Podcast

July, 2009

Anthony Vitiello:  Greetings and welcome to the first in a series of podcasts produced by Volt Consulting Managed Service Programs. This series, slated to continue through 2009, will focus on topics relevant to human capital supply chain management and offers a venue for the sharing of best practices and industry-leading thought. We are pleased to host what promises to be spirited dialogue between Volt Consulting experts and experts from the broader community of professionals, analysts, consultants and practitioners.

My name is Tony Vitiello and I will be moderator of today’s discussion. Today’s forum will focus on the practical uses of business intelligence in the acquisition and management of human capital.

The panel today consists of one Volt Consulting expert and one expert industry analyst. Representing Volt Consulting is Mr. Elliot Owens, Director of Business Intelligence. Mr. Owens is a Six Sigma Black Belt and a veteran of the human capital industry with more than 17 years of experience in the field. Four years ago, Elliot formed the Business Intelligence Group which has been delivering critically-acclaimed, cutting edge business intelligence service to Volt clients.

Our guest expert today is Mr. Patrick Connaughton, a senior analyst with the esteemed Forrester organization. Patrick primarily contributes to Forrester’s offerings for the sourcing and vendor management professional. He is a leading expert on the selection, design and implementation of e-purchasing and supply chain management software and consulting services. His upcoming research areas include spend analysis, risk mitigation and vendor consolidation.

Welcome, gentlemen, and thanks for taking the time to bring your valuable perspectives to our listeners. Let’s get right down to it then, shall we?

Our first discussion point poses the following question to Patrick: How would you describe the state of the human capital industry today and the overall usage of business intelligence?

Patrick Connaughton: Thanks, Tony. You know, when it comes to the overall BI landscape within human capital, you know, we really characterize it as adoption being very low. And when there is adoption, it’s really fragmented across individual locations or business units.

But importantly, our research shows that it’s really on the cusp of taking off. And, you know, supplier performance and risk are really top of mind for all of these companies right now in today’s recessionary environment. So, because of supplier performance and risk being really top of mind, this is actually one of the fastest-growing software categories within all of sourcing and procurement that we track.

So, adoption is low, but we see it taking off really quickly. And, at the end of the day, it’s really something that we expect to happen within the next couple of years as the software products mature and more people adopt the solutions.

Really, it’s important to get that adoption under control because what happens is if not enough people adopt it then you don’t have enough data, so you can’t really use the analytics. So, it’s kind of a double-edged sword. So, we see people – as adoption rises, it actually will really act as a catalyst in the industry.

Elliot Owens: Patrick, I agree with you and just want to add that I tend to feel that the human capital industry had been slow to adopt business intelligence probably because it’s not readily apparent that business intelligence lends itself to the industry.

Human capital is, of course, about people, hence the term human. And I feel that the difficulty in measuring an industry based around people has made the adoption very slow, though we’re quickly catching up and learning that you can measure humans and there can be business intelligence in this human capital industry.

Anthony Vitiello:  Given that relatively low rate of adoption for human capital management business intelligence among organizations today, can you define, Elliot, and explain, perhaps, what the components of a business intelligence solution are for human capital management?

Elliot Owens:   Yes. Once again, the human is the key word within human capital management and because we’re dealing with humans, it’s not like approaching business intelligence with other industries, whether it be manufacturing or in the pharmaceutical industry with lab testing; it’s very readily apparent how business intelligence applies to those industries, but in human capital it’s very different. So, what is required is domain expertise, understanding the nuances of a people-to-people business.

On top of that, because it’s a people business and there’s huge variance when it comes to people, you need a lot of data; you need a lot of data from multiple enterprises, multiple industries to really enable business intelligence to come to the forefront and provide value.

And then third, you need the tools. You typically would need a vendor management system, a system that’s specialized for the acquisition of human capital. So, an e-commerce procurement system such as Ariba or some of the others out on the market may not do because these systems were primarily designed for commodities. So, you need that specialized vendor management system.

And on top of that, I cannot imagine how you would provide true business intelligence and analytics without a data warehouse. A data warehouse is a key component to business intelligence.

Anthony Vitiello:  Hearing your explanations and definitions of some of these elements makes these activities seems a little bit less daunting, but I’m sure there are plenty of opportunities for things to awry.

