Memo to CIOs: Where to Invest Your IT Dollars

After a tough year of cuts, layoffs, and the pressure to do even more with less, many of you are facing the toughest fiscal environment of your professional careers. Can you achieve your key objectives in 2010 with reduced spending and a smaller staff?

It is possible, and many of the answers can be found in your data. You can achieve significant cost savings and initiate projects with millions in ROI benefits by stepping back and taking a creative approach to solving your most complex business challenges.

Following are some tips designed to inspire you to find opportunities for savings and efficiencies within your own organization.

Savings Tip No. 1: Plug Your Money Leaks

For a large manufacturer, the drip may start with equipment returned for discounts on a future purchase. Your basic reports may show the process works most of the time. However, an audit may reveal millions of dollars leaked annually to improperly credited returns, systems that vary by region, and discrepancies between the return policy’s legal specifications and the day-to-day execution of the returns process.

The CFO relies on auditors. Similarly, an internal or external business intelligence team with finance expertise can help you identify the gaps, plug them and pursue refunds. Your business intelligence experts can take the additional step of building the correct business rules into your monitoring software, and create a dashboard to ensure that the problem won’t happen again.

Savings Tip No. 2: Boost Retention and ROI Through Marketing

Set a goal to increase retention of your most valuable customers by at least 2 percent to 3 percent. Instead of investing several million dollars in a large solution and waiting two years or more to confirm the ROI model, you can build a small prototype of the new system using less than 10 percent of your implementation budget.

Identify a small, select group of high-value customers as they approach the timeframe for a new purchase. Apply targeted customer relationship-building messages over one quarter. In most cases, you will receive statistically significant feedback within the program’s first month.

If the program is successful, you can continue to build additional prototypes, using the sales lift to pay for new testing phases. Eventually, you can roll out a full campaign management system and leverage the previously built prototypes with no throw-away effort. Using this approach, you also gain valuable knowledge about the best ways to scale your company’s marketing process and the technical solution.

Savings Tip No. 3: Create Favorable Contract Terms

Thanks to the current economic climate, vendors are more willing to make concessions to land your business. An experienced negotiator who understands your company’s needs and brings deep knowledge of your vendor’s products or services to the conference table can identify areas of significant savings. Possible tactics:

  • changing a multiyear deal to allow you to exit from the contract at will; this provides an opportunity to go back and renegotiate as necessary;
  • creating attainable success metrics for both sides to monitor the program objectively on an ongoing basis;
  • building in a percentage refund based on a sliding scale if the vendor fails to meet key deliverables based on the metrics; and
  • ensuring the vendor fully understands your company and contract objectives in order to streamline the resources assigned to the project.

Since many third-party negotiators take a percentage of the net savings, it’s a zero-cost solution.

Savings Tip No. 4: Ensure Billing and Payment Accuracy

When billing processes, systems and codes vary by market or region, many companies in high-transaction industries devote significant resources to manual reconciliation. Investing in an information and reconciliation platform solves a host of problems. It compiles data points from different markets and translates market-specific financial information into enterprise reports and dashboards. Results include streamlined financial reconciliation and improved information quality.

Using the newly created enterprise reports and dashboards, business intelligence experts can more easily identify areas of revenue recovery with vendor and customer data. Simply ensuring that customers were moved from promotional pricing to standard pricing in the correct timeframe can uncover millions in missing revenue. Additionally, state-of-the-art reporting provides the accurate, real-time information executives need to make informed business decisions.

Savings Tip No. 5: Tightly Manage Perishable Inventory

For distributors of perishable food and plant products, spoilage and expiration pose a constant threat to the bottom line. With many producers working on very thin profit margins, relying on poor or incomplete reporting means continued losses.

A moderate investment in an enterprise data warehouse can save tons of merchandise from the landfill. Improved tracking and on-demand reporting provide the information you need to improve your inventory-control procedures. You can then identify and manage products based on expiration date, allowing you to move the highest-priority items to store shelves more quickly.

Plan for Recovery

Keep in mind that your data is one of your most important business assets. You can achieve positive results in a few weeks or months with a modest investment.

Leveraging your data now to solve some of your organization’s most complex business challenges will pay dividends for years to come.

Brad Cowdrey is founder and managing partner of business intelligence firmClear Peak.

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