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If You Build It…

Smaller companies have shied away from data-warehouse projects, but when done right such projects can stay on course and provide genuine value.

Now You See It

The BI system continues to evolve. This year one focus is on the development of custom portals, secure internal Websites devoted to specific subject areas and departments. The new Key Products Portal, for example, provides executive-level users with key performance indicators about the company’s top products. The portal also offers news stories relevant to those products, their customers, and competing options.

Another new portal, for the accounting department, highlights crucial information relating to accounts payable, accounts receivable, shipments, and credit/debit memos. An AP staffer can immediately see the current state of AP: how many invoices are past due, how much cash is outstanding, and so forth.

The portals are designed to provide what Retano calls “four-in-four” information: the four things that a manager or executive should know within four seconds of launching the portal at the start of the day. Using the number four is partly aesthetic (“We tried five, but four graphs fit nicely in a window,” Retano says) and partly psychological, as the human mind cannot easily comprehend more than four objects or images simultaneously.

But What’s the Payoff?

Retano says the goals of the data-warehouse project — easy access to a consistent database, sharable data, a more informed view of the business — are being realized, but he admits that the economic value of such capabilities is very difficult to quantify. It’s possible to measure the time that users save in not having to manually generate reports, but a data warehouse is fundamentally a decision-support tool — and how can you quantify the results of a smart decision, such as suspending an underperforming product line, when so many factors will influence the result of that decision?

That challenge bothered Impax CFO Art Koch when he approved the program in 2007. The firm attempted a cost-benefit analysis, but the results were inconclusive. Koch admits he had doubts; he knew that “projects like this are built on great aspirations, but don’t always deliver.” His approval ultimately hinged on testimony from the firm’s sales group, who argued that enhanced data-analysis capabilities would provide competitive advantages.

James Kobelius, a senior BI analyst with Forrester Research, notes that vendors like to push what he calls “the lottery value of BI” — that a single great decision can transform a company. But in practice, he says, most decisions supported by BI are routine and operational — and unlikely to provide great incremental value.

Nonetheless, Kobelius maintains that even if decision-making remains more an art than a science, the value of systems that support it can be quantified. He is developing a conceptual ROI model for decision-support infrastructures, based in part on assertions that every bad decision has a calculable “do-over” cost, and every optimal decision has a calculable monetary return.

Retano says there is a danger in overrelying on data when making decisions, and that the subjective component of experiential wisdom plays a key part. “But,” he says, “at least BI gives you a better base from which to extrapolate your own conclusions.”

David McCann is senior editor for technology at CFO.

Key milestones in Impax Labs's data-warehouse project

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