Having spent a few years in the BI industry working with quite a few clients it has become very clear that many companies are taking on similar BI projects. It makes perfect sense that companies belonging to a particular industry will need to make very similar decisions. How these companies approach a particular problem (decision point) may differ widely. Some may invest heavily in the best decision support system imaginable, and others may leave these decisions to the intuition of individual contributors.
There is opportunity to add value by providing highly focused External Decision Support Systems (EDSS) to targeted verticals. The model for such of a service would be based on the below principles.
1. EDSS is owned, housed, operated, and maintained by the vendor
2. A common decision (highly focused) among multiple organizations is identified
3. The EDSS will be provided input data to include sets provided by clients as well as sets of external data common amongst all clients
4. Algorithms are created and executed by the EDSS engine which convert the inputs into the desired output (decision)
This model provides the client with very clear advantages.
1. No need to build or maintain a BI project required to support a particular decision (no cost of ownership)
2. Client benefits from the investment of other companies dealing with the same problem/decision point.
3. External data that would be too costly for individual companies to acquire becomes cost effective for a pooled resource to make available.
The vendor that provides EDSS becomes a true specialist in the BI system that is being offered. This level of expertise does not exist in today’s distributed BI project model as each company is limited to the expertise that can be developed in house.
Target EDSS’s will need to focus on decision support systems that require high levels of analysis. By designing and delivering a tool that overcomes the many obstacles associated with building a truly analytical BI system, EDSS providers will add value.
Thursday, March 5, 2009
Focusing on the Core
To be competitive in today’s business environment companies must have a market advantage. Clearly the days of opening up the only company serving a starving demand are over. If a company is innovative enough to identify or create a new or underserved market, then it will not be long until a slew of undercutting competition raises the stakes. This makes it extremely important that companies focus on what they do best; i.e. their core competency. By maintaining focus on the core businesses stand a much better chance of maintaining the market advantage which was the foundation for existence at startup.
Given that there is value in maintaining focus on the core, let’s examine how a business might determine which functions to keep in-house and which should be outsourced. The basic formula should not change.
If in-house total cost is greater than outsourcing total cost, then outsource.
This is a very simple guideline, but the key is in the word “cost”. Below is a list of costs that should be evaluated.
Complexity – What is the costs of adding complexity to a business? If a company is in the business of manufacturing a product, then what is the impact of adding the burden of managing a BI system in addition to maintaining the core business? Will focus be lost or lessened? If so, what are the risks associated with this shift of focus?
Management – What is the cost of managing a BI project? Are there resources currently available in-house with the expertise needed to manage a BI project? If not, will the project be added to an existing manager’s function? What are the risks associated with managing a BI project with under skilled personnel?
Product Selection – All BI projects utilize a core set of software products to include ETL, database, and front end. Which products will be purchased? Will these products provide the desired functionality? Is there in-house expertise available with broad enough product experience to make a product decision? What are the costs associated with developing the BI project on software the fails to deliver the desired results?
Architecture – Perhaps the most important decisions that are made during the design phase of a BI project are architecture related. Is there enough in-house expertise to make these decisions? What are the associated costs with architectural mistakes?
Value – What level of value will be added by an in-house BI project development team? How does this compare to an outsourced BI project? Time to delivery should be considered. What is the time value of the BI project? Annual value of BI project / 12 months = Cost per month BI project is delayed
This short list of considerations is meant to give some insight into the costs that need to be evaluated when considering whether to complete a BI project in house or to outsource. It is important to the BI project’s success as well as the company’s success that this decision is made with care.
Given that there is value in maintaining focus on the core, let’s examine how a business might determine which functions to keep in-house and which should be outsourced. The basic formula should not change.
If in-house total cost is greater than outsourcing total cost, then outsource.
This is a very simple guideline, but the key is in the word “cost”. Below is a list of costs that should be evaluated.
Complexity – What is the costs of adding complexity to a business? If a company is in the business of manufacturing a product, then what is the impact of adding the burden of managing a BI system in addition to maintaining the core business? Will focus be lost or lessened? If so, what are the risks associated with this shift of focus?
Management – What is the cost of managing a BI project? Are there resources currently available in-house with the expertise needed to manage a BI project? If not, will the project be added to an existing manager’s function? What are the risks associated with managing a BI project with under skilled personnel?
Product Selection – All BI projects utilize a core set of software products to include ETL, database, and front end. Which products will be purchased? Will these products provide the desired functionality? Is there in-house expertise available with broad enough product experience to make a product decision? What are the costs associated with developing the BI project on software the fails to deliver the desired results?
Architecture – Perhaps the most important decisions that are made during the design phase of a BI project are architecture related. Is there enough in-house expertise to make these decisions? What are the associated costs with architectural mistakes?
Value – What level of value will be added by an in-house BI project development team? How does this compare to an outsourced BI project? Time to delivery should be considered. What is the time value of the BI project? Annual value of BI project / 12 months = Cost per month BI project is delayed
This short list of considerations is meant to give some insight into the costs that need to be evaluated when considering whether to complete a BI project in house or to outsource. It is important to the BI project’s success as well as the company’s success that this decision is made with care.
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