In 1994 the Royal Dutch/Shell Group (Shell)'s oil products businesses had management information systems installed in over 100 countries, all of which were based on different technologies and tools. What they needed was a consistent global measure of profitability, so, for example, they could manage profitability the same way in Malaysia as they did in Italy. Many companies within Shell had also had mixed results in developing their own data warehouses.
"The situation was very haphazard," Richard McNulty, commercial information manager, Shell Australia says. "If we wanted to identify the cost of delivering a service or product to a category of customer, for instance, it was next to impossible because we couldn't tell consistently around the world which customers fell into that category."
The Oil Products group put in place a long-term strategy and global initiative to remedy the situation and measure the business consistently, but according to McNulty, there were no adequate tools available to move forward. Consequently, Shell Oil Products' London business unit, in consultation with the rest of the world, sponsored Shell Services International (SSI), Shell's global IT and business services group, to develop a product that met the needs of the business.
That product is a data warehouse package and analytical engine, known as Kalido, which, in McNulty's words, "was made to order for a global business set of requirements". Kalido is now in its fifth major release. It has been implemented in 76 Shell companies around the world and is now available commercially in Australia as well as in the UK, US and Singapore (see, "To Market, To Market").
Kalido runs on an Oracle 7.3 or Oracle 8 database under Unix or Windows NT. According to SSI, the functionality integrates multiple currencies, disparate internal and external data sources (including ERP packages) and provides meta data management. Kalido was first implemented in Australia in late 1996, but according to McNulty, initially this was as a prototype. While it was used extensively for analysis and provided a quick return on investment, it was limited to a very small part of the business.
It was not until June 1999 that Kalido went into full production mode in Australia, in conjunction with Shell Oil Products' implementation of SAP R/3's Sell-to-Customer module, which replaced a legacy system. At the time of writing there were over 200 Kalido users and McNulty says this number is growing on a daily basis. They cover a broad range of people and include trade managers (those responsible for customer relationships and analysing business trends), corporate finance and senior management.
Shell Oil Products uses the Business-Objects decision support system as a front end to Kalido, which McNulty says complements Kalido extremely well. Kalido extracts data from Shell's SAP R/3 system and the company is now in the process of consolidating this with data from other legacy, PC and Access-based systems. "Kalido's ability to take data from basically any source is one of its real strengths for us," McNulty says.
"Another is the time-based view it allows you to take of what's happening in the business. For example, if we had a marketing structure based on geographic lines and decided to change that to a product-based structure we can make that change in Kalido and from that point on we could report both retrospectively [geographically] and in the new [product-based] way of viewing the world. At any time we could also reapply the old way of viewing the business and see how the business is doing in the old mode as well," he says.
"Kalido retains that time-based view of your structure indefinitely. The more you change it, the more it remembers the old way but allows you to superimpose your new view of the world on top. That's a key feature for us because our business is very dynamic, as are many businesses these days. Structures are constantly changing and we need to be able to accommodate that easily."
Additionally, McNulty says that Kalido does not require business people understand underlying data structures or relationships to obtain benefits from its use. According to McNulty, these benefits, although hypothetical and potential at this stage, include a much better understanding of the company's profitability at a very low level of detail such as by product and type of customer. This in turn presents the company with choices if the margin on a particular product is not good enough. It can try and increase income for that product, reduce costs for that product, or offer customers of that product an alternative if the company determines the product doesn't have a viable future.
Another benefit McNulty cites is the degree to which Kalido lets Shell categorise its business and obtain multidimensional views of its customers. "If a mining company buys jet fuel for a helicopter, in the past we would have considered that we've just sold jet fuel to a mining company," he says.
"Now we can say we've sold jet fuel to a mining company that flies helicopters. Through [Kalido] we can quickly and easily identify all the mining companies across the world that fly helicopters. That immediately gives us a marketing base for a particular end product.
"We can also start to explore sales to a particular customer and compare the current month to the previous month and then compare this to other customers who buy the same products to see what the overall trends are. We want every Shell oil products business using the same product worldwide so that we can share and collate information between countries. For example, if someone in London wants to see the value of a particular customer here in Australia, we will be able to provide this information in a comparable format."
