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IBM hosted the Big Data and Analytics Analyst Insights conference in Toronto recently to emphasize the strategic importance of this topic to the company and to highlight recent and forthcoming advancements in its big data and analytics software. Our firm followed the presentations with interest. My colleagues Mark Smith and Tony Cosentino have commented on IBM’s execution of its big data strategy and its approach to analytics. As well, Ventana Research has conducted benchmark research on challenges in big data.
The perennial challenge for the IT industry observer is to be skeptical enough to avoid being taken in by overblown claims (often, the next big thing isn’t) without missing turning points in the evolution of technology. “Big data” has always been with us – it’s the amount that constitutes “big” that has changed. A megabyte was considered big data in the 1970s but is a trivial amount today. There’s no question that the hype around big data is excessive, but beneath the noise is considerable substance. Big data is of particular interest today because the scope and depth of the data that can be analyzed rapidly and turned into useful information are so large as to enable transformations in business management. The effect will be to raise computing – especially business computing – to a higher level.
The IBM event demonstrated that the technology for handling big data analytics to support more effective business computing is falling into place. It’s not all there yet but should improve strongly over the next several years. Yet while technological barriers are falling, there are other issues organizations will need to resolve. For example, the conversation in the conference sessions frequently turned to the people element of successfully deploying big data and analytics. These discussions confirmed an important finding in our big data research, shown in the chart, that more than three-fourths of organizations find staffing and training people for big data roles to be a challenge. It’s useful to remind ourselves that there will be the usual lag between what technology makes possible and the diffusion of new information-driven management techniques.
The conference focused mostly on the technology supporting big data and analytics but included examples of conceivable use cases for that technology. For example, there was a session on better management of customer profitability in the banking industry. Attempts to use software to optimize customer profitability go back to the 1980s, but results have been mixed at best, and a great many users continue to perform analysis in spreadsheets using data stored in business silos. IBM speakers described a generic offering incorporating Cognos TM1 to automate the fusion of multiple bank data sources that are incorporated in a range of profitability-related analytic applications. The aim is to enable more precise pricing and price-related decisions related to rates and fees, among other factors. This application enables consistent costing methodologies, including activity-based ones for indirect and shared expenses, to promote a more accurate assessment of the economic profitability of offers to customers. A good deal of the value in this offering is that it puts the necessary data in one place, giving executives and managers a consistent and more complete data set than they typically have. As well, the product’s use of in-memory analytic processing enables much faster calculations. Faster processing of a more complete data set enables more iterative, what-if analyses that can be used to explore the impact of different strategies in setting objectives for a new product or service or examining alternatives to exploit market opportunities or address threats.
As the Internet did, big data will change business models and drive the creation of new products and services. The dramatic drop in the cost of instrumenting machinery of all types and connecting them to a data network (part of the concept of the Internet of Things) is already changing how companies manage their productive assets, for example, by optimizing maintenance using sensors and telematics to enhance uptime while minimizing repair expense. Decades ago, companies monitored production parameters to ensure quality. More recent technologies can extend the speed and scope of what’s monitored and provide greater visibility into production conditions and trends. Representatives from BMW were on hand at the conference to talk about their experience in improving operations with predictive maintenance. Centrally monitoring the in-service performance of equipment and capital assets is old hat for airlines and jet engine manufacturers. For them, the economic benefits of optimizing maintenance to maximize the availability and uptime were significant enough to warrant the large investment they started making decades ago. The same basic techniques can be used to for early detection of warranty issues, such as identifying specific vehicles subject to “lemon law” provisions. From IBM’s perspective, these new technologies will enhance the value of Maximo, its asset management software, by extending its functionality to incorporate monitoring and analytics that help users explore options and optimize responses to specific conditions.
IBM Watson is the company’s poster child for the transformative capabilities of big data and analytics on how organizations operate. The company’s objective is to enable customers to achieve better performance and outcomes by having systems that learn through interactions, providing evidence-based responses to queries. My colleagues Mark Smith and Richard Snow have written about Watson in the contexts of cognitive computing and its application to customer service. And we awarded IBM Watson Engagement Advisor our 2012 Technology Innovation Award. Conference presenters gave an extensive review of progress to date with Watson, featuring innovative ways to use it for diagnosis and treatment in medicine as well as to provide customer support.
