Data Warehouse Or Bust - InformationWeek

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1/13/2005
12:39 PM
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Data Warehouse Or Bust

Owens Corning gave its IT group only 10 weeks to roll out an unconventional data warehouse and analytical package that would help rescue the company from a desperate gross margin situation.

In October of 2000, Owens Corning, the building-supplies and glass-fiber manufacturer, entered Chapter 11 bankruptcy on the heels of a multi-billion-dollar asbestos lawsuit. The company has yet to emerge. Even as the class-action case has dragged on (a settlement figure was once estimated to be around $16 billion), so has the wrangling by the company's creditors over how much they should recover for their losses. Owens, Toledo, Ohio, estimated that its legal fees alone would amount to $330 million.

Meanwhile, the company's current operations have plugged along, and by the end of 2003, everything seemed to be moving in the right direction -- revenue was up, operational costs were down, productivity was up. But one major problem remained, tied especially to the drag on profits caused by the ongoing legal mess. The company had met every major financial goal except one -- gross margins. Instead of improving, margins had in fact dangerously narrowed, to the point that the company needed to take some kind of drastic action.

"We had to do something about it," said Klaus Mikkelson, IS director at Owens Corning. "A company our size couldn’t withstand a sliding gross margin for too long."

Mikkelson began investigating data warehousing and BI analytics applications that could allow salespeople to get a read on where margins stood on a daily basis. Previously, Mikkelson said, "At the end of every month every department knew exactly what their gross margins were. And I was happy for them. But an aggregate can only tell you how bad it is -- and it was bad. What it doesn’t tell you is how to do something about it."

With the old method, the company had only 12 chances a year to make cost corrections, Mikkelson said. "But if you can answer that question every day you come in to work -- how did we do on margins yesterday? -- and get a fact-based answer, you're much closer to being able to do something about it. You have 365 chances for cost corrections."

So Mikkelson went shopping. Because of the size of Owens Corning -- $5 billion in annual revenue and innumerable business lines, from roofing materials to fiber-optic cables -- the most important purchase was a data warehouse, one that could easily and efficiently cut across all the company's transactional databases.

One name stood out from all the rest, a U.K.-based data-warehousing specialty vendor called Kalido, a company with only $9.5 million in revenue last year. Recently spun off by Royal Dutch Shell, it had been created by tech people within the oil conglomerate as a warehouse solution for that company's own far-flung operations. Kalido's warehouses, in fact, are designed specifically for multi-nationals, with their diverse business lines in different markets, in different countries, with varying regulations and laws and peculiarities.

Mikkelson, however, was skeptical. "I started investigating Kalido because the claims they were making were outrageous. Clearly they were lying through their teeth." According to Andrew Hayler, one of Kalido's founders, a traditional data warehouse costs $3 million on average, and takes nine to 18 months to build. A Kalido warehouse, however, would cost $1.5 million and take 4 to six months to build -- half the cost, less than half the time. Interested in verifying Kalido's wild assertions, Mikkelson went through three proofs of concept. "And not once did they have to revise any of their claims," he said.

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