Imagine a top-brand company dropping the price of its high-end product to one fourth its original price. What thoughts would come into your mind? Will it be reliable? Will it last long? Will it have all the required features? Will it meet all my needs? Because its cheap, will it be of inferior quality? The answer is a big no. A few years back, cheap meant bad. Any product that was sold cheap would be considered of low quality. For example, it was awkward to tell your colleagues that you are wearing a cheap shirt as it meant you couldn't pay for a better brand. Things are different now. For some it may seem cheap, but for others, it's just the right price. Could you resist buying a brand new car for just $2,500?
Recently Tata Motors, an Indian based auto company, launched the worlds cheapest car called Nano. The car is a four-door, five-seat hatch, powered by a 30 HP Bosch 624 cc four stroke engine. The Nano is capable of 65 miles an hour. There is a small trunk, big enough for a duffel bag. The Nano, which cost just $2,500, will change the face of not only the Indian car market, but the global auto industry. It is the best example for other industries like IT at a critical time when worldwide they are straining all effort to come with different ways to stay competitive in declining market conditions. This is a very interesting innovation that has taken place. These other industries need to see from this how they can give the best value to their customers at an unbelievable price. There is slowdown in the U.S. economy after years of exhilarating growth. The IT industry is facing the scene of a slowdown due to U.S. economic worries triggered by the subprime mortgage crisis. In such a tight economy, it is very crucial to innovate different ways to stay competitive. The IT industry needs to provide their customers a dream-come-true experience, like the Tata Nano has given to their customers. They need to create more opportunities that their customers can afford in this weak market condition. The IT industry has to thrive to deliver the best value at low cost if they want to survive in this economy. What is this magic that could bring down the cost of BI solutions drastically without compromising on the quality? We will see in this article the levers that Tata used to reduce the cost of its car. We will compare those levers with possible levers in business intelligence implementations for cost reduction.
State-of-the-Art Design: The Secret Lever
The fact that Nano is the cheapest car ever made does not mean that it is either low quality or a knock-off copy of some high-quality variant. The cost-effectiveness and quality have been achieved by understanding the specific critical customer need in that segment and creating the design accordingly. It is providing what the customer wants by first eliminating what is not required. Similarly offering a low-cost BI solution does not mean inferior quality architecture equipped with only the basic components. It does not mean that such implementations would be supported by less experienced or graduates fresh out of college. What will deliver such efficient low-cost BI solutions are inexpensive technical solutions produced using state-of-the-art design and components. The design would be sleek and will map to exact customer needs. Low costs in BI could be engineered by designing the slimmed-down version of information needs within the organization. It will be achieved by efficiently leveraging existing infrastructure components, resources, technology, processes and innovative designs. It is about designing your BI solution based only on the prioritization of the key user needs of your enterprise. These basic needs have to then be converted into critical success factors by management buy in.
Data Management: The Central Lever of Cost Reduction
When we talk about BI, its all about data and how to transform it into information, and this in turn would help to make better business decisions. BI systems are like the eyes of an organization that help them to see things around before taking any step rather than taking decisions blindly. If you walk down the aisle of any organization, you would always hear employees unhappy as they find is difficult to get the right data to make their business decisions. At the same time, if they get the data, they are not very confident if it is accurate. It is very interesting to see how most organizations get into this kind of situation. The root cause of this problem is lack of data management and data governance in most organizations. A Forrester consulting survey of 407 senior IT decision-makers at companies with more than $250 million in annual revenues found that manual efforts remain the dominant approach for integration of data silos.1 Due to this, there is a huge unmanaged accumulation of data over a period of time. Multiple versions of the same data get created from different sources. After that, there is a big confusion as to which is the most accurate data. This leads to data quality issues which at times run out of control. On average, if you are looking for particular information within an organization, you are bound to find at least four to five instances from where you can obtain the same information. Almost 90 percent of the time you will find that there are data discrepancies in all the four to five instances of the same data. It is very important for most organization to get rid of unwanted data and at the same time move less critical data to low-tier storage. The very first thing organizations need to do is to lose weight by rationalizing their data and eliminate redundancies created by unwanted data. This is very similar to Tata Nanos central approach for its car. It has kept the base minimum that would be required for its customer to make a comfortable ride. This not only reduces the cars cost but also improves miles per gallons.
