Hi Tony,

Thank you for the compliment....:-)

1. Government Departments.

My experience is that Government Departments are an entirely different beast to commercial organisations. Also, Government Departments in different countries operate very differently. So making any generalisations about them is fraught with danger.

2. Government Departments that I have worked with have had some specific need for some kind of data warehouse. From budgeting and planning, cash flow management etc to compliance assessment and fraud detection. There is significant need for compliance detection in any Government Department where citizens are expected to 'self-comply' and 'self-regulate' and then be subject to after the fact audits. Taxes are the best example of this.

3. Apart from that, I'd not make any generalisations about Government Departments. They spend money at the end of the year if they have some left and often just to get rid of it so they will get more next year.

They are not driven by the normal commercial realities of the private sector. Certainly, they are generally not driven by 'customer satisfaction' or level of quality of 'service delivery' to their 'consumers' of products and services. I don't think that is too critical a comment to make...so they do not 'benefit' from CRM or 'differentiated service levels' and those types of things that driver new revenue/profit to commercial organisations.

4. Why do people go for 'cost cutting'?

A. It's simple, and the damage done is usually not evident until the person that cut the costs has moved on. 2 weeks ago at Heathrow airport there was a good example of what is wrong with cost cutting vs profit optimisation. British Airways had cut staff so far, and were 'surprised' by the higher than usual resignation rate, that they didn't have enough staff available to check passengers in and many flights were cancelled. This has an obvious effect on their customers and their revenue.

B. It's fast. I don't spend a whole bunch of money and suddenly I look good to my boss.

5. What is my response?

During the recession in the 90s I developed the following response. When senior managers told me all they were interested in was cost cutting I suggested they should shut down the company as that was clearly the best way to cut the most cost out of the business. After the senior manager protested that it was a 'stupid idea' (or whatever) to shut down the company I would politely suggest that perhaps he was more interested in profitability than cost cutting. They usually agreed.

6. Current Situation

In many areas of the world private sector does not have a lot of room for cost cutting. Many large companies have cut costs to the bone in many areas and so there is little room left to cut costs.

7. Why is the opportunity so much larger with 'Generate New Revenue Profitably'?

A. It is MUCH harder to generate new good margin business than it is to just cut costs. You actually have to stop and think about it and apply some grey matter.

B. It is so much easier for critics of the DW to say 'we would have thought of that even without the DW'. So it is hard for the business analysts to get credit passed/allocated to the DW.

C. Many more areas of the company are involved. In most cases, in projects where the DW we were building was going to provide the highest returns the decisions that it drove were made at board level and they were the BIG decisions.

Often times the decision was about the investment of hundreds of thousands of dollars in some sort of program to transform an area of the company or to run some large campaign or something similar.

Often times it requires systems changes, new product development, training and education for staff etc. Such decisions are hard to attribute to 'the DW'.

With these things making it 'harder' to get the DW going it's no wonder that using the DW to drive new revenue is so much harder and much less frequently attempted...

Personally, I really like it when the benefit of the DW can be seen in the annual report and the CEO talks about how successful the business has been that year. Then the DW project is really successful... :-)

Best Regards

Peter Nolan

Data Warehousing Consultant

Mobile: +353 879 581 732

-----Original Message-----

From: owner-dwlist@datawarehousing.com

Sent: 15 September 2004 04:29

To: dwlist@datawarehousing.com

Subject: RE: dwlist: Business Case

From: "Lew" <sklew@hotmail.com>

Peter,

I read your paper on cost benefit analysis for a data warehouse.

Excellent paper. You mention though that 75% of the benefit of using a data warehouse is not in cost saving but profit/revenue improvement.

How would this logic apply to a government agency who do not make profit. Would they benefit only from cost savings? If this is so, would it be fair to say that they do not have as much to gain from a data warehouse as private sector businesses?

Thanks

Tony