Enterprise Business Intelligence From Erp Systems V3

Enterprise Business Intelligence from ERP Systems Dave Guevara IdealCMS [email_address] www.idealcms.com

You Will Learn Objectives Pragmatic design and analysis techniques that expose enterprise information from ERP systems Straightforward metrics alignment process Examples of what to do when the ERP system is only partially deployed or modules aren’t integrated Trade-offs between when to use a EDW, data marts, data federation, ODS or reporting mart

Agenda Challenges: enterprise info people want to use. Biz value driven design of enterprise info. Metrics, strategic & business alignment CDI enables EBI with ERP & non-ERP sources “Side view” data for EA, SOX and SLA. Wrap-up discussion, Q&A

Challenges in Providing Enterprise Information that People want to Use Lot’s of busy reports and “so what” data No clear visibility of cause & effect Where is the business value? Need it sooner than later Transactions data from ERP isn’t enough

Business Impact 52% never realized strategic value . 89% are flying blind ! 57% cannot deliver market driven demands & capabilities. 50% say they could have realized value at 50% of cost. “ IT Portfolio Management”, Bryan Maizilish, Robert Handler © 2005 Business Impact

The “What” and “How” Dilemma Iteration How Should You Do It? Bridge the “ What ” to the “ How ” with Business Value Alignment Delivering Maximum Value Technical Requirements Decomposition Delivery Project Development Test & Validation Test Requirements Development Cost Justification Resource Planning Project Objectives Ideas Prioritization Prioritization Competitive Strength / Market attractiveness Business Objectives What Should We Do? Business Value Roadmap Business Milestone Roadmap Cost Justification Resource Planning Prioritization Business Milestone Roadmap Project Objectives Ideas Prioritization Project A Business Milestone Roadmap Cost Justification Resource Planning Prioritization Business Milestone Roadmap Project Objectives Ideas Prioritization Project B Business Milestone Roadmap Cost Justification Resource Planning Prioritization Business Value Roadmap Project Objectives Ideas Prioritization Project C

Business Value Milestones Connect Your Value to Project Milestones Business Value Milestone Resource & Asset Allocation Budgets (Opexp, Capex) & Cash Flow Scope, Change, and Cost Control Opportunity Management Time Sequencing Capability Development Resource Planning Risk Assessment & Management Business Impact & Performance Goals Functions & Features

MDM: Master Data Management Operational Integrates operational applications for ERP, CRM, financials, etc. Analytic Prominent in data warehousing since it balances between tracking data lineage and repurposing data to create new structures (e.g. aggregates and time series) Enterprise Broader in scope than operational and analytic MDM and may encompass both

1 st Step in Designing Software Solution for MDM Decide data model of business entities Hierarchical, multidimensional, object-oriented, relational or flat “ Move past reacting (like out-of-sync systems) to proactively searching for opportunities for improvement (like more systems in the MDM grid).” TDWI Study “Master Data Management: Consensus-Driven Data Definitions for Cross-Application Consistency” by Philip Russom Oct 2006

Business Value Driven Design of Enterprise Information Only 5 ways to impact business value Use market or service driven (not vendor) approach 4 levels of data abstraction Business context comes from metadata

Ways to Impact Business Value Increase Revenue Reduce Costs Improve Process Efficiencies Risk Mitigation or Improve Governance Enhance or Preserve Capabilities

The Investors’ View River of Cash™ Flowing through Your Business River of Cash™ is a trademark of IdealCMS Cash Flow: Financial Context for Decisions IT & Product Financing (FCF) Investors & Debtors Investment Loans & Leasing Returns to Inve s tors Returns to D e btors Investing (ICF) IT Systems & Projects Fixed Assets & Investments Operating Expenses Paid Collected Sales Operating (OCF) Revenue & Costs Processes & People Project Pipeline Increase Business Value from IT is from: Increase Sales, Reduce Costs, Improve Process Efficiency Mitigate Risks, Improve Governance Capabilities: Enhance/Preserve

Your Company’s River of Cash™ Your Company Collections [direct, channels…] (OCF in) Labor Operating Expenses (OpExp) Paid Non-Labor Operating Expenses Paid Draws from LOC (FCF in) Debt Repayment (FCF out) Bank Fixed Assets, PP&E (ICF out) Direct Cost of Goods/Sales Paid Shareholders Unusual & Spec Project Expenses Paid Dividends (FCF out) Paid In Capital (FCF in)

Align Sales to Customers’ Pain MARKETS CUSTOMERS “ Must Have” Service &/or Products “ Pain” Based Value Proposition VALIDATE , VALIDATE , VALIDATE Consistent sales growth requires: Consistent sales activity Clear “Pain” based value proposition Perceived “Must Have” Services/Products Constantly VALIDATE your customer’s Pain (it changes), THEIR understanding of your Value Proposition, and THEIR decision if you are “Must Have”. Your Company Collected Sales

4 Levels of Data to Information Abstraction Decision Level Strategic Management Task, Event Problem Solving Task Data Abstraction KPI, Goals, Goodness Actionable Metrics Business Context & Sequence of Transactions Transaction Type of Information Performance, Financial, Economic Economic, Financial, Operational Operational, Financial Operational, Financial

Customer Order Example in Context of MDM Data design at transaction level and of metadata must be able to support Analytic & Enterprise analysis, and visualization at each decision level.

