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Integrating financial and operational data boosts business performance.

by Ronald Swift, vice president of cross-industry solutions marketing for Teradata

Nearly all business leaders recognize the pivotal role information plays in their companies' success. Increasingly, enterprises are initiating innovative decision-making processes that seamlessly incorporate both financial and operational data. The enterprise data warehouse (EDW) provides the transformative power these companies need to achieve real-time access to reliable, transparent data. (See figure, below.)

Enterprises continue to reap benefits from their operational departments' laser-like focus on information and analytics, but leading companies recognize that operational insight is most useful when it can be reliably translated into financial terms using an EDW.

Business leaders who leverage an EDW to merge their financial and non-financial data can testify that the significant effort required to successfully integrate this information is more than matched by its ultimate payoff: improved fiscal and operational fitness. Furthermore, executives who take this plunge report that their companies emerge leaner, stronger and better equipped than before to take on the competition.

Figure 1: What is Finance and Performance Management all about
Integrating operational and financial data enables insight into managing key value drivers throughout the enterprise.

The power of information convergence
When you consider how central information consistency is to managing resources on a daily basis, it's difficult to make much of a case against integrating financial and operational data. Most corporate executives who have had to make decisions in environments with separate, siloed financial and non-financial data know that when no clear linkage exists between the financial and the operational, you can easily fall prey to speculation and guesswork.

In a fully integrated data environment, however, financial and operational managers can utilize relevant current and historical financial data to refine operational drivers. Armed with insight into the financial consequences of day-to-day operational activities, these companies are best positioned to understand and project revenues and expenses, evaluate and refine business processes, and set competitive and achievable performance goals.

The other dramatic benefit of an EDW is management's ability to ensure that data definitions (for example, which specific elements compose customer revenue, standard gross margin or fixed cost absorption calculations) are consistent across the enterprise. This consistency allows companies to provide reliably accurate financial and operational data to users, ensuring apples-to-apples comparisons and dependable analytics.

When these capabilities are combined with a role-based, self-service reporting environment, increasing numbers of leading companies are proving that leveraging integrated financial and operational data greatly expands the ability to measure enterprise performance, improve efficiency and maximize profits.

Moreover, a recent report from Gartner, Inc., "CFO Finance System Priorities through 2009" (Nigel Raynor, Aug. 24, 2006), predicted that "CFOs who do not work with CIOs and IT to address data quality issues will suffer from 'multiple versions of the truth' and will not be able to provide effective strategic advice to the business."

Leveraging the power
An effective Finance and Performance Management system converges all pieces of information in a way that informs and empowers every relevant user, regardless of the question at hand. Companies that have implemented an integrated EDW with financial information created consistency and enabled new insight at all levels while answering previously unanswerable questions.

CFOs whose companies leverage the Teradata EDW for Finance and Performance Management have overcome seemingly insurmountable challenges to achieve a variety of goals, including increased profitability, improved procurement processes, better resource allocation and more reliable metrics. Additionally, Teradata gives companies valuable tools to hone cost projections for customer marketing and support and also to develop sustainable, increasingly automated regulatory and compliance processes. T

Data warehouse creates a web of connectivity

Officials at WESCO International, Inc., an industry leader in electrical products distribution and procurement services, understood that integrated data was essential to the success of their business goals. Faced with an undeniable need to centralize the company's most strategic operational and financial data, WESCO's management team leveraged the Teradata Warehouse as a "spider web" of connectivity: joining disparate sales, purchasing, accounts receivable, accounts payable, inventory and supplier information through this consistent, reliable and easily accessed repository.

By mining this doubly rich vein of financial and business data, WESCO purchasing managers can track parts buying and availability across the company's many locations, thereby reducing duplicate inventory, gaining centralized vendor buying power on bulk items, and saving the company millions annually. Benefits include a significant reduction in annual procurement spending and an increase in gross profit margin. As these benefits dropped directly to WESCO's bottom line, stockholders saw a dynamic increase in share value.

"I could make a pretty strong argument for a Teradata return-on-investment value at any point between $5 [million] and $50 million," says WESCO CFO Steve Van Oss. "But a better way to look at it is that this tool has become an integral part of the way we run our business."

Company success through data integration

Here are just a few examples of how customers leveraged the integrated capabilities and solution framework of a Teradata Warehouse to meet their own unique business goals.
> By mapping revenue data back to the specific features offered in each product, online payment powerhouse PayPal is better able to determine which features drive profit and which fail to earn their keep. Additionally, the company's Financial Planning & Analysis and IT teams now source all analytics from the same data warehouse platform, ensuring a shared, enterprise-wide view of the business. This common view has enabled leaders to act as a team to support critical functions and more effectively improve overall corporate performance. (For more on PayPal, download the podcast from
> Officials at Ford Motor Company integrated their company's vehicle plant data and purchasing data in a Teradata Warehouse, allowing them to build a vehicle-level view of profitability that incorporates the impact of both raw materials and non-standard incremental features for each stock keeping unit (SKU). Ford extracts real-time vehicle profitability details from Teradata and delivers it to information stakeholders at least daily, or more often during peak reporting periods.
> For St.George Bank, Australia's fifth largest bank and one of that country's top 15 publicly-held companies, gaps in the company's systems for reporting risk variables required the bank to maintain higher capital reserve holdings to comply with Basel II requirements. Reconciliation of the bank's Teradata-based Group Data Warehouse with the general ledger allowed St.George to support compliance and risk management initiatives which drove a reduction in capital reserve requirement levels, making more funds available for lending. (A detailed case study about St.George's achievements is available on Teradata Magazine Online.)

Teradata Magazine-June 2007

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