Users: Real-time solutions justify cost

A commonly heard complaint when real time IT implementations are being considered is the apparently prohibitive cost; that the return on investment (ROI) is too small to justify the hefty up-front costs. But for two companies speaking at a Conference Board of Canada series on building a real-time enterprise in Toronto on Thursday, this perception turned out to be untrue.

Mark’s Work Warehouse Ltd. and IT heavyweight Hewlett-Packard Co. both installed real-time solutions which saved time as well as money.

“My message to you is that real-time can actually save you money,” said Robin Lynas, CIO with Calgary-based Mark’s Work Warehouse.

HP has calculated its savings at US$37 million over five years. This is being achieved by creating a real time integration hub, said Greg Battas, director, Real Time Architecure, NonStop Enterprise Division with Palo Alto, Calif.-based HP. “We discovered the ROI was going to be bigger than we thought it would be.”

At BMO Financial Group, the move to a real-time solution was less driven by ROI than an enterprise-wide customer relationship management (CRM) initiative – or customer value management solution as the bank likes to call it, as CRM often gets a bad rap. This was according to Frank Erschen, vice-president, Technology and Solutions, Enterprise IT Strategy and Development Services with BMO Financial Group in Toronto.

For Mark’s, which has grown from 140 stores in 1994 to a projected 450 by 2006, the need to cut costs and streamline processes while centralizing data was paramount to sustaining its growth. The 320 stores each had its own server which batch connected to a central server at the end of the day. “It killed us at the back end,” Lynas said, referring to the once a day logjam of large batches of information being sent over the network.

By moving to a real-time solution, two things occurred. On the cost savings side, Mark’s has been able to remove the 320 store-based servers and replace them with seven central servers, while on the network side, by sending point of sale information in real time to the central server, there is no logjam at the end of the day.

Mark’s built the application, middleware and front-end systems entirely with Java running on Linux, Lynas said. The result is a reduction of maintenance costs by 50 per cent, he said. “I haven’t had a Linux problem.”

Additional benefits have included a reduction in help desk calls (systems are more intuitive to use) and training cycles reduced from two days to half a day, Lynas said. The project took about five months to roll out, from February to June this year.

HP’s drive to real-time supply chain management was, in part, forced on the company because of its sheer size. The company had about 200 instances of SAP running worldwide, Battas said. The result was that supply-chain batch information gathered at 8 a.m. became less and less accurate (and valuable) as the day went on. A decision was made to create a global view of the entire supply chain which was “no minor undertaking,” Battas said.

At the solution’s core is an integration middleware hub through which everything passes. The choice to do this, rather than centralize as was done at Mark’s, was again influenced by HP’s size and diversity. The company couldn’t force one solution on everybody since part of HP’s success comes from its business unit autonomy.

Battas explained how the new system could solve a hypothetical problem.

“Say GM had a $100-million line of credit,” Battas explained. “Originally it would have been allocated…say $20 million for displays, $30 million for servers.”

If an $80-million order came in for servers it would be rejected by the system. Now with the real-time solution the request would be run against an overall line of credit and be allowed to go through, he said.

CRM aside, the annual internal savings for HP have been huge; more than $6 million in total IT benefits, $1 million in operational benefits and $2 million in strategic benefits, not to mention a 15 per cent improvement in order cycle time, Battas said.

At BMO, the desire to create a real-time CRM solution was driven by the need to have a better and more responsive customer view, in everything from capturing and analyzing customer data to generating business leads. “This is a journey we started in ’99,” Erschen said.

Prior to the solution’s implementation information was often held in silos. If a customer contacted the call centre with a specific request only the call centre would know about it. Now this information is sent to all the parties which could potentially be affected by the interaction, Erschen said.

Two keys to the BMO success were executive level sponsorship (it went right to the top) and, as simple as it sounds, a common lexicon or language to describe data events and actions. “It becomes absolutely critical,” Erschen said.

All of the participants agreed that real-time solutions are not a panacea for all IT requirements but that areas that can benefit from real-time solutions are not always obvious.

HP helped Target Corp., the large American retailer, create a real-time bridal registry, an offering which is not intuitive.

As it turns out, Target’s call centre often got calls within days of a bride registering at a store (and before the batch data was processed and sent out) and the call centre would have no record of her registering. The repercussions could be serious. Disney World data, for example, has shown that a company has just 15 minutes to recover a guest from a bad experience, Battas said.