Although this was not directly related to big data, IBM also used the conference to announce the availability of Cognos Disclosure Management (CDM) 10.2.1, which will be available both on-premises and in a cloud-based SaaS version. CDM facilitates the creation, editing and publishing of highly structured enterprise documents that combine text and numbers and are created repeatedly and collaboratively, including ones that incorporate eXtensible Business Reporting Language (XBRL) tags. The new version offers improvements in scalability and tagging over the earlier FSR offering. The SaaS version, available on a per-seat subscription basis, will make this technology feasible for midsize companies, enabling them to save the time of highly skilled individuals as well as enhance the accuracy and consistency of, for example, regulatory filings and board books. A SaaS option also will help IBM address the requirements of larger companies that prefer a cloud option.
Most of the use cases presented at the conference were extensions and enhancements of well-worn uses for information technology. However, when it comes to business, the bottom line is what matters, not novelty. Adoption of technology occurs fastest when “new” elements of its use are kept to a minimum. The rapid embrace of the Internet in North America and other developed regions of the world was a function of the substantial investment that had been made over the previous decades in personal computers and local- and wide-area communications networks as well as the training and familiarity of people with these technologies. Big data and the analytics that enable us to apply it have a similar base of preparation. Over the next five years we can expect advances in practical use that benefit businesses and their customers.
Robert Kugel – SVP Research
Planview recently announced general availability of Planview Enterprise 11. The new release enhances the user experience through a comprehensive redesign of the interface to promote ease of use. The changes are intended to facilitate an integrated approach to long-range planning of capital projects and major corporate initiatives across departments. There’s an important difference between strategic and long-range planning, and this difference is the reason why long-range planning benefits from software specifically designed to support that process. Strategic planning involves the formal conceptualization of a corporation’s strategy and its individual supporting elements such as product, sales, pricing and financial strategy. The strategic planning process is aimed at solidifying ideas and concepts into words to ensure understanding and agreement by the senior leadership team. Strategic planning naturally is done at the highest echelons of an organization. For that reason, it involves a relatively small group of senior executives and deals more in concepts and less in specific numbers. Long-range planning is the next step. It’s the formal quantification of the strategic plan and how that strategy is expected to play out. Translating the company’s strategic plan into numbers should be an iterative process of dialogue between those who set the strategy and those responsible for carrying it out. Being able to get quick answers to these what-if questions makes for a more productive, accurate and fact-based dialog.
One of the key findings of our recently completed benchmark research on long-range planning is the importance of integrating capital projects and major corporate initiatives as discrete elements in a company’s long-range plan. This research, which was conducted with The Financial Executives Research Foundation (FERF) and Planview, shows that companies that explicitly include projects and initiatives have a long-range planning process that is better aligned with strategy. Yet we found that only 26 percent of companies fully integrate projects and initiatives in their long-range plans.
Improving the planning processes in corporations has been central to my research agenda for the past decade. In part this is because it’s one of the core business processes that can benefit most from using more appropriate technology. Capital projects and major corporate initiatives are an important component of the long-range planning process, but many companies find it challenging to incorporate them as discrete items in their long-range planning and review processes because they use spreadsheets, which are not well suited for the task. The benchmark research shows that a majority (52%) of companies use desktop spreadsheets to manage their long-range planning process. Spreadsheets are not a good choice for this type of planning because they have substantial limitations in handling any collaborative, repetitive enterprise-wide activity, especially ones that involve planning and analysis of multiple business units, regions, products and customers. Their shortcomings are especially evident when users try to integrate even moderately complex and discrete business elements such as capital projects and other initiatives into an overall long-range plan. Companies that use dedicated planning applications twice as often said the data they use for long-range planning is up to date (32% vs. 16%). The research also shows a strong correlation between the timeliness of the data used in analyzing and managing long-range planning and the ability of a company to make good investment decisions that we find as issues of stale data in organizations today from where 19 to 72 percent have challenges today.
Planview Enterprise makes it easier for companies to incorporate the details of investments and initiatives in the long-range planning process. Asset-intensive companies and those that continually invest in offering new products or services will find having this ability useful for planning, analyzing and managing these capital investment and major corporate initiatives. In contrast to ongoing, repetitive aspects of a business, an initiative has a distinct beginning and an end that is reached after the completion of multiple steps. These steps almost always require resources such as people’s time, money and the use of other corporate assets. Planning, analyzing and reviewing the financial aspects of projects or initiatives are difficult because the aspects are subject to change, especially in the time dimension. For instance, a delay in the delivery of a piece of machinery, approval of a building permit or some other discrete element often will delay some or all of the rest of the project’s activities. When that happens, businesses – and especially finance departments – need to be able to calculate the financial impact of that delay on the project (costs will be lower in some months and higher in others) as well as its consequences for expected downstream revenues and expenses related to that capital project or initiative (incoming cash and some costs will be delayed, while some outlays, such as interest and guaranteed payments, will not).
