Wolman, group director for financial planning and analysis, but the systems it was using for accounting (Sun), HR (SAP), and consolidation (Comshare), couldn’t meet its changing needs, so it has supplemented them with an enterprise-wide planning system.
With the help of an IBM business partner (Artesian Solutions), Misys used IBM Cognos 8 Planning to build eight interdependent financial models capable of analysing every aspect of the group’s monthly costs and figures, comparing current and historical data to help provide the most accurate forecasts possible. Actuals are imported from the accounting and HR systems, and the consolidated and functional models are synchronised every hour, to provide the latest figures for analysis and reporting. “In the software industry, the majority of costs are related to human resources,” explains Wolman, so employee data is very valuable.
“If we know which employees are working in which business units in which regions, and what their salaries are, we can predict quite accurately what our costs are likely to be in the different areas of the business,” says Wolman. With hourly updates, business analysts are always working with the most accurate and up-to-date information, and they have more flexibility. “Business users can serve themselves, by drilling down and slicing and dicing the data they are interested in and analysing it themselves, in real time,’ he adds, where they would previously have had to work within the limitations of standard reports or get the IT team to create customised ones.
According to Wolman, Misys now has a “solid foundation for planning and forecasting that is already delivering value to the business”, in areas ranging from financial planning to treasury, and Misys is exploring the new possibilities that would be offered by the addition of a dedicated business intelligence tool, Cognos BI. “We are looking at introducing this because it will give other areas of the business access to advanced analytics,” says Wolman, and this will help Misys to “make the right decisions” and hopefully “increase its competitive advantage in the financial software sector” where it operates.
Leap of faith
The media law firm Wiggin has already taken this step, by introducing a Redwood business intelligence (BI) system (from LexisNexis), which has enhanced the firm’s ability to make well-informed business decisions on the fly. “We had been measuring profitability through a self-generated, back of a fag packet model,” recalls John Bannister, chief operating officer (COO), Wiggin LLP, and although the firm’s partners recognised the key drivers of profitability and their importance as performance indicators, getting the associated data out of the firm’s “cobbled together systems” required “massive effort from the finance team” and by the time it was available the information was often too late to assist with the decision-making process.
So Bannister set about finding a system that would make managing the business and its profitability part of its everyday processes. “The practice management systems used by the majority of law firms tend to track the old favourites of chargeable activity, billings, recovery rates, debtors and work in progress,” observes the COO, but he wanted something that could be used to calculate costs and profit and attribute those (directly and indirectly) to particular clients, matters or individuals, something that would “enable innovative thinking about how to run and measure the business of a professional services organisation.
Hence ‘business intelligence’, which Bannister wants to make live up to its name. “To me, it’s more than just better informed decision making and more accurate and timely reporting,’ he says. “It’s about challenging the traditional financial models and their limited performance indicators through new ways of analysing data that ultimately lead to an easier and more informed decision-making process” he explains, “and of providing the ability to quickly communicate this information to the right people at the right level across the firm,” and the Redwood BI suite mirrors his ideas about how a firm should be managed and provides the tools to explore these further.
Business benefits cubed
Redwood is based on a data warehouse that utilises several data capturing modules, with profitability, billing and collection, business development, and diversity, with data cubes designed to help those involved in finance and marketing, and those with management responsibility, understand how a firm is performing from a number of perspectives. “As stage 1, we chose to adopt the billing and collection cubes, with restricted access, in order that we could learn how best to manage the information and control its output”, says Bannister, with stage 2 rolling out a dashboard that allows greater access across the firm.
The law firm has seen some impressive benefits. “The billing and collection cube enables us to look at debtors not just on an aged basis, but allows us to measure the consistency of payments made by individual clients,” reports Bannister; it also allocates a relevancy to each client, calculated on the basis of their individual payment history. “If a client always pays their bills after 40 days it will have a high relevancy,’ he explains, and if their payment history is “variable” the client will have a low relevancy. As well as helping the firm to manage its cash flow more efficiently, this prioritises the efforts of the credit control team - which has reduced debtor days.
But Bannister describes the profitability cube as the “key driver” behind the decision to introduce a “true BI system” rather than rely on information from its finance systems, or adopt a more traditional practice management system. “We are now able to model various scenarios that enable us to pitch at the most competitive level and yet remain profitable,” he says. Client profitability has also been enhanced. “We don’t have the luxury in the current market of losing clients,” adds the COO, as even unprofitable ones can provide cash flow, but Wiggins can better understand the key variables that impact on client profitability. “As a result, we are able to make informed decisions on rates, discounts and staffing,” he says, and overall, “we are better informed and understand our business and how it works far better than before”.
Squeezing suppliers
While Misys has focused on using employee-related data to make better decisions, and Wiggin has focused on using client-related data, the engineering firm Smiths (which provides products and services for threat and contraband detection, medical devices, energy, communications and engineered components) has taken a different approach to extracting the maximum value from the information at its disposal, by using a BI system (Infor Performance Management) to focus on its suppliers.
“All businesses manage suppliers,” observes John Williams, who was until recently, director of enterprise solutions delivery at Smiths, “but in a portfolio business like Smiths, or any organisation with multiple units, there is often little leveraging of suppliers across the group,” and rather than focus on traditional metrics such as on time delivery, Williams was keen to see “tactical value generation” within the group. “The information we needed to do this existed, but it was held in a multitude of source systems,” he recalls, “so we used Infor PM as an enabler to collect the information and then used a master data management philosophy to classify them by commodity type and legal owner.”
As a result, Smiths was able to see how much it was purchasing from a particular group, even if – as in the case of General Electric, for example – all of the subsidiaries did not have this name. “As a result we revealed over 15,000 suppliers common to more than one Smiths’ division,” says Williams, “and well over 60 organisations such as General Electric, that supply all of our divisions.” This gave Smiths the opportunity to more fully exploit its economies of scale, and helped to drive the development of a “global procurement board” within the group, with the responsibility for making decisions on suppliers on a global basis, rather than leaving this to the divisional silos that had previously made these decisions.
By exploiting available data in this way Smiths was able to make procurement savings of £9m during 2009, with a further £11m expected during 2010. It also used BI to cut costs in other areas too. “After collecting and analysing data on employee travel patterns, such as frequency, carrier, class, days between a booking and the flight, and even the most common routes travelled, we were able to use the information to drive actions such as cultural change,” Williams explains, by balancing the approach Smiths takes to travel against the possibilities offered by technologies such as videoconferencing and telepresence.
Only after all of this did Smiths put customers under its BI magnifying glass. “We extended the capability to include looking at who our customers are globally, and using the same approach to mastering the customers and identifying legal owners, as we had with suppliers,” he says, which had an added bonus: “We were able to identify our suppliers who are also customers, allowing us to further leverage the scale of the Smiths group.” But Williams has a few words of advice for those who think that BI could also offer them a way to better exploit their data. “Understanding how information can drive value, and understanding the expected outcome are critical to success,” he says, adding: “Technology is the enabler rather than the answer.”
