Case Study A Business Intelligence Solution is the Best Medicine

When a pharmaceutical major opted for a data-warehousing solution, it was in reaction to the realities of the market. Stiff competition from global players was forcing the management to either shape up or ship out. Important data were unavailable to assist in decision making, and utter confusion reigned. The resources of the company were being stretched and the morale of the employees was at an all time low. It was necessary for the organization to know when a particular medicine is outdated or where the stocks are lying, or for that matter, the inventory level or outstanding. After deliberations with various vendors, they erode in on SAS to implement the business intelligence solution. In July 2000, a pilot project was undertaken in one geographical area Mumbaiwith the sole purpose of understanding the problem, if any, and fine-tuning the solution to suit the needs of the organizations. We took one geography on a pilot basis and tested for the efficacy of the solution in that area, says the CIO of the firm. It helps us to ascertain the pitfalls and gave us an understanding where we might have to make the necessary changes internally. It also provided an insight to the users on what they could expect from the implementation. Having done that to our satisfaction, we then implemented it in other geographical areas where we have a presence. The firm was keen to start realizing the benefits on their investment in IT. The solution, however, only got compounded since the implementation overshot the time frame that was mutually decided upon. We had agreed to a specific time schedule, says the CIO. Unfortunately, that was not adhered to by SAS, and the implementation time overshot by nearly six months. The very purpose it was supposed to serve streamlining the internal processes so that the benefits could accrue to the company at the earliestwas not happening. A business transformation takes place when technology is used to restructure the core business itself, to innovate rather than to automate. In such a case the potential RoI is almost unlimited. But, questions the CIO, how can we ascertain the benefits immediately? To ascertain the return on the investment we have made would take us at least a couple of years. We have only just managed to implement the solution. Unfortunately, ascertaining the RoI is not all that easy a task, especially in the case of IT. It is unlike any other investment that is beneficial to the business, he says. First, in case of IT, it is not possible to do base lining. IT is a facilitator and benefits accrue only after a certain period, say 3-5 years, and have passed. Even then he strongly feels that it is not possible to measure the benefits in every area. It is somewhat like spending huge amounts on advertising. How can one

gauge the increase in business because of the advertisements placed in the newspaper and the TV? Thus, according to the CIO, tracking of RoI is possible only in very specific areas, such as production schedules or inventory management. Further, states the CIO, unless and until process improvement is achieved it is not possible to accrue benefits. However, he is certain about one thingcompanies should keep a track of the benefits that ought to accrue to them. It is very essential, he avers, for companies to expect and keep track of the benefits. Otherwise, there is no purpose of implementation. For any organization that is implementing a business intelligence solution, there are two kinds of benefits that should accrue to themtangible and intangible. In other words, quantitative and qualitative. Tangible benefits are those that can be seen and felt immediately, such as streamlining of processes in the production department, flow of processes in the production department, flow of information from remote centers, improvement in decision making due to availability of information, inventory management, etc. Similarly, intangible or qualitative benefits could be an increase in the morale of the employees and benefits pertaining to the HR function. These are not readily seen or felt but the effects can be realized over a period of time, usually 3-4 years after the implementation. In such situations, it is important that companies constantly invest in training their employees. Training falls under the first phase of implementation, similar to forecasting, says the CIO. It has a negative return on investment. It is only in the next stage that companies can expect a modest return on investment, followed by the third stage where phenomenal returns accrue to the company, as by this stage there would be constant flow of information, and the companies can make valued decisions. During the fourth and last phase, generally referred to as the re-engineering phase, companies can expect almost unlimited returns on their investment in IT as business move to eliminate unnecessary tasks and use just-in-time scheduling and seamless integration with suppliers and customers. Any company that plans on implementing a business intelligence solution has to keep the above stages in mind, which will help them in focusing their energies accordingly, says the CIO. That is, if the implementation takes place on time. -----------------------------------

QUESTIONS
1. Discuss the various approaches in the light of the case given above. Which approach do you think would be most suitable for this case? 2. Discuss the managements reasons for measuring the return on investment made on information technology. 3. Ascertaining the RoI is not all that easy a task, especially in the case of IT. Why?