However, the change in the way Shell Australia now views the world was the project's biggest challenge. While McNulty says the implementation of Kalido and BusinessObjects went very smoothly, a lot of effort had to go into training and documentation to help people understand the change in business reporting and the new mindset it requires.
Data integrity and complexity is often an issue in data warehouse implementations. Shell Australia has 1500 employees and sells thousands of products to hundreds of thousands of customers. According to McNulty, Shell Australia put a lot of effort into making sure it had a robust process for transferring data from SAP into Kalido and validating it. Kalido has some standard tools to assist in this process and SSI also developed a data vetting tool specific to Shell Australia's implementation. Consequently, McNulty thinks the task was far less difficult and more effective than it might otherwise have been.
"We want to worry about the business issues and the way we'd like to view the business. We want the technology to be invisible to us, but provide us with all the flexibility we need. And we've got much closer to that arrangement with this product," McNulty says.
To Market, To Market
The Shell Services International group of companies (SSI) has annual revenues in excess of $US1 billion and more than 6000 employees in 125 countries. In addition to servicing Shell companies, SSI also sells its services to external organisations. These are both energy and non-energy-related companies but currently they account for only a small proportion of SSI's business and none are direct competitors to Shell in Australia.
The concept of establishing a separate commercial entity to provide one's IT, as well as other corporate services, is not new, nor is the extension of the provision of such services to outsiders. BHP and Qantas are examples of Australian companies that have done this in varying degrees with BHP IT and Qantek respectively. However, a number, including Qantas, have scaled back these activities in recent times in order to focus on their core business - such as flying planes.
According to SSI's communications manager - Asia Pacific, Hugh Massam, the group exists to take advantage of the potential economies of scale from combining operations and sharing services, particularly in IT. SSI's brief, says Massam, is to deliver better value to Shell by lowering costs and providing superior solutions for the same price and ultimately to deliver better value to Shell's shareholders by generating extra revenue.
Although not part of the original plan for the product, the commercialisation of Kalido is an extension of this philosophy. According to SSI Australia's management information and data services practice leader, Andrew Williams, SSI has invested in the order of $US10 million in Kalido over the last five years and is now committed to bringing the product to market and selling it new (non-Shell) customers.
"We've made a significant investment in Kalido, which has already paid itself back within Shell. It is a unique product for the data warehousing industry and has innovative features that GartnerGroup and Meta Group have said are about 18 months ahead of equivalent products in the marketplace. SSI's objective is to bring this solution to market and try and get some additional value out of it. We think it has genuine competitive advantage," Williams says.
Many "user" organisations over time that have attempted to onsell a software product they have developed for their internal use, having discovered, or at least perceived, a gap in the market for it. The general wisdom, though, is don't as most just get themselves into a lot of strife.
For every dollar spent on developing a product, on average $10 is required to market it. Organisations can spend a small fortune upfront only to discover six months later that nobody really wants their product after all. In addition, they can lose sight of their original objectives, with IT resources being allocated to making the product commercially viable instead of focusing on the business's own requirements.
Williams believes SSI has taken account of all of these factors in its decision to commercialise and onsell Kalido. He acknowledges that it is a big step and one that SSI has not taken lightly. To start with, the company has established a separate team within SSI to manage product development and engineer the product to commercial quality standards. Team members have been recruited from around the world specifically as software developers (as opposed to those within SSI who provide consulting services on Kalido's implementation).
Just as importantly, perhaps, Williams admits that SSI doesn't have the experience to direct sell IT products and so has established a partner program to assist it in marketing Kalido. According to Williams, these partners are data warehousing specialists and in Australia include Beacon Group and james martin + co.
"We've been working with our partners for some months now, building their understanding of the product. They have seen the sorts of problems their clients have but have not had a solution like Kalido [to solve them]," Williams claims. It's still early days for Kalido on the open market. At the time of writing, SSI has sold Kalido to only one external organisation - Unilever in the Netherlands - but claims significant market interest locally since its launch in Australia on 27 October 1999. It also has an international patent pending for the technologies within the product.
Neither is SSI unduly concerned about Shell's competitors getting hold of Kalido through its commercial availability. In conjunction with SSI, a customer first has to develop a business model into which Kalido will fit if there is not one available for that industry or the organisation's particular requirements. However, Williams says the business model that has been implemented for Shell Oil Products will definitely not be available to Shell's competitors.
