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United we stand
The success of a merger or internal restructure may depend on how well the business intelligence systems come together. CFO looks at the risks and how to manage them
By Keith Power
CFO. 01 August 2004
In an industry such as wagering, where millions can be won or lost almost instantly, business intelligence (BI) systems and a good understanding of your customers and your business are vital. So a challenge for Tabcorp and TAB as they bed down their $8-billion merger will be to combine their respective BI systems.
Tabcorp's official line is that it is too early to comment on the matter at this point. However, although TAB's business intelligence manager, Paul Ormonde-James, is unable to comment on the merger specifically, as a general observation he says that the beauty of TAB's data warehouse is that it has been built to be scalable and flexible. It can consequently grow at whatever pace necessary.
"Our system taps into all data and information sources within the company, and every executive and employee can access it through our front-end portal. We have set screens that individually feed [our executives] the information they need," he says.
But in using a data warehouse, it is important to determine how much information of the past is relevant to the future. Care is needed, Ormonde-James says, not to assume that the future is a complete subset of the past. TAB consequently uses tools to look at "what if?" scenarios to determine what would be the probable results and effects of particular events.
Ormonde-James thinks the next stage for TAB in helping it make better-informed and faster decisions is to get more into knowledge management and collect more passive information.
"Although data warehousing is a great source of financial and trend data, 80% of a company's value is really in people's heads. I would suggest that in mergers and acquisitions there may or may not be a possibility of people coming and going, and that you want to try and capture as much of that [passive information] as you can.
"One thing we've found in TAB is that people have views and knowledge about things, whether it is their job or not, because they have interests; and some of the real value in corporations is knowing how to tap into that."
Although TAB uses a number of front-end BI tools (user-facing applications, or what the end-user sees) to access its data warehouse, it has integrated them into a single system. However, integrating disparate BI systems and obtaining a homogenous solution is not easy, according to Shai Agassi, executive board member of SAP AG, the person responsible for SAP's overall technology strategy and execution. Nor does he see a big consolidation effort under way.
However, although Tabcorp and TAB are reticent about their post-merger plans for BI, Agassi believes organisations should not wait until a merger starts before planning, as they need a clear pre-merger idea of where the two companies' data lies. They should also not think of the integration as a BI strategy on its own but as part of a complete enterprise application strategy, he says.
Experiences and views can differ. Brenton Smith, managing director of Business Objects Australia and New Zealand, a BI tools and services provider, claims that consolidation of disparate BI systems into a single solution now accounts for between one-quarter and one-third of his company's business. Much of it, he says, is as a result of mergers and acquisitions.
According to Smith, integrating such systems is not technically difficult, as BI implementations are not nearly as complex as enterprise resource planning (ERP) implementations, for example. Rather, the challenges are the same as for most large projects - namely, politics and people's affiliation for their current systems. Consequently, Smith thinks a BI consolidation project requires one person with the clout to get things done in the organisation, with no emotional ties to a particular product.
The strategy to integrate BI systems should be high on the agenda to help rationalise the companies following a merger or acquisition, Smith says, and the new system across the top should eliminate all the disparate systems below. Like Agassi, he also thinks companies should start planning straight away to keep the reporting requirements flowing, especially if the merger/acquisition involves a public company.
"The main point I would say to any organisation rationalising its BI systems is to pick a strong vendor that is not going to be acquired itself. Treat them the same as an ERP vendor - as a strategic partner," Smith says.
Jon Longworth, a manager in Deloitte's business intelligence practice, thinks transparency is important straight after a merger or acquisition, so, again, planning for the integration of disparate BI systems needs to start before the merger.
"The new owners, in particular, are going to want to get a very good handle on exactly what has happened with the acquisition, and how the operations are going. So transparency into financial and operational performance is the key. You want two streams running. One is tactical, to get on top of what information there is. The other is more strategic, which is starting to plan for the rationalisation of the underlying infrastructure," he says.
According to Longworth, rationalising BI tools is relatively easy, as it involves replacing tools that are largely capable of the same things. However, he finds the integration process can be quite difficult technically at the data level. Organisations often have existing issues such as data quality to contend with. On top of that, they are then trying to bring various different data sets together and possibly representing them with a single tool. This can undermine attempts to start to aggregate and make meaning of the data from the two organisations, he says.
It is also worth undertaking a health check of the existing BI systems in both organisations, Longworth adds.
"A company may come to the conclusion that neither of those environments is sufficient to provide the kind of agility it requires going forward. So you may not, in fact, be looking at an integration but at a replacement of both environments. That's probably one of the most valuable things to assess first, rather than get halfway through a very painful integration exercise and then realise that," he says.
It is not only mergers and acquisitions that drive integration of BI systems. Many organisations have multiple BI systems resulting from individual departments doing their own thing, but as they come to view BI as being strategic, or as a result of an internal restructure, for example, they wish to consolidate them. According to Smith and Longworth, the issues they face are usually no different from a merger/acquisition.
Lloyd Bennett, chief finance officer, Department of Defence, considers the golden rule in supporting business decision-making to be a very consistent understanding of one's business across all aspects of the organisation. He says that Defence is trying to achieve better integration of its information through the use of data warehousing tools. SAP is Defence's core financial transaction engine, and it uses additional SAP tools such as Business Warehouse to exploit the information stored therein.
"We're a capability-oriented business, and I want to automate the base information gathering so I can help people be equipped to do the intelligent analysis that they need to do," Bennett says. "I wouldn't exaggerate what an IT system can do for you. To my mind, it's making sure people have the information they need in a way they need it, especially in a place like this, so you take the mechanical information gathering process away and allow them to do the smart analytics quickly."
"You need to make sure you have your information management strategy well defined and your information architectures well defined, and then you can give people the knowledge and information they need," Bennett says.
Across the Tasman, New Zealand-based DB Breweries faced the challenge of a fragmented reporting structure, in which different teams in the company were generating management reports using different tools. While DB Breweries had been using a mix of SAP and Cognos reporting tools to generate its financial, sales and distribution information, the group's manufacturing teams were using Crystal Reports and senior analysts were using Microsoft Excel.
Andrew Cammell, DB Breweries' information systems manager, says: "In order to gain a sense of how the business was operating at any time of the day, we needed to turn multiple reports from different legacy systems into a single, standardised set of reports and consolidate the data into our data warehouse."
"We regularly came across conflicts - for example, in the monthly sales figures. We wanted all teams to be reviewing the same set of figures in exactly the same format, so people could trust the accuracy of the information they were using. We needed people to focus on the decisions to be made rather than the validity of the information."
DB Breweries initially created a new role for a business analyst in knowledge management to focus on the reporting procedures, and then selected Cognos ReportNet to replace all its existing reporting solutions.
According to Cammell, within six months of implementing ReportNet, DB Breweries was able to expedite many business processes, provide faster response times to inquiries, boost staff morale and reduce technical support calls and operating costs.
"It [ReportNet] simplifies reports, generates reports more rapidly and provides consistency in reports, in line with our structural change for both national and regional reporting. The reporting capabilities give us an accurate breakdown of sales and supply chains, down into actual transactions and summary tables. Managers can now view supply chains and project sales across the company's three operating regions - Northern, Central and South Island.
"We can now see manufacturing facility's electricity usage versus the hectolitre of beer sold, enabling us to have better visibility of processes. Moreover, in order to gain daily sales figures we used to have to go through around 27 steps. We can now do this in three easy steps," Cammell says.
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