To Enterprise 11 Planview has added an in-memory processing capability that can make planning and review sessions more interactive by speeding up responses to queries and what-if scenario planning. A numbers-driven dialogue about investment choices is more useful when it takes only a couple of seconds to see the impact of, for example, a proposed schedule alteration, different expected profit margins or an increase in interest or exchange rates. The new version supports the requirements of users in different roles and departments. It has enhanced project and product roadmapping that helps the transition from a manual approach to an enterprise system. Time tracking is facilitated by a new mobile time-sheet capability supported on iPhone, Android and BlackBerry 10 devices. As well, Planview has been offering Enterprise in a software-as-a-service (SaaS) configuration. The redesign is aimed at improving the performance and usability of the software in a Web-based environment. In the past, Planview appealed to larger organizations with significant project management requirements. One of the objectives in the Enterprise 11 redesign, especially when used in a cloud environment, is to make the application more accessible by smaller organizations or ones that need to manage a limited set of projects and initiatives.
Enterprise 11 provides companies with an alternative to spreadsheets. Spreadsheets are not adept at combining project or initiative resource details (number of people and specific materials required, for example) with the cost details (cost per hour or cost per unit, respectively) and it can be impossible to get back to this underlying detail when spreadsheets are rolled up into a financial plan. Spreadsheets also are especially lacking in handling the time dimension or even moderately complex dependences that exist in almost any project. Consider, for instance, a factory expansion where the plumbing and wiring work can only begin after machine X is installed, or a national roll-out of product Y will begin only after market trials in multiple cities are completed and a messaging strategy is selected. A delay in the delivery of the machine or ambiguities in the results of the city trials will automatically stretch out the timeline. It’s difficult enough to create a project cost model in a desktop spreadsheet and integrate this into a spreadsheet detailing the long-range plan. It’s even more difficult to reflect actual amounts, compare these to the plan, make changes to the plan over time, assess the impact on the company’s financial statements and cash flow from changes made to the plan and decide how best to effect those changes. Having software that automatically recalculates costs based on schedule changes enables executives and managers to quickly understand the implications and assess the impact of different responses to a change in the schedule.
If we continue the factory expansion example, does it make sense to spend more to expedite the delivery of equipment and materials to accelerate the availability of a capital asset, or should the company just live with the delay? Planview Enterprise helps find a quick and accurate answer to that question. Having accurate data available when assessing capital spending projects and initiatives has an impact on how well a company makes these investments. Our research shows that 90 percent of companies that have accurate information make good investment choices compared to two-thirds (66%) that work with somewhat accurate data and just 30 percent that work with somewhat or mainly inaccurate data. The cumulative impact of consistently making choices about good capital spending and corporate initiatives is likely to be a significant factor in a company’s long-term profitability and competitiveness.
Planview Enterprise also helps companies assess their investment options, especially organizations that have ongoing needs to choose between substantial capital spending programs, funding new product development projects or doing both. Being able to model each investment as a discrete unit, to change assumptions about how, when and under what conditions they will be performed and to alter when and under what circumstances to fund these investments gives executives a more complete understanding of their options. Having a clearer picture should enable them to make better decisions about these investments more consistently. Moreover, since Planview is able to automate the collection of data about the actual execution of the investments, senior executives will be able to track their performance faster, more accurately and with much less effort. Having this level of accountability is likely to promote more consistently better investment decisions.
Larger organizations are likely to find a switch from spreadsheets to Planview Enterprise to be beneficial because they have more people and more ongoing investments. Our research shows that in 67 percent of companies in which more than 20 people are involved in long-range planning, spreadsheets make it more difficult to manage the process, and they also make it harder in 41 percent that fewer people engaged in the process. The research gives all companies a reason to rethink their use of spreadsheets because they were consistently rated lower than other alternatives for executing a wide spectrum of analytical and process management tasks associated with long-range planning.
Competence in long-range planning is vital to the success of any business. Being able to select the best alternatives for capital projects and major corporate initiatives promotes long-term competitiveness and the ability to achieve necessary returns to sustain a company’s financial health. Being able to examine the ongoing performance of these investments and make necessary adjustments to ongoing plans gives a company needed flexibility and agility in today’s turbulent economic and financial environment. Especially for corporations that now use spreadsheets to manage their long-range planning, I recommend they look at Planview Enterprise as an alternative to support a more effective long-range planning process.
Robert Kugel – SVP Research