"You can use bricks and mortar to build a really good house or a fairly ordinary house, depending on the skill of your business to define what it wants from the house and to design it accordingly. So while Kalido is providing our oil company competitors, among others, with the same, albeit revolutionary, bricks and mortar, we believe we retain our competitive advantage because of the house that we've built with it, which is a very good house," adds McNulty.
- K Power
A Commercial Relationship
In January 1998, Shell Services International (SSI), Shell's global IT and business services group, established itself in Australia in its own right and Shell Australia effectively outsourced its information technology to SSI. According to McNulty, the relationship between the two entities is very much on a commercial footing.
"We have a brief to establish a continuing relationship with SSI on commercial grounds," McNulty explains. "We work on a basis of quotation and invoicing and actual money flows between us. We have service managers in place, much the same way as we would in a long-term strategic partnership with another supplier."
In fact, McNulty says he is free to deal with SSI or not and in some instances Shell Oil Products has arrangements with external suppliers where there are clear benefits. However, in areas such as the provision of infrastructure, he says there are obvious strategic reasons for a direct relationship with SSI and it would be pointless to look elsewhere.
McNulty describes himself as a "mini-CIO" for the commercial (as opposed to retail) business of Shell Oil Products in Australia. He has a business background and prior to taking up his current position - coincidentally, at the time that SSI established itself in Australia - he managed a distribution terminal. McNulty says that he and his staff take care of the business analysis side of projects and SSI provides the technology expertise that Oil Products needs.
An IT steward's role like McNulty's is becoming increasingly common, given the general trend towards full or partial outsourcing of IT. However, a lot of organisations still have difficulty in aligning business and IT strategies. McNulty admits it is a complex issue but thinks Shell Australia has the right focus, which is to set the business strategy first and then allow other things, such as IT, HR policies and marketing initiatives, support what it wants the business to do.
"I'm not sure all organisations necessarily work in that way," he says, "but the thing I enjoy most about my role is understanding what the long term holds in terms of information, looking at the increasing variety of technology and tools available and mapping out a path [through those options]."
- K Power
Eating Your Own Dog Food
We have found the solution, and it is usWhen data warehousing technology is part of your company's core business you tend to be under the spotlight in terms of how you use the technology internally, as Sam Coursen, vice president and chief information officer, NCR Corporation, can attest to.
"Many customers who come to NCR ask to talk to our IT group as they want to see what we're doing. So it's important for us to exhibit best practice, especially in areas like data warehousing because we're part of the company that's selling this product [Teradata]. We have to demonstrate that we're doing what we're recommending," Coursen says.
There are additional internal pressures for Coursen and his staff. Many of the company's end users are IT professionals themselves and are consequently very demanding and perceive themselves as experts at what the company is trying to do internally. Conversely, though, NCR is often the first customer of new releases of its own technology.
Coursen says he has close access to the product developers and understands what's coming down the line before anyone else. He is also able to sell the broader career paths available within the company as a differentiator when recruiting IT staff.
Over the past five years NCR has centralised its own IT from a country model to a global model and defined a standard set of applications as part of an efficiency drive. This has seen IT numbers reduced from 3000 to 1600, while the overall size of the company has remained reasonably static.
Coupled with this organisational change has been NCR's data warehousing strategy or Business Information Delivery framework, which Coursen presented on at NCR's Partners Conference in Orlando, Florida last October. In the past he says the company's operational information was only available country by country and it wasn't possible to get a global view of the company. Consequently, one of the key goals was to "provide the necessary information for NCR managers to make well-informed business decisions in a rapidly changing business environment".
NCR now has 1.5 terabytes of data available for query. However, as in NCR's case, Coursen advocates implementing a data warehousing strategy on a priority, rather than on a "big bang" basis. "It's important to implement projects incrementally so you can provide real deliverables that have real value without waiting years. Then you can add the next set of value and so build momentum," he says.
Like many other data warehouse projects, Coursen admits that data quality was also an issue and thinks there's no magic cure. "An enterprise model and a reference for all key data elements are essential in order to get value out of your data warehouse. You have to define metrics, see where you are and start making improvements [to your data] and continually make improvements over time until you drive the quality up," he says.
- K Power
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.