Can you characterize for our listeners some of the typical challenges or the major roadblocks that end users might encounter in their efforts to employ business intelligence and analytics?

Elliot Owens: We’ve seen on the marketplace, Tony, that there have been mistakes when it comes to business intelligence in the human capital realm. The first mistake is really the misunderstanding of what business intelligence is. And although access to data, visibility into data and reporting are key aspects of business intelligence, business intelligence is not just about reporting. It’s about being able to provide the data that enables the analytics to really drive knowledge and that knowledge, in this case, means the ability to help with decisions, knowing how to act, how to improve, how to optimize whether it be your supplier base or the type of people you are bringing on board or how you bring those people on board. So, business intelligence goes much further than simple reporting.

The second mistake is that organizations will typically go out and buy some sort of business intelligence tool, like a Cognos or an ad hoc reporting tool, and they’ll lay it over a transactional database and think they have business intelligence.

Well, problem there is that the data in a transactional database is very different than the data that you’ll need to perform true analytics and, therefore, business intelligence. You really need to manage that data, model it in a way that’s appropriate for the analytics.

Anthony Vitiello:  Anything you’d like to add to that, Patrick?

Patrick Connaughton: Yeah. You know, this is something that we talk to a lot of our readers about and we get a lot of phone calls when there’s challenges out there and a couple things really are top of mind.

You know, there’s some blocking and tackling things like the idea of treating it like a real project. So, when you think about BI and how it’s fragmented, and there’s individual business units that have rolled this out, a lot of times people are looking at this and it’s very ad hoc and the end result is that you don’t end up getting all the data that you need and it’s not really being imported in a reusable way.

So, what we suggest to folks is make it a real project, get a project manager, approach it from an enterprise level and make sure that it’s part of IT’s plan to build you actual extracts from the other systems that you’re going to need across all the different business units. You really want to formalize a lot of this stuff before you put a program in place because the key to success is getting away from a lot of these ad hoc kind of procedures and really institutionalizing it.      

In addition to that, you know, we see some other challenges out there. One of the big ones is folks will go down this path and they’ll get really successful at rolling out a BI solution and measuring things internally, but they forget about the external world. So, you know, if you’re just looking at yourself and measuring your own performance and you’re not looking at it against others in the industry, you may kind of think that “Oh, well, we’re doing a great job.”

But until you get that point of reflection, until you can see “How are we doing against our peers in the industry?” you really don’t have a good idea of where you’re at in terms of your processes. So, you want to make sure you look externally when you start to get into things like benchmarking and process design to really make sure you’re driving out efficiencies.

You know, other things we hear about, and I think Elliot really drove home a couple of these key points: it’s the idea of a traditional BI tool versus a product that’s dedicated to this software category, to human capital. And what’s happening in the industry right now is that these things are moving towards the center in terms of functionality. So, you have BI tools that are really good and slicing and dicing and have a lot of analytical capability, but they don’t have that underlying data model that’s specific to human capital that you really need.  

On the flipside, the VMS solutions, you know, they have that data model, but they’re still building out the “what if” in the analytic capability. So, there are some tradeoffs here and you want to make sure you make the right decision, you kind of go into it understanding it, so, that’s really key. But the VMS tools are getting much better, so that’s probably a good approach to take here.

Elliot talked a lot about the data model and I think that’s really key and something that you should think about. And ultimately one of the things that, you know, is really important when you start one of these programs is we hear a lot of companies looking at the vendors and saying, “Okay, software vendor, you need to do this for me and it’s critical this tool does all of these things, that you provide me with this support,” but a lot of companies will forget to take a step back and look at their own internal process in their organization and see if they’re really structured in a way they can take on an initiative like this and be successful.

So, you know, it’s important to take a step back, look at your own organization and not overly rely on the vendors to do this for you. That’s really key: taking ownership and really driving these projects home. Those are some of the big things that we hear over and over again from our readers.

Anthony Vitiello: Well, that’s some very astute input. Thanks a lot. What are some of the practical applications of business intelligence?

Patrick Connaughton:  This is one of the areas where I’d have to say the most number of questions that we get from clients and readers is around benchmarking. You know, “How do I benchmark my rates both internally and externally?” and then “How do I benchmark my KPIs, my internal processes? You know, where am I at and where do I need to focus my time?”

