Chairman, President and CEO,
Conversion Services International, Inc. (CSI)
Before he founded the strategic consulting group Conversion Services International (CSI) in 1990, Chairman, President and CEO Scott Newman cut his teeth at the New York Federal Reserve Bank. Newman's system development and cash processing work at the Fed gave him close acquaintance with IBM mainframes and AS400, for which he developed his own "Doorways" operating system as a counterpoint to Microsoft Windows. Competitive conflicts terminated the project, and a stint at Marsh & McLennan led Newman to start CSI with a hard focus on business intelligence and data warehousing. East Hanover, NJ-based CSI now boasts 200 employees, partnerships with the big names in BI/DW and engagements with clients in a variety of vertical industries. DM Review Editorial Director Jim Ericson recently caught up with Scott for a recap on his busy career.
DMR: What does your business look like now compared to when you started it in the 1990s?
Scott Newman: In the mid '90s when we began to focus on data warehousing, our first big engagement was with a large international bank. The problem they and others faced at the time was to deliver an integrated set of customer statements to their clients. If you were a high net-worth individual in those days, you might receive eight to 10 pieces of mail on different products because a lot of operations were outsourced or just housed on different systems. They couldn't deliver an integrated statement or even identify the net worth of an individual. Today, it's the same lack of ability to integrate the information that's really needed across the enterprise. Companies wanted to understand their entire business in one place, but the technology wasn't in place to support that on the database end and definitely not on the business intelligence front. There was a tremendous early failure rate, so as we went forward, companies moved to smaller chunks, which gave birth to data marts for more manageable projects. Scroll forward to today, and companies are revisiting the enterprise strategy, but they have an environment of data marts built over time with different technology sets, leaving us with the problem of keeping things going while trying to get back to a strategic attitude.
DMR: That's a quick genesis, which I'd guess leads us to the current fixation on data integration.
SN: Data integration and gaining buy-in for that from the business are definite issues. What I'm not seeing enough of is companies taking a top-down view of total metrics, the key performance indicators they need to run their business, and drill that down to the systems and operations they need to support that, then build it from a bottom-up perspective to fill those needs. Usually, it still sounds like, "I have an issue going on in my business, M&A activity that requires information to be brought together." Or, it's a new initiative that needs four pieces of information in context. We're still not seeing the holistic view of information that supports the integration component. We're also coming out of a number of difficult years with the burst of the bubble, post Y2K, 9/11 and recession; it's just now in 2007 looking like companies are really starting to think about potentially larger initiatives.
DMR: Are your clients tackling enterprise strategy from an ROI or cost-benefit standpoint?
SN: The last five or six years have been all about cost cutting. If there's a specific return against a specific body of work, it will get approval. It's very different from the strategic, longer-term plans corporations had in the 1990s, which I saw working at the Fed in those days. We don't see companies operating on five-year plans anymore. We're not seeing business performance management as the driver of everything, understanding what the actual opportunities in the business are and drilling down to what's needed to support that. We've done a number of strategy engagements where we promote a vision of looking ahead at information needs that support business needs. We're hoping that 2007 will open up a little bit in that direction, but it's still driven by who's going to pay for it today and some specific justification for doing anything now.
DMR: Is it tough to sell the performance and process management requirements to clients?
SN: We promote those things as a way to bridge the IT and business sides. Companies have trouble when all these initiatives are IT-driven and generally don't get high adoption rates. The business side tends to be very impatient and doesn't necessarily work very well with IT, so they might spawn off their own initiative and tie in with some of the strategic technology initiatives. But our view is to really get high level and ask, depending on the business, "Where is your business now, where do you think it's going? What is the cost of current operations, what are the different efficiencies you can take from operations and what are the information needs so you can move more quickly and react to customer demands?"
DMR: Are most of your projects IT driven?
SN: I don't know that I can define a pattern except to say that every client is different.
DMR: Are clients looking to depend more on current operational data versus the traditional warehousing model?
SN: Well, it's no longer glamorous to say I'm going to build this nice warehouse; it's more about what they believe they will get out of it. Fortune 2000 companies have many systems and continue to invest in systems or inherit them through M&A. There's really no time to step back unless you decide on a major ERP [enterprise resource planning] initiative and a single system, and even ERP is not going to handle better than 65 percent of the information needs of a big organization. A few years back the leading edge was EAI [enterprise application integration], which was sold as a solution to weave all your applications together and share information as needed. But most companies found EAI a tremendous effort that was not viable over the long term because of system changes. Newer companies like Amazon.com grew everything out of that so their systems were completely integrated from the get go. They have a tremendous advantage over brick-and-mortar companies that grew over time and had so many systems to deal with. The amount of information that Amazon captures and retains per customer, how that's integrated and turned into cross-selling and up-selling is definitely leading edge, and few retailers are anywhere near to where they are.
DMR: Where does that leave the brick-and-mortar companies?
SN: In my experience, they're still hesitant. Often, they need to make a major investment in ERP; their systems are 20 years old and they really need to update. But they underline that it's a couple of million dollars in investment. So it's, "What's the push for us to make that big investment?" One of our retail clients recently met with an industry consultant who talked about one small component of the business, markdown optimization, which addresses under- and overstocks of inventory in different locations. They figured out that the potential benefit to them is about two percent of gross revenues, which more than covers the cost of multimillion-dollar systems, and now they're very hot to do it. But they're still not thinking strategically and for now are overlooking other areas of opportunity.
DMR: How do you marry enterprise vision and fast results?
SN: We don't always get the opportunity, but we like to start with a strategic engagement and lay out a multiyear plan, strategy and vision. Then, we layer on specific ROI-based projects that keep true to that vision. Every initiative budgeted for a given year is viewed against that overall plan. You have to keep that going within the organization so that when someone new comes in they understand why things are going on and how they fit in, and some of the payback might not be realized until another piece is put in two years later. A lot of that is just communication.
DMR: Kind of a living will?
SN: (Laughs) Technology is out there now that can support incrementally building an enterprise warehouse over time, and we try to lead customers in the direction of understanding the end game and how they can get specific benefits along the way. But generally, they pursue the point solutions; the ones that have decided to change everything are few and far between. The overall problem of tackling the enterprise is something like an 18-wheeler that's moving on the highway. I need to change all my wheels, but I can't pull over. That's the challenge. When I get a flat, I pull over and change a tire. But at the end of the day, I know I need to change all my tires, and you can't pull over for that.
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