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March 8, 2002

Planning the Future

Focused on demand visibility, new BI will help companies avoid recession havoc next time

David Stodder

If the U.S. economy is recovering, the road back is looking pretty bumpy. In recent weeks, Ford Motor Co. announced that it intends to lay off 35,000 workers and discontinue producing such emblematic automobiles as the Lincoln Continental and Lincoln Town Car. Kmart Corp. filed for Chapter 11, making it the largest retailer in history to seek bankruptcy protection. Meanwhile, on nearly the same day, Amazon.com Inc. recorded its first-ever quarterly profit, albeit aided by a weakening euro, which substantially lowered the company's debt burden, according to the Wall Street Journal.

Of course, the colossal business story of the year — and maybe the decade — is the fall of Enron Corp. and the potentially criminal behavior of its accounting firm, Arthur Andersen LLP. Many commentators are calling this still-breaking story a postscript on the New Economy: that is, the decline and fall of a company that grew big fast by living on the bubble of inflated stock, borrowed money, and faith that everything could be turned into a friction-free commodities trading marketplace, with itself playing the profit-happy mediator. It's too soon to determine what Arthur Andersen thought its role in this debacle was supposed to be, other than to express its irrational exuberance by shredding disagreeable documents.

Whether you're Enron's former CEO Ken Lay, one of the company's unlucky 401(k)-holding employees, or just an average, innocent investor, this recession's stock market roller coaster has dealt a cruel lesson in how fleeting wealth "on paper" can be. Paper wealth is not so much money as it is information, and information is power in the hands of those who can control its flow. Considering that many other companies in a variety of industries use means similar to Enron's to finance growth and expansion into new markets, the U.S. Congress and federal regulatory bodies have a delicate job ahead of them. How much public visibility into corporate financing and "strategic" accounting is appropriate — and how much will organizations jealously guard their control over the information flow? The blurred distinction between employees and shareholders brought about by stock ownership plans will make decisions difficult. Policymakers must decide which regulations are appropriate, and which could unduly straightjacket companies that must move fast to exploit new markets with the power of their business models.

To increase competitiveness and understand return on investment, businesses are turning to activity-based management and other performance metrics to interpret intangible assets, such as customer value. How will this trend affect the sanctity of the balance sheet as a public expression of overall business performance and value? And to what extent will these metrics become audit trails of their own? Regulators responding to Enron's demise and Arthur Andersen's questionable behavior must be sensitive to a very real and ongoing revolution that is changing how businesses evaluate performance.

BI: FOUNTAIN OF YOUTH?

As businesses rake the ashes of this recession for clues to strength and recovery, they will be looking hard for some better means of understanding demand: that is, how they can use information systems to anticipate the market, stay ahead of customer preferences, and adjust business processes to enable growth. In the 1990s, companies made huge strides on the supply side: making manufacturing processes more efficient, honing the logistics of transportation and delivery, and even establishing just-in-time processes for mass customization. Yet, when things went sour, they couldn't adjust quickly, not only to save profits and revenues in the supply chain, but also to chase demand where it was headed.

This recession has revealed how much businesses are hampered by the disconnect between traditional reporting systems, which focus on past results and tangible assets, and the critical bastion of planning and forecasting, where strategic decisions about the future are made. Company after company has had to take drastic survival moves because they did not anticipate the recession. Many have had to enact simplistic, across-the-board cuts that might cheer current institutional shareholders, but do not help strategically as companies try to move forward.

In most organizations, planning and forecasting activities depend on the spreadsheet: that is, the killer app of 20 years ago. And it remains the dominant, preferred crystal ball: right at their desktop or on the plane, users can input and massage their own data and perform what-if scenarios. Decision-support tools, executive information systems, and BI solutions that rose up over the last decade to serve users had no chance of traction if they did not either bow to the regency of the spreadsheet or avoid its bastion altogether by working in the background.

Moving out of this recession, however, things may change. Data warehouses and data integration layers are maturing; enterprise applications, e-business customer interaction systems, and other resources are generating terabytes of data that users know would be critical for planning and forecasting, if they could only bring it into their spreadsheets. The BI software industry, in the form of analytic applications, is responding to this need with modern approaches that use middle-tier caching architectures to achieve requisite high performance with massive data volumes — and still pay homage to the spreadsheet frame of reference that business users know and evidently love.

Rather than compete with the dominant BI vendors, such as Business Objects SA, Cognos Inc., and Information Builders Inc. for the user's reporting needs, many of the newer analytic application vendors are focused on the engine level — and are focused on deriving value from existing data warehouses and other data resources to drive better planning and forecasting. They want to bring business users out of "spreadsheet hell": that is, an increasingly omnipresent purgatory of monster macros, thousands of cells, and inconsistent data, all of which can grind collaboration between managers, departments, and lines of business to a halt. If the recession has taught Global 2000 businesses anything, it may be that they can no longer run vital planning and forecasting on the antiquated platform of individual, PC-based spreadsheets.

Since I've blabbered on too long already in this column to discuss the software vendors leading the way in appropriate detail, I'll save that for my next installment. Two standouts that I've met with in recent weeks are Whitelight Systems Inc. and e.Intelligence Inc. Whitelight is likely more familiar to readers due to product reviews and other recent coverage in Intelligent Enterprise. The second, e.Intelligence, is led by a familiar face: Rick Tanler, previously founder of Information Advantage (technology now owned by Computer Associates) and someone whose involvement in BI goes back to the days of Metaphor Computer Systems. We'll pick up here next time.

IN MEMORY

I'd like to close by remembering Richard Yevich, who died on January 20 at his home in Springfield, Illinois after a brief illness. Richard was principal of his consulting firm Yevich, Lawson and Associates and was an IBM Gold Consultant, which made him part of a small circle of revered outside experts in IBM DB2 UDB implementations. I got to know Richard through his activities with the International DB2 Users Group (IDUG). His award-winning talks on a range of DB2 database design, performance, and management topics were always a highlight of IDUG's annual conferences.

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Richard brought tremendous insight, enthusiasm, and humor to his presentations, which undoubtedly helped countless database professionals succeed in implementing DB2's increasingly advanced features. And he was very independent: Speaking from his experience, he said what he thought, even if his views didn't always jibe with the approaches sanctioned by DB2's developers. However, there was no more enthusiastic supporter of DB2 technology.

In DB2 Magazine and in one of Intelligent Enterprise's predecessors, Database Programming & Design, we were fortunate to have published Richard's work. We offer our condolences to Richard's family, friends, and associates for the loss of a rare talent and memorable human being.

David Stodder [dstodder@cmp.com] is editorial director of Intelligent Enterprise.