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When applying information technology to drive better business performance, companies and the systems integrators that assist them often underestimate the importance of organizing data management around processes. For example, companies that do not execute their quote-to-cash cycle as an end-to-end process often experience a related set of issues in their sales, marketing, operations, accounting and finance functions that stem from entering the same data into multiple systems. The inability to automate passing of data from one functional group to the next forces people to spend time re-entering data and leads to fragmented and disconnected data stores. The absence of a single authoritative data source also creates conflicts about whose numbers are “right.” Even when the actual figures recorded are identical, discrepancies can crop up because of issues in synchronization and data definition. Lacking an authoritative source, organizations may need to check for and resolve errors and inconsistencies between systems to ensure, for example, that what customers purchased was what they received and were billed for. The negative impact of this lack of automation is multiplied when transactions are complex or involve contracts for recurring services.
Our benchmark research shows that data fragmentation, consistency, availability, usability and timeliness are key issues for companies. The information management issues in process design and execution are similar to those at work for analytics. However, addressing them effectively requires a different approach than just creating a separate data store to be the “single version of the truth.” Careful consideration is required to determine the best method to manage data throughout a core business process, particularly when multiple applications are required to automate and support the execution of the process. Software application platforms offered by some vendors make it far easier to integrate niche software applications into processes in a way that may eliminate the need for an operational data store.
The information dimension is usually overlooked in designing business systems because data is viewed as a given, is not explicitly considered (“we’ll work out the details later”) or is considered only an afterthought. This may occur because the information dimension of systems engineering is treated as being of secondary importance to defining the best process and determining the required applications capabilities. But we think making data an afterthought is a mistake. Ventana Research uses a framework that explicitly calls out information (all forms of data) and technology (software, hardware and networks) as separate elements in addressing business issues, rather than lumping the two together as “technology.” Explicitly taking the data perspective into account provides a broad perspective that frames process and technology requirements. We assert that treating data as a core consideration can result in better process design and clarify the issues companies must consider to select the appropriate systems to support the people and process aspects of business operations.
Quote-to-cash is a useful example of where an end-to-end process requires more than just workflow to manage the handoffs as tasks are executed. In some simple cases, an ERP system can handle all of the details. In others, automating the process and data flows may require multiple systems (such as a CRM system for customer and account information, as well as systems for product configuration, contract management, billing and collection in addition to ERP. Some of the data assembled in a quote-to-cash transaction may have to be transferred to other operational systems to fulfill the transaction. To achieve best results, data must be staged and controlled from start to finish and there must be a single system of record. Deciding on what application (or applications) to use to manage the process and where to locate the system of record physically and logically depends on a company’s specific circumstances.
Engineering quote-to-cash end to end from both process and data flow perspectives can speed its completion (thereby improving customer responsiveness), remove unnecessary manual steps (generating efficiencies) and reduce or eliminate errors at every step (resulting in better customer service and lower costs).
Another example that benefits from a data-driven end-to-end process is requisition-to-pay. It may seem counterintuitive, but accelerating the payment of invoices can improve a company’s bottom line. With interest rates in much of the developed world at historic lows, the greatest return on available cash is taking advantage of early payment discounts. Yet few companies take advantage of these. One important reason why they don’t is deficiencies in the data and technology needed to make early payment practical. Starting the automated process at the point of initial requisition gives the treasury function better visibility into the amounts and timing of future outlays, making cash forecasting more certain. Greater certainty about the corporation’s cash position lowers the amount of cash it needs to hold to meet payment obligations while maintaining an adequate operating liquidity buffer to allow for forecasting errors and unanticipated needs. Companies that have limited visibility will be cautious about making payments and must maintain a larger, more conservative buffer stock of cash. Using automated systems to speed the processing of invoices by eliminating delays in handoffs is only one element needed to make early payment discount feasible. Timely access to accurate data to support processing invoices is necessary, as is data needed by an analytical application that supports the treasury function to handle the complexities of managing cash effectively.
The importance of timely access to reliable data is often overlooked, but it can be the key ingredient to improving the execution of core business and finance department functions. Engineering data and data management into the design of technology-driven processes must not be an afterthought; it must be integral to the decisions about what software is used and how processes are to be performed. Our research shows that data issues plague companies, and the larger the company, the bigger the problem may be. Effective data management is essential to improve corporate performance. We advise companies to review their current processes and take steps to modernize and automate any that are a drag on performance.
Robert Kugel – SVP Research
One of the potential benefits of cloud computing to access business applications and data is its potential to improve the situational awareness of executives and managers. By this I mean their understanding of what’s going on outside their company in addition to what’s happening within it. Today people have access to a trove of information about their own company, which is the result of decades of investment in an expanding range of enterprise transaction systems (ERP, CRM and supply chain management, for example) and convenient data stores that make accessing data easier than ever. But although people have access to internal information, most have big gaps in their knowledge about what’s going on in the outside world. Take, for example, market trends, information about a competitor’s, supplier’s or customer’s financials or industry-specific demand forecasts. Our benchmark research shows that while two-thirds of companies are satisfied with their ability to integrate information from standard internal sources, only 39 percent feel that way about reference or competitive data from external sources and 36 percent about text data from social media.
Cloud-based deployment of applications has the potential to address this intelligence deficit, but only if users demand it. In some respects, the dearth of external information today is a legacy of limits imposed long-ago by computing infrastructure. Obtaining information about the world outside the four walls of an organization used to be difficult, time-consuming and not always trustworthy. Some people may have had subscriptions to magazines or industry newsletters. Yet unless these publications were nearby and you knew it, accessing their information was difficult. Today, however, almost all such information is available on the Web, often for free. If, say, you need to track production of closed die forging, press and upset forging by country in Europe, you simply look here. The Web has made it easier to receive and use information. Not too long ago, updating third-party data stores involved getting delivery of physical media (such as optical or magnetic storage discs). However, the bad old days linger on in attitudes. Most business people are not in the habit of thinking about integrating external data into enterprise systems, which I assert is one reason why only about one-third of companies have satisfactory access.
Human nature is another reason why external information is not as available as internal. Organizations tend to look inward. Too often, performance is assessed only on an us-vs.-us basis, as in comparing actual results to a budget or to the same period a year ago. But business is a competitive game, not solitaire. In the past, it might have been difficult to use external benchmarks to measure an organization’s own performance, but in today’s environment it’s not. And there’s no good excuse for persisting in bad habits that prevent companies from using more information about the outside world. Organizational habits can be altered, but doing so usually requires a change of tone at the top. CEOs and senior executives stand to gain the most from better situational awareness, but I worry that few of them understand that a lack of readily available external information is undermining their company’s ability to compete.
Speaking of bad habits, the integration of new technology into business operations has long been unsteady and inconsistent. It took about half a century after the invention of the fractional horsepower electric motor for the redesign of factories to take advantage of the greater flexibility of that technology over steam engines. By comparison, adoption of the Internet by business has been stunningly swift in some respects but not others. When it comes to the cloud, the extent of adoption differs considerably. Businesses that thrive on novelty – and the parts of the business that are most engaged in novelty (such as marketing, sales and product design) – have been the earliest to incorporate cloud technology into their processes and systems. Industrial companies and departments such as finance and operations have been slower to bring new information sources into their management processes. All companies can benefit from increasing their understanding of what’s going on outside their four walls. The cloud is there to help – but only if companies and their executives want that help.
Robert Kugel – SVP Research