Outsourcing Your Data Warehouse

I was intrigued by a recent post on the CORTEX about Optus signing a three year deal with HP Enterprise Services (formerly EDS) to outsource several core applications including the data warehouse. I don't have much more detail than that but my first thought was to wonder about the wisdom of an organisation outsourcing core capabilities like analytics.

Later on I thought a little more about this and I wondered if my first reaction was wrong - and hence this post.

I believe that an ability to compete on information (i.e. analytics) is a core capability that many firms have to possess to succeed. Does that mean that they also have to keep in-house all their information management activities? Is the entire information chain from source to decision a core activity? Or can you outsource the data warehouse/data stores and still be good at 'doing analytics'?

I don't have any hard evidence either way so I will make a judgement call and say no. What's my justification for this? Here's my logic:

• A warehouse is a lot more than a place to store data. Building and operating one means that you learn a lot about your data, how it is used operationally, what it is - and frequently what it is not. I'm talking here about the quality of your data and the insight that this knowledge gives you about the soundness of the data you use to make decisions.
• The people that make ETL happen can also tell you a lot about what really goes on in your transactional applications and business processes. The best ETL and data warehouse experts I have worked with have always had a fantastic ability to support business people and ensure that they become better information users.

Sure, you still gain insight from your analytic activities that make use of the data warehouse but I would worry about the impact of outsourcing on my business decision makers ability to access the knowledge locked in the (HP) ETL and data warehousing team.

This may not be as important in organisations with well developed MDM infrastructure that robustly captures and makes available this information to the business. I'm pretty sure that few such organisations exist today.

So Optus will (presumably) save some dollars in the short term but as the months go by the hidden costs associated with less insight will greatly outnumber these. Ultimately, this may all be a moot point as based on discussions I have had with Optus BI staff over the years, as an organisation, they do not seem to be very good at analytics anyway. A lot of good analytics people have left Optus over the years and they all seemed to be frustrated at the inability to make an impact on this.

I'm also aware of the irony of my opinion being based on 'experience' when I spend my career advocating fact-based decision making. So let's just keep this post between you and me. OK?

Comments

[OzAnalytics]

Tim - absolutely agree. Analytics is not IT and requires different skills to operate and manage. The capabilities required are different, not better or worse than the other.

I still want to have my data integration experts in close contact with the analytics people so as to maximise the amount of customer insight I get. So I'm happy to hear that it is *maybe* the IT management aspects that are being outsourced at Optus.

Thanks for the post.

Steve

ps. Keep on blogging!

[OzAnalytics]

Thanks for the comment and the link to Tim Manns' blog. I know it and like it (or at least the bits I understand I do ... ). As to how they are doing on analytics, I was comparing what others in Telecoms are doing - and not just in Australia.

No criticism of Tim was implied or intended (quite the contracy!) as the issue is more around the businesses ability to make use of analytics.

What we need is a bit of disclosure around how everbody's models are performing. That's not going to happen anytime soon and even if we did see some data, the question would remain: Are we comparing apples with apples? Do we both define lift in the same way, etc? I think that Tim has also talked about this on his blog.

Steve

[TimManns]

Hi Steve,

From a purley personal point of view, *maybe* its more of a IT management role that is outsourced. Telcoms often have huge datawarehouses and systems that run 24/7. Outsourcing IT systems to staff that operate out-of-hours and fix bugs etc seems like a common thing many organisations might do.

Analytics of data warehouses and customer insights is a completely different skillset than managing an IT system such as massively multi-parrallel data warehouse. I believe advanced analytics requires a lot of business knowledge and is far less likely to be outsourced by any organisation for exactly the reasons you mention :)

- Tim

[Shane]

Steve,
It is hard to say what if any impact the outsourcing will have on analytics, but from what I read at http://timmanns.blogspot.com it does not sound like they are doing to badly on the analytics front...
Shane