Business Intelligence: Last to Leave the Nest

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December 22, 2003 (Computerworld) -- Companies are outsourcing IT initiatives overseas to save costs, but is it worth it to send business intelligence activities offshore? The costs and benefits of such programs are difficult to pin down even when they're kept in-house. Data management consultant William McKnight, president of McKnight Associates Inc., says the offshoring trend will likely hit BI in the next few years. In the meantime, he recommends that companies take it slow and stick to an onshore/offshore model, in which the project managers, integrators and architects are homebodies so they can maintain some control over the projects, while only routine tasks are done offshore. Jean Consilvio talked with McKnight about how companies can assess their readiness to outsource such a core business function.

Why not send BI overseas? It's probably not a good first target for offshoring. Data warehousing and BI is very iterative and business-focused - it's not a technical exercise. That's why we got into so many failures early on, because we treated it like a technical exercise.
It's important that most of the [staff] on the project have business knowledge. And it's also a best practice to have a small team of five to seven that acts as a SWAT team and continually executes on deliverables, as opposed to -- what I think is a poor practice -- having a 25- to 50-person data warehousing team. Until you have your processes efficient, having that many people is just adding to inefficiency.
The offshore model makes sense when you have larger projects. If you consider that maybe 2005 or 2006 will be about when offshoring best practices emerge for technology-related projects, you're probably looking at another year or two before offshore BI has best practices.

How are companies deciding whether it's financially worthwhile to go offshore? How you deliver is a TCO question, it's not an ROI question. It has everything to do with the investment, but the business targets don't change, regardless of the delivery mechanism. And so offshoring, if viewed as a lower-cost approach, will increase your ROI because you'll have lower costs. But it won't do much for your returns except put them at a slightly higher risk, because the delivery may not work as expected unless you employ best practices.

What are some of those best practices? Set up tight specifications, and don't expect too much first off. I would recommend starting with a staff-augmentation-type approach and growing from there. Set up service levels, and set your expectations appropriately and ease into it. Keep an onshore presence for the business knowledge.

William McKnight, president of McKnight Associates Inc.

Why keep that onshore? BI is very business-focused. We develop something quickly, we put it out there and get user feedback. We enhance it, we improve it, and then we move on to the next target and do the same thing with that, while continually supporting what we've put into production. So that life cycle is very quick-turn. That means the development team has to be reactive to the feedback that we get on a day-by-day basis. A lot of the feedback comes in the form of business feedback, and it has to be translated to technical specifications.
If you're going to have offshore BI, you're probably looking at a best practice of doing that only if you have longer-term projects with more stable requirements. And you must have a willingness to specify those requirements to the degree necessary such that a technical person can act upon them without too much knowledge of your business.

What are the risks in offshoring BI? I think the biggest risk is that ETL [extract, transform and load], which is a huge part of data warehousing and BI, is vastly underestimated. And it's not solely a technical exercise. It has an equal component: business. So those rules for how the data should look for users should come from users. And you enhance the risk that the users will not be as involved as they need to be when you go offshore.
All risks are going to be in the semantic gap of what is expected and what is delivered. This is why the benchmarks and the preagreed criteria are so important to establish upfront.
Also, know how you're going to exit a contract before you enter.

How long are contracts? A company has to be very careful getting into offshoring of BI because it's very fluid, it's ongoing in nature, and it never ends. So to think that [a contract is] going to have a start date and an end date that's firm is probably going to lead [the relationship] in the wrong direction. And don't forget about making arrangements for ongoing support.

Should companies evaluate tools when going offshore? Tools are a means to an end, and you're negotiating for service delivery. I would want to audit what tools they're using, simply because if things go wrong and I need to take that onshore, I would want to feel comfortable that scalable tools were being used. But we also don't want to try to re-engineer what the offshoring company is good at.

What skills do the in-house folks need to run offshore BI? The main skills are systems integration, project management, and managing to delivery. Somebody who's not a technician can perhaps do a better job at managing an outsourcing relationship, because they're managing to business deliverables. The same is true for work that's done in-house: Focus on the business deliverables.

William McKnight
Title: President
Company: McKnight Associates Inc., Dallas
Employees: 10
Accomplishments: Founded his consulting firm six years ago and specializes in data warehousing and CRM initiatives. He's a columnist for Data Management Review and an industry conference speaker and teacher.

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