Data Doghouse - performance management, business intelligence, and data warehousing

People, Process & Politics: Integration Competency Centers

In our “People, Process & Politics” series we have discussed how non-technical aspects of business intelligence, data integration or data warehousing projects are the critical components of success. Sorry product vendors, but no matter how impressive the tool, if a company fails on the 3 Ps then the projects using those tools will fail to produce reasonable business value.

On the technology side, enterprises need to organize their integration efforts using an integration competency center (ICC) approach. An enterprise needs to identify the scope of its data integration efforts, define its vision and architecture, and then implement that vision. A blueprint is necessary to build what you want but you also need your resources to effectively execute to build what the business needs. 

ICC organizational Models

Too often people envision an ICC to be a centralized group that controls all integration work. In addition, ICCs are perceived to be a large corporation creation that just does not fit in a small to medium enterprise. On both counts, they could be but they do not have to be. 

Enterprise Software: The Next Acquisition Wave

The high tech titans - IBM (IBM), HP (HPQ), Oracle, Microsoft (MSFT), SAP (SAP) and EMC (EMC) – and their  smaller software brethren have been nibbling at tuck-in acquisitions. Still, they have been building their cash hordes and watching on the sidelines to determine the extent of the recession (it did not turn out to be the 2nd coming of the Great Depression) and IT spending cutbacks.

Some have speculated that they  were waiting for the valuations of their acquisitions to bottom out before they pounced. If that was the primary factor, the buying binge would be in full swing since software valuations have rebounded significantly since the market lows.

Instead, the reason for their restraint is probably their conservative financial management - one of their under appreciated characteristics. They have virtually no debt (the credit crisis does not affect their operations as it does their customers) and they generate cash flow from software maintenance fees. This means the titans can wait until they feel the time is right to start up their acquisition machines. That time is when they have some confidence that IT spending will pick up or when one of their rivals starts the acquisition engines.

IBM's announcement yesterday that it will be acquiring SPSS (SPSS) for $1.2 billion in cash is likely to be the trigger event for its rivals to jump back into the M&A waters with both feet.  Just as dozens of software acquisitions a few years ago culminated in business intelligence (BI) powerhouses Business Objects, Hyperion and Cognos being bought by SAP, Oracle and IBM respectively, the IBM acquisition is going to trigger purchase of enterprise software companies. 

The categories that are holding their own through the recession and will grow significantly when IT spending rebounds are the most desirable acquisitions. These categories include BI (including business/predictive, data mining), data integration or middleware, SaaS (software-as-a-service) or on-demand software and enterprise application vendors oriented towards specific industries or business processes.

We follow these software categories in our two indexes:

• BI/DW Index
• On-Demand Software Index or SaaS (software-as-a-service) Index

These indexes track both the potential buyers and sellers in the enterprise software M&A activity.

Open source software (OSS) will be in play IF the titans can figure out how they can create a profitable  business model to justify the investment or if they feel they can leverage the software to hurt rivals.  (This is not a great business strategy, but egos sometimes supersedes business sense.) Emerging technologies such as columnar databases will continue to tuck-in purchases.

In our next post on acquisitions, we will look at the crystal ball and match buyers with sellers. In our match making we will speculate on the likely match-ups and who we feel should walk down the aisle together.

IBM beats recession?

IBM (IBM) released their quarterly results yesterday. They easily beat earnings estimates and raised their full-year earnings guidance. Revenue was down but margins improved significantly. Business headlines are very favorable extolling the results. 

IBM’s results should solidify its stock and overall tech leadership in the market. But before getting too excited about press praise we should look at the results.

People, Process & Politics: Integration Portfolio

In our previous post “People, Process & Politics: Business & Integration” we discussed how to create the business and IT case gather sponsorship and enlist funding for an enterprise-wide approach to data integration. With the green light to proceed it is now time to start breaking the integration silos.

Enterprise data is a key investment, so treat data integration projects like investment portfolios. Set priorities, determine budgets and expect a return on investment. The portfolio should include any project that involves data - from its creation in your transaction systems all the way through reporting and analysis.

Establishing the portfolio

Creating the integration portfolio involves assessing where you are, determining where you want to be and how you are going to close the gap. 

First, you need to take an inventory of what data integration is already occurring in an enterprise. Existing IT projects may be under the label of: Corporate Performance Management (CPM), Master Data Management (MDM), Customer Data Integration (CDI), Product Information Management (PIM), Enterprise Information Management (EIM), Data Warehousing (DW) and Business Intelligence (BI). The technologies that may be used: ETL (extract, transform and load), data virtualization (formerly EAI Enterprise Application Integration), EII (Enterprise Information Integration), SOA (service oriented architecture) or yet another variation of what used to be called middleware. And do not forget data shadow systems or spreadmarts that are used extensively across enterprises using SQL scripts, ODBC/JDBC, Microsoft Access and Microsoft Excel to “integrate” data.

When assessing this inventory examine what has the most significant impact on the enterprise either in terms of business benefit or IT cost. You are not going to be able to “boil the ocean” so concentrate on the areas that provide the best rate of return for your efforts. Since there are generally many areas that need to be address, it is generally best to go after the “low hanging fruit” efforts. 

Second, you need to determine what you want your integration portfolio to be in the future. You cannot succeed unless you have an agreed upon goal, i.e. architecture, that supports what the information needs of the business. The integration portfolio needs to be an integral part of your information architecture and systems. 

Finally, you need to create an integration roadmap to move from your existing data silos to your desired information architecture. This will involve integration initiatives providing new capabilities along with projects that renovate or replace existing silos.

Portfolio Management

The best way to ensure funding for the right projects is a data integration investment portfolio. With this approach, each project is examined to determine if a data integration component exists. If so, that component is examined in the context of all the other data integration components of other projects. This review will determine if there are any overlapping or complementary aspects between projects, thereby eliminating redundant expenditures and leveraging work across projects. Looking at data integration efforts from an enterprise perspective often enhances these efforts because you are no longer sub-optimizing the data integration efforts of each project to fit within that individual project's budget and resource constraints. A more robust effort can be undertaken when the enterprise is being used as a focus. In addition, some aspects that may have hindered other projects' efforts may be modified in order to reach a better solution.

Money talks. You absolutely must have financial incentives such as budgeting to get buy-in for data integration projects. Enterprise-wide data integration, while appealing to many in the IT industry, is just an esoteric concept that will be overshadowed by short-term and parochial projects unless backed up by budgetary allocation and review.

Next Steps

With your integration portfolio guiding integration investments, it is time to organize your enterprise integration efforts. In our next “People, Process & Politics” we will discuss creating an integration competency center and its best practices.

Analysts Upgrade Tech: Is the Party Over?

Last week, Goldman Sachs analyst David Bailey raised his rating for the hardware sector to attractive from neutral. He remains cautious "although we are not calling for an immediate improvement in corporate IT spending" but he does expect "greater upside than downside to estimates into the seasonally stronger half of the year and in 2010." Next year he forecasts increased IT spending and corporate tech upgrades. With an eye towards the glass being half full rather than empty he states "This, combined with a 25% decline in the Goldman Sachs Technology Index since the peak in August 2008, creates a compelling buying opportunity".

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