Reduce Architectural Complexities: The Simple Lever
BI architecture of many midsized or large companies are incredibly complex with tangled systems, which are difficult to digest at first instance. There are several components within BI architecture that are built without any strategic vision and some of it gets mushroomed due to tactical thinking at various department levels in the enterprise. Over a period of time, many insignificant architectural components become more or less part of the whole BI body. It becomes difficult to just cut such components many times. Removing such unwanted architectural components might turn out to be a painful, cumbersome process. A simple sleek design is what the Tata Nano theme is based on. When the car was designed, they asked the question, What parts of the car can we eliminate? This kind of design makes it less complicated to maintain in the long run. Fewer BI architectural components would mean minimizing on interfaces, fewer databases, less hardware and less process to run it. All this would have large savings on cost to keep your BI up and running. The fact still remains that companies struggle to come up with a BI strategy that would address their architecture issues at the enterprise level and make it more simple and sleek. A survey by Accenture indicates that 75 percent of 162 CIOs surveyed said they want to develop an overall information management strategy in the next three years in order to leverage that data for strategic advantage.2
Rationalize: The Soft Lever
Most large organizations have all kinds of databases, data integrations tools and reporting tools. This wide range of BI tools not only increases the overall cost of BI but also takes the company a large leap away from standardization. The dollars you spend on people for maintaining your BI environment with different BI software and their license renewal cost would hardly justify its usage. If you count the different features that all your current BI tools provide in your organization and compare them with how many are being used, the number will not go above 20 percent. In case the of Tata Nano, the car's dashboard features a speedometer, fuel gauge, the essential light indicators and an oil light. These are the functions used most often in a car. This is exactly what is required in a BI solution. Only provide the features that are required and most frequently used. Just imagine the cost you could save by having complete tool rationalization with a single vendor database, single data integration tool and single BI reporting tool. Moreover, if you reduce the unwanted database tables and interfaces and simplifying reports by including only the most important features and, life becomes simpler for everyone. All this would reduce your technology and people cost to run your BI environment. Tata has used regular bulbs that meet regulations instead of long-life bulbs in the Nano. These are small things, but building your BI just to specifications like this matters most to reduce your overall BI cost. With some of the leading vendors in BI moving to open source BI, companies could explore this path and achieve a huge cost advantage.
Standardize Process: The Difficult Lever
BI needs at corporate level in most organizations are of strategic nature. The data needs for corporate information are more aggregate in nature. The corporate BI reports maps directly to goals and policies of organizations. The BI needs at different business unit levels under corporate are more of operational level. These facilitate managers to take their day-to-day business decisions. The business processes across these different business units vary some way or other. However, as the final business goal for all units are the same and they work under the same corporate policies, there are many processes within the organizations that can be standardized, streamlined and shared. Nevertheless, the reality is far from this kind of ideal scenario in most companies. Employees in organizations do same things differently. Just imagine the cost the organization would have to bear for reinventing the wheel in different business units every time. When Tata Nano was manufactured, the organization noticed this critical factor on saving cost on processes. The manufacture of steering columns, steering gear and differential drive assembly for Tata Nano used a tubular design instead of the conventional rod design in all cars. This helped to cut costs, particularly in the processes involved, as it had fewer steps to create tubular design. In tubular design, there was large scope to have the same repeatable process that could be leveraged in different assembly units in manufacturing process. Organizations should conduct a deep due diligence to investigate the long, repetitive processes. Based on this, they have to figure out to what extent they can standardize the processes and reuse them across different business units consistently. Fewer processes to deliver BI would mean less resources and considerable cost savings.
Outsourcing: Last but not Least
Tata Nano got some car parts from vendors who did their own research and development for them to reduce cost. Some vendors developed products with Tata Motors, and quite a few were given designs by Tata Motors. The company even helped some vendors find international partners to make products that met the company's requirements. Some vendors who supplied parts to Tata Nano did competitive buying of material from countries like China and Thailand. This is very similar to leveraging an onsite offshore model in IT. Customer can outsource their work to IT vendors who can than do some part of the BI work at offshore at lower cost. This model would give companies huge savings as the cost of developing and supporting BI applications would be drastically lower when done offshore in countries like China and India. Most of the offshore vendors also promise certain productivity gains over a period of time for customers. This is achieved through the automation of some long-running manual task and also by cross-training resources to reduce effort. The different levers explained in this article, if used appropriately, will bring amazing results to deliver low-cost and high quality BI solution to your organization.
For the first time in India, those on the fringes of the middleclass can hope to fulfill their aspirations of owning a Tata Nano car due to low cost. Similarly, if we are able to reduce the BI cost drastically, this technology would cover a very large segment of the population on the affordability parameter. Just as the mobile revolution heralded inclusion in communication, making a telephone affordable to even a student, affordable BI can make every common man take advantage of it. BI usage would improve common mans quality of life by helping him to make the right personal decisions. Most of us could make better decisions in managing our personal finance, investment decisions, spending habits, insurance policies, vehicles or even which companies to work for using BI solutions. Tata Nano achieved the low price tag through sheer design innovation and not cutting corners on essentials. The same mantra has to be applied to get major cost reduction for a BI solution. This will spread BI solutions for better decision-making beyond the walls of organization and out to everyone. It will help each of us to make better decisions in our personal life. BI would soon become common peoples BI.
- Thomas Wailgum. "How Master Data Management Unifed Financial Reporting and Nationwide Insurance." CIO, December 21, 2007.
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