Business Value Exercise Enough talking! Let’s get into small groups Objective: Determine how to translate an earnings growth goal into the key performance indicators that your BI solution will report from the ERP financials.

Lessons Learned on Designing Business Value Driven BI Determine early the level(s) of decision making & decision making stakeholders. Actionable metrics show what needs attention, what to do and who to call Actionable information is defined from decisions being made, cause & effect analysis, and the actions taken Define the full vision, but implement in small steps Work side-by-side with your key constituents for a few days or a week Identify exceptions to the rule, or decisions that are made “outside the system” Identify HOW your “customer” determines cause & effect. Verify level of data abstraction and the relationships of these data to decision making criteria Design your reporting data architecture then evaluate the appropriate data access Map the high-level actionable or scoreboard metrics down to the transactional source data prior to deciding the preferred architecture

Metrics, Strategic & Business Alignment Start with the end-in-mind IT Portfolio Management provides guidance Focus on metrics not reports Lead the alignment discussion, don’t wait

Business Alignment of Enterprise Info “ IT Portfolio Management”, Bryan Maizilish, Robert Handler © 2005 IT Portfolio Management Enterprise Strategic Intent Enterprise Business Objectives Business Unit Objectives/Requirements IT Plan (IT Policies, Principles, Road Map, etc.) What are the Key Performance Indicators? What belongs in the Performance Scorecard? What are the Critical Success Factors? Customer Requirements Enterprise Architecture Business Intelligence Competitive Intelligence What selection criteria will be used to filter the Portfolio?

Portfolio Management Processes Simplify Business Alignment Into Data Architecture Strategies Risk Management Methodologies (eg SOA, MDM, CDI) Design Processes Enterprise Architecture Business Value Governance Initiatives Portfolio Management Technologies Visibility Projects Architectures Roadmaps Architecture Blueprints Investments Budgets Best Practices

Line-of-Sight Across Levels of Decision Making Decisions Revenue & Profit Results Desired Outcomes Investors Board of Directors Executive Team Management Teams & Key Employees Work Groups & Customers Vendors & Subcontractors Supply Chains Distribution Channels Stakeholders Line of Sight Needs Goals

Alignment For Actionable Metrics Organization Structure Actionable Metrics Operations Model Economic Model Operations Metrics Financial Metrics

Metric Alignment Exercise Get back into small groups Objective: Using the KPI from the first exercise to define the Actionable Metrics for the COO who is driving down COGS.

Lessons Learned on Alignment The business and strategic alignment process for any enterprise program (EDW, BI, EA) is the same as that used in IT Portfolio Management. So don’t reinvent the wheel, use the pieces that help you. Often the business or executive teams will not provide the strategies or initiatives with enough clarity that they are actionable at a design level. Plan on doing your own alignment analysis and to facilitate this process with your business, process and finance SME’s. The metrics alignment process runs in parallel to the business/strategic alignment process, however the outcomes are Actionable Metrics, Back-of-the Envelop metrics, Key Performance Indicators (KPI) and Enterprise metrics (side view).

Using CDI Enables Enterprise Business Intelligence from ERP and Non-ERP Sources Timeliness and time frames Cross-correlation of data into decisioning context Business context to provide meaning Goals to provide measures of goodness

Timeliness of Visibility in BI Timeframes: Real Time: O&G trading, customer service, telecomm Near Real-Time: Online retailer, Webcasting, Walmart Periodic (day, week, month, quarter): Scoreboards On-demand: Use determines refresh rate Scheduled: EFT batch submit Event Driven: Notification reports (SLA, major customer sale) Cross-relating data sources requires that both sources refresh on like timeframes Find slowest common denominator. Note data refresh and report refresh in report, scoreboard...

Overstock.com EDW/BI Architecture Overstock architecture diagram is not available electronically per conditions applied by Overstock.com in how their system is briefed. The system is described in the Speakers notes.

