With Shift from Cost-cutting to Revenue Growth, Analytic Needs Also Seen Changing

Companies turning to enterprise-wide analytics that show how they are performing in the eyes of customers, Silvon CEO says

Companies turning to enterprise-wide analytics that show how they are performing in the eyes of customers, Silvon CEO says

Oak Brook, IL — December 2, 2004 — As the economy improves, more corporations are turning to enterprise-wide analytics to help them find more efficient ways to generate revenues, according to Mike Hennel, the president of enterprise performance management (EPM) specialist Silvon Software.

Hennel was the keynote speaker at Profit 2004  Empowering the Demand-Driven Enterprise, this year's Silvon Software Users Group Conference that drew attendees from across the United States and Canada.

"There is a very distinct shift in the type of metrics that our customers are leveraging," Hennel told attendees. "During the economic slowdown, they focused on cost reduction — how to squeeze more out of their current assets. In the last six months, companies are now more interested in enterprise-wide analytics that show how well they are performing in the eyes of their customer."

Hennel said the change in focus to "demand-driven supply networks" is a sign that the economy is picking up steam. "People are now thinking about how to drive revenue, instead of just cutting costs across the board," he told attendees.

Companies now are concentrating on using analytics such as Silvon's Stratum Enterprise Performance Management (EPM) suite to improve in areas such as customer profitability, better demand forecasting and visibility, and revenue growth.

"For instance, our customers in the publishing, manufacturing and consumer packaged goods markets are using EPM tools to come up with better pricing models," Hennel said. "They can now identify the true profitability of a customer by using Stratum to analyze the cost of value-added services they are providing to customers, as well as other factors such as returns and logistics. Companies do this to determine the impact of the services they are providing, understand what those services are doing to their cost structure, and then come up with different views on how to set their price models for different customers."

Hennel said companies taking a demand-driven supply network approach are trying to gain as much visibility across the enterprise to reduce variability in their forecasts. By generating accurate forecasts and using analytics to better understand demand signals, companies can develop a single consensus forecast that can help them drive demand while also setting performance metrics across the enterprise for all departments.

The increased focus on demand-driven supply networks has changed how companies view the data they have available, according to Hennel. In the past, the approach has been to get visibility of what has been happening — for instance, using the "bread-and-butter" type of sales reporting and analytics that companies have historically relied upon.

"What has changed is companies are now doing more lifecycle reporting — how much revenue is coming in, how much is coming from new versus repeat customers," Hennel said. "With the analytics available in EPM applications such as Stratum, companies can now segment customers differently. They can determine which customers buy on price and compare them to the customers who have high growth potential over the long term. They can then use that information to refine service and pricing strategies in order to drive revenue growth."

Don't expect the focus on generating revenues instead of cutting costs to change anytime soon, according to Hennel.

"Customers have shed so much operating capacity, that now that the economy is coming back they're starting to bump up against that capacity," Hennel said. "However, they are still in the process of rebuilding their balance sheets. They want to make sure they come out of the economic downturn as strong as possible after the rough times of the past two or three years. To do that, they are turning to analytics to help them scorecard their performance so they are driving as much as they can out of every asset in every department across the enterprise."