When Raghu Bala, CTO of Automotive.com, joined the company in 2006 to help it build out its business intelligence infrastructure, he put up on his office wall a picture of a cup stuffed with dollar bills and change, with a caption underneath that said, “Panhandling for BI budget.”
“I actually got some money out of that,” Bala mused during his talk Wednesday at Computerworld’s Business Intelligence Perspectives conference. He and other IT leaders shared their tips on how to deploy BI cheaply, profitably and effectively.
A former Yahoo Inc. engineer, Bala was surprised more than once at how much of a “shoestring budget” the company, which operates 200 magazines and Web sites such as Motor Trend magazine, ran on.
When Bala requested to buy a pricey storage area network (SAN) for the data warehouse’s storage, management balked.
“One of the guys said, ‘I can go to Fry’s and buy a bunch of 10 TB drives and string them together. Why do you need to spend $200,000 for a SAN?'” Bala recalled. “I had to explain to him all about snapshot backups, Raid 5, Raid 10.”
When that didn’t convince his manager, an exasperated Bala sarcastically suggested that he “just go and get a bunch of thumb drives and cascade them together, since they’d be free after all.”
Eventually, Bala agreed to have his team build its own SAN out of a cluster of Linux servers. That involved $12,000 in hardware and software costs, and two to three months of time for its lead developer. The result is impressive: a custom operational data store with an “extremely fast” in-memory cache that Bala says can store millions of events per hour.
Bala also saved money other ways by using the free Excel-based BI tools that Microsoft Corp. bundles with its SQL Server database , sharing database administrators with the engineering team, and building cubes for reports only after watching what reports the power users at Automotive.com built for themselves.
This saved IT the labor of having to create and e-mail dozens or hundreds of canned reports, and instead trained the users to “generate their own reports and generally think for themselves,” he said.
Know your profitable and unprofitable customers
For companies with long-term customer relationships, one of the best things BI can do is help figure out which are the profitable ones and which are the money-losers.
According to Basil W. Blume, chief analytics officer of Colorado Capital Bank, the average ratio of profitable:unprofitable customers in the retail banking industry is 70:30.
“It’s just not profitable when all they have is a $1,000 checking account,” he said. “But the other 30 per cent of customers make it up.”
If not directed by management to solve this problem, Blume suggests that BI managers step in and draft a plan of how to figure this out.
But which of the many definitions of profitability should they use? Blume suggests using the “contribution margin.” That’s a relatively simple figure to derive, he said, especially compared to net income, which requires users to divide gross income by fully loaded costs.
Getting adoption in a non-techie workplace
Anthony Marano Company is a 50-year-old fruit and vegetable wholesaler in Chicago. Operating out of a single 400,000 square-foot warehouse, the $200-million-a-year family-owned company remains close to its heritage as an Italian American-owned grocer.
“There’s a lot of guys named Joey, Nicky and Tony here,” joked Chris Nowak, the chief technology officer.
Until 2003, none of Marano’s buyers and sellers used computers. Orders were handwritten and vendor and customer information was stored on Rolodexes. All of the expertise resided inside the brains of Marano’s buyers and sellers.
This seemed treacherous, considering the real-time nature of Marano’s business. The company specializes in supplying produce at the last minute. “We are the 24-hour Walgreen’s of fruits and veggies. People buy from us when they are short,” Nowak said.
Also, Marano’s huge size and customer base means that it could supply vital pricing information back to farmers that could influence their decision whether to go to the trouble of trying to recover a damaged crop, such as strawberries at risk from a freeze. That wasn’t easy without a BI system, much less PCs for the buyers and sellers to use.
Nowak was brought in to deploy the company’s first computer-based BI system. Knowing that overcoming resistance from the users — the sales staff — would be key, Nowak made sure to select an easy-to-use and powerful tool for them.
He licensed the Inxight software owned by SAP AG, which offers a visualization tool called StarTrees. These are circular expandable charts that Nowak purposely chose for their resemblance to old-fashioned Rolodexes.
These charts quickly and conveniently let the sellers get price and stock information on all 1,400 types of produce carried by Marano.
The charts were so useful that soon all 28 buyers and sellers were trained and using the StarTrees, Nowak said. It allows them to offer more fine-tuned pricing to buyers and farmers and move product more efficiently with less spoilage, ultimately boosting profits, he said.