TDWI MDM Study Mid-2006 of MDM Business Entities Customer 74% Products 54% Financials 56% Biz Partners 49% Employees 45% Locations 41% Sales Contracts 25% Physical Assets 21% % of 741 respondents that identified Business Entity as important in MDM. TDWI Study “Master Data Management: Consensus-Driven Data Definitions for Cross-Application Consistency” by Philip Russom Oct 2006

Relating Financial Data to Operational Data Debit Credit Account Type AR AP Inv Assets Liab Equity Account 1100 1200 2000 2500 … Report Metric Sales by Division Depreciation Account Inversion +1 -1 Chart of Accounts 1100 1200 2000 2500 … Credit Inversion +1 +1 Filter Attributes xxx yyy zzz xxx yyy zzz

SOA Example of Data Sourcing Issues for EBI Develop data governance standards sooner than later. Use new initiatives (like SOA) as way to introduce data standards & rework old structures. SOA adds transaction data that is outside the ERP & non-ERP systems, so design in how you will get visibility.

Lessons Learned on CDI enabling EBI Get in front of the problem where ever you can! Identify early on where you will need trend or historical reporting capabilities. When relating financial data to operational, sales or service data design: COA mapping tables Sign inversion tables User interface for finance or accounting to manage these mappings Define and document the different definitions for the core data entities (customer, products, partners, etc.), then determine what is the master source of record and the defining business context. Whenever possible establish data structure standards for any new software development and application enhancements. Same goes for new design approaches like SOA. Determine where to incorporate data transformation mapping tables based on development standards, data accessibility and system architecture. Develop a roadmap and a data architecture blueprint for your data migration plans to your preferred future data structure. Develop an approach (even if sub-optimal) to work with what you have as data sources. When all else fails, and depending on your BI, ETL and database technologies, pull the data into a BI mart.

“ Side View” Data for EA, SOX and SLA Side View data is about the systems, processes and performance SOX compliance data may provide visibility onto candidates for process improvement Correlating system/app monitoring data with transaction loads may highlight cause & effect

“ Side View” into Enterprise Data Sources Capturing a little extra data provides tremendous “Side View” visibility

Relating SOX Audit Structure to Financial & Operational Data Revenue/AR SOX Compliance Cash Cycles Procurement/AP Inventory/ Goods Fixed Assets/ PP&E Treasury/ Financing Operating Cash Flow & Earnings Financing Cash Flow Investing Cash Flow

Work Function View can Identify High Value Data for Side View CORE ACTIVITIES ARE: A group of tasks that produce output Specific enough to be actionable CORE ACTIVITIES ARE NOT: Customer orders Process descriptions Control Input Consumables Output Uncontrollables & Environment Work products Measures of Quality Timeliness Reporting Resource Time IT Resources & Capacity Sales Orders Work Orders CRM Executive Oversight Order processing System Time through work function

Lessons Learned on Side View Data When designing your primary EDW/BI or enterprise information systems remember to look at how you will see your system, processes and events from a side view. Side views may be for compliance (SOX), enterprise architecture (EA), service level performance (SLA), disaster recovery (DRM) Relating system monitoring data to transactional data may provide unique visibility into cause & effect. SOX compliance is based on the five cash cycles. Since logging functions can produce huge files that just burn storage and provide little value, evaluate where to insert event data writes. Interrogating transaction rates and latency from the transactional records can provide insights into data loading issues, timing problems, demand surges, performance hits due to external data feeds, and possibly SLA conditions at end-user experience level.

Lessons Learned on Buy-in KNOW your “customers’” view of “What’s in for me?” Start with the end-in-mind. Use a roadmap to set expectations and update Frequent communications and reviews are critical Use mockups to visualize the “customer” requirements. Actionable metrics require knowing: What Needs Attention, What to Do Who to Call Set up Change Management at the beginning of the project Respect your business SME’s, Humility is good

Wrap-up Session Q&A General Lessons Learned Be prepared to do your own business/strategic alignment analysis Focus on metrics alignment as 1st step in requirements. Get your requirements into software requirements & framework Be specific and offer solutions to the software developers Do the performance trade-off analysis Verify how you correlate processes, tasks, transactions and data entities into the business context of your decisioning requirements. Get a handle early on about data inconsistencies Constantly revisit timing performance and load management Be prepared to design around sub-optimal implementations Be able to capture metadata and reference data not otherwise available Use query time optimization techniques to assure timeliness while not interfering with transactional throughput.

References & Information Articles on BI and EDW topics are available at www.idealcms.com Guest authors who would like to contribute an article or white paper on these topics are invited to submit ideas to www.idealcms.com . “ IT Portfolio Management, Step-by-Step, Unlocking the Business Value of Technology”, Bryan Maizlish & Robert Handler, Wiley © 2005. “ Managing by the Numbers, A Commonsense Guide to Understanding and Using Your Company’s Financials”, Chuck Kremer and Ron Rizzuto with John Case, Inc. © 2000 Contact Information for Questions Dave Guevara, IdealCMS (303) 694-9394, [email_address] , www.idealcms.com

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