For the first reporting tool, OConnor decided to build a daily report that could show the companys bookings, billings and order backlog. OConnor knew the reporting tool would not be accepted unless it was validated. His first project hire was Karyn Houle, an analyst from the companys finance department whose job was to verify that the daily Cognos reports were accurate.
The reporting tool was completed within the 90-day time frame, and it was an immediate hit with senior management. Rather than waiting until the end of the week to see an Excel spreadsheet on sales, billings and order backlog, they were now getting graphical reports every morning with the previous days numbers. The tool also allowed managers to easily drill down to see such items as sales by product, region or customer. The finance department continued to produce its spreadsheet reports in parallel with the new daily reports, but after two months of validating the results, the management team decided to rely solely on the interactive reports.
"That was a watershed moment," OConnor says. "Until that point, there was zero interest in the finance community in what we were doing. Now we had their attention."
Over the next two years, the development team methodically produced a stream of other reports and scorecards for areas such as cash flow, accounts receivable, revenue budget and forecast, inventory, material budget and forecast, head count, and compensation planning and analysis. The reports were all designed to be self-service—easy enough for managers to use without the need of technical assistance. All development was kept to the 90-day cycle, increasing credibility as each new report was rolled out. In addition, making changes to the Cognos reports was relatively simple. Houle says a change could typically be made in four to six hours, compared to the four to six weeks required to change SAP.
The impact was soon felt on the bottom line. Since the SAP system had been relegated to a transaction engine, OConnor was able to reduce the number of licensed users from 1,090 to 260. In addition, the number of technology staff dedicated to SAP was cut from 36 to just one. No changes were allowed to the SAP system, and it continues to function reliably. Where possible, redundant report applications for areas such as inventory and personnel were eliminated along with their support staff. By the beginning of 2004, OConnors I.T. head count had been reduced from 112 to just 34.
The $12 million annual-budget target was achieved and taken further. Fiscal 2004 technology expenditures came in at around $7.6 million. The most recent run-rate is $1.5 million per quarter, or $6 million per year, a 70% reduction from 2001 levels.
In total, OConnor says the company invested about $500,000 in the business intelligence project over three years and has generated about $13 million in direct annual savings.
Ray Homan, vice president of high tech industries for SAP, maintains Zarlink might have gained greater business benefits if it had expanded the use of sap in areas such as business intelligence, but he admits that business pressures may have forced the companys hand. "At the time the decision was made, it was probably prudent," he says. "It may not turn out to be the best decision over the long term, though."
In addition to the information-technology department savings, there have been other significant benefits. Since analysts were no longer required to pull together weekly reports, the finance department was able to cut its staffing roughly in half. The team also implemented a self-service human-resources application that also allowed staff cuts. In all, OConnor estimates that about $10 million in annual savings were generated elsewhere in the company as a result of the technology overhaul.
The staff cuts were difficult but necessary, according to OConnor. "One of the keys to our success is that each time an application was implemented, we went back through the process and made sure all of the savings were harvested," he says.
There is no denying that the past three years have been heart-wrenching for many of the people laid off by Zarlink. But rather than create a dysfunctional technology department, OConnor maintains the opposite is true.
Houle concurs: "We feel were playing a key role in the companys drive to profitability and future growth."