So, you know, I have to think that practically speaking that’s one of the areas that the companies are really, really focused on and one of their biggest pain points. You know, the vendors, the VMS solutions are really moving forward here, though, and I think because they’re deployed over a software-as-a-service model, you know, they’re able to do a lot of these things because they have access to the data.

So, I think it’s possible and it’s moving in this direction and I think that’s really, you know, where companies are looking for guidance.

Elliot Owens:  And I think as a VMS provider with business intelligence offering, by having data across multiple Fortune 1000 companies in multiple industries, you’re able to apply the multiple regression and multi-varied analysis to the data to understand how various factors interplay against each other and affect performance in the human capital realm.

So, one of the common questions we get from our clients is “How many suppliers should I have? What’s the right number of suppliers?” And by utilizing the business intelligence and the analytics that go along with it, we were able to set up key performance indicators and red flag reports so that we can tell when a client, perhaps, has too many suppliers or too few or needs more coverage and perhaps fewer vendors in another area whether that be a geographical area or a skill set or a business unit.

By setting those up, we’re able to monitor our clients and then help guide them in terms of how many vendors do they need and then looking at those vendors and understanding their performance based on statistically-validated key performance metrics, be able to tell them which suppliers are performing well and which suppliers are under-performing and then work with them to make sure that they retain their coverage and have the right number of suppliers participating in order that they drive both better quality and better rates.

Anthony Vitiello:  Great. Elliot, for a more mature, advanced program, where do you see business intelligence heading?

Elliot Owens:  I think the next steps for business intelligence as it advances in the human capital realm is within the area of workforce analytics, understanding “Well, I’ve got a project I need to complete, is it better to user internal resources? Is it better to go externally? Should I hire time and material workers? Should I outsource, should I offshore or should I find a low-cost labor market within the U.S.?”

And business intelligence can help you make those decisions and help you decide what is the optimum way to get the work done on a project with regards to managing the human capital.

Anthony Vitiello: Anything to add to that, Patrick, about the future evolution of BI tools?

Patrick Connaughton: Yeah. I think Elliot makes an excellent point around some of this cost benefit analysis and the planning and I think that’s really visionary, the idea that you could look at a project and determine, based on rate information and availability, whether you bring somebody that’s just staff (sounds like: aug) versus project consulting or even outsourcing completely. So, that’s something the companies are really looking for and there’s just not a great solution out there today.

At the end of the day when I think about where this is going, though, and what the next-generation solution looks like, I think it’s about this root cause analysis, right? It’s beyond just reports, but insights and how do I not only see, “Well, you know, this supplier isn’t performing well or we’re paying more in this specific region,” but understanding that next level of why. You know, “Why is this supplier performing poorly? Why are we paying more in this region?” and being able to do some deeper analysis.

And I think as the tools mature a lot of the analysis and “what if”-type scenarios will start to be built into them. So, as an end user you don’t have to create this and build it yourself, you know, the tools will start to get the key questions worked into it that you can then put your data into.

So, being able to answer questions like “How many bids are the optimal number to extend out to suppliers for a certain type of position in a specific region?” Maybe it’s two or three; maybe it’s greater than ten, but understanding what that magic number is and being able to do it based on historical data, those are the types of things that can really drive some process improvements and make sure that you’re getting the best rates.

So, being able to do that level of analysis, view the trends over time and see, you know, what is that number, how can you consolidate to a smaller supplier base. All of this helps build the foundation ripe for continuous improvement and a really healthy partnership with your suppliers to make sure that your program is going to be world class.

So, that’s where we see the space going. You know, I think it’s exciting and that we’re obviously seeing a lot of growth here, so we’ll definitely want to keep our eye on it.

Anthony Vitiello: Well, that was some really excellent stuff, gentlemen. I want to take this opportunity to thank you both for your valuable time and your invaluable perspectives. I hope everyone listening takes as much away from this discussion as I have.

In closing, if you should have any questions for Patrick Connaughton about today’s discussion or about Forrester’s services, you can call him at 617-613-6486.

Similarly, if you should have any questions about Volt Consulting Managed Service Programs or Elliot Owens’ business intelligence services, you can contact us at mspglobalsales@volt.com or visit www.voltmsp.com for more information.

We hope you’ll join us again for our next podcast in this series. My name is Tony Vitiello, your moderator. Thank you and good day.

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