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Case Study

Teradata Data Mart Consolidation Return


on Investment at GST

Professor Robert J. Sweeney, Wright State University


Robert J. Davis, Teradata, a division of NCR
Professor Mark Jeffery, Kellogg School of Management
Case Study
Teradata Data Mart Consolidation Return on
Investment at GST

The telecommunications company was having a


tough year with the stock price down 35%.
Overview persuaded? He also wondered how best to quell
Professor Robert J.
Robert Davis had just finished a meeting with Richards’ concerns about organizational
Sweeney of Wright Mark Johnson and Jeff Richards the CFO and change and moving to a Teradata architecture?
State University and CIO of GST Inc. The telecommunications com- Fortunately, Johnson and Richards had provid-
pany was having a tough year with the stock ed a detailed breakdown of their costs for the
Robert J. Davis of existing systems.
price down 35% and Johnson was looking for
Teradata, a division ways to significantly reduce costs. Davis
worked for Teradata and Richards had request- GST INC.
of NCR prepared
ed he come in to talk with the CFO about Located in the southeast, GST operates
this case study in streamlining their investment in technology. in the highly competitive telecommunications
industry. With 13 million customers in
collaboration with Davis had suggested data mart consolidation
as a potential solution. 11 states, 28,000 employees and annual sales
Professor Mark Jeffery exceeding $5 billion for the most recent
from Northwestern The idea of consolidating systems seemed like year, GST was positioning itself to become an
an easy win, but Johnson was not impressed. industry leader through its commitment
University's to product innovation and personalized
He wanted to see hard numbers “before he
Kellogg School of invested a dime.” Richards was customer service.

Management as not as skeptical but he was concerned about


the move to a non-standard infrastructure, GST began in 1903 as Greater Southern
the basis for class what he would do with the technical resources Telephone, the region’s third largest incumbent
local exchange carrier (ILEC). Over the years,
discussion rather potentially displaced by this
new system, user training, and related Greater Southern has changed its name to GST,
than to illustrate organizational change issues. extended its reach as a competitive local
effectiveness of exchange carrier (CLEC), and now
Davis walked out of the GST corporate provides a complete menu of state-of-the-art
management. Some telecommunications services to its ever-
headquarters towards his car. Johnson had
facts within the case really harped on the need for a realistic ROI expanding array of business and residential
analysis before he committed any upfront capi- customers; each customer has a unique
have been altered
tal to the project. Davis needed his team need for which GST has cultivated a unique
for reasons of to put together an ROI analysis that would relationship. The service menu includes data
and voice transmission capabilities such as
confidentiality. clearly demonstrate how the Teradata
solution could help GST and impact their broadband data services and Internet access
bottom line. He wondered how much capital delivered over a digital network.
would be required to fund the consolidation
and if Johnson and Richards could be

EB-3105 PAGE 2 OF 13
Case Study
ROI for a Customer Relationship Management
Initiative at GST

A. Organization Chart for GST Inc.

Mary Gros
CEO

Tom Webster,
COO

Mark Johnson, Jeff Richards, Daniel Wymer, Barb Young, Cheik Daddah, Erica Kolks, Nichole Knell, Karine Hatti,
CFO CIO CAO General Counsel Investor Relations Marketing Industry Relations Human Resources

Stacy Hoyle, Jill Newburg, Dominique Arnold, Jeff Shoemacher, Meghan McCormick, Raveen Rajavama, Jean Secrist,
VP Region #1 VP Region #2 VP Region #3, VP Region #4 VP Region #5 VP Region #6 VP Region #7

1a

B. Organization Chart for GST Inc. Region #4

Jeff Shoemacher,
CEO,
VP Region #4

Fall Ainina, Rebecca Koop, Susan Lightle, Bud Baker, Paula Saunders, Cathy Kempf, Michael Edwards, Joe Castellano,
CFO CIO CAO ILEC CLEC Internet Services Data Services Customer Relations

1b

As the business evolved technologically The organization of each GST geographic TERADATA
and geographically, GST adopted a region includes a regional vice president serv- Teradata is a division of NCR Corporation, and
decentralized model by region. The ing as the CEO of the business unit, a regional is a leading provider of enterprise data ware-
corporate level leadership team includes CFO, a regional CIO who also reports to the housing technology and solutions.
the President and CEO, the COO, and corporate CIO, a CAO and several product NCR has a storied history dating back
fifteen vice presidents; seven are regional managers. Exhibit 1b represents the organiza- to its inception in 1884. In that year, John
VPs while the other eight include the Chief tion chart for GST Region 4. H. Patterson purchased the National
Financial Officer, Chief Accounting Officer, Manufacturing Company, maker of the first
Chief Information Officer, Senior VP Mary Gros, CEO, had requested a set of income mechanical cash registers, and renamed it
for Investor Relations, VP for Human statements reporting MIS expenses separate National Cash Register Company.
Resources, VP for Marketing, VP for Industry from Cost of Goods Sold. She noted the
Relations, and the General Counsel. The high- increase in IT expense each year, both in Extending from mechanical cash registers,
level corporate organization chart is provided dollars terms and as a percentage of revenue, NCR evolved into an innovative supplier
in Exhibit 1a. and charged Johnson with finding ways to of advanced Point of Sale Solutions, the world-
cut costs. Exhibit 2 contains the comparative wide leader in sales and shipment of
income statements for the past three years Automated Teller Machines (ATMs), and data
for Region 4.

EB-3105 PAGE 3 OF 13
Case Study
ROI for a Customer Relationship Management
Initiative at GST

The data warehouse systems con-


Comparative Income Statements GST Inc.—Region #4 nect with customer mainframes
2001 2000 1999 and operational systems to “siphon
Revenue* $319,904 $280,289 $252,437 off” pertinent detailed data from
Costs and expenses, excluding
silos into a large database, where
MIS and depreciation $107,406 $106,539 $108,037
the data can be queried for effective
MIS 95,971 75,678 58,536 and timely analysis and action.
Depreciation and amortization 55,824 45,605 39,832 This integrated decision support
system is called an Enterprise-wide
Operating Income (Loss) $60,703 $52,467 $46,032
Data Warehouse (EDW).
Interest and dividend income 3,733 2,524 2,973

Interest expense (21,790) (15,939) (13,417)


The primary elements of
Other income, net 698 531 326 Teradata’s value proposition are:
Income (loss) before income taxes $43,344 $39,583 $32,914

Provision (benefit) for income taxes 20,911 18,833 15,333


Proven Performance -
Customer References
Net income (loss) $22,433 $20,750 $17,581
2 Teradata customers include
* All numbers are in units of thousands. many successful global compa-
nies such as: Wal-Mart, Bank of
warehousing solutions. In 1974, the company upon customer information previously locked America, 3M, SBC, Delta Airlines, Whirlpool,
officially changed it name to NCR Corporation. in isolated data silos. Exhibit 3 is a schematic Belgacom, Harrah’s Entertainment, Royal
Today, NCR has a global reach with annual view of isolated data silos in a typical large Bank of Canada, Procter & Gamble, AT&T,
revenues of $6 billion and approximately corporation such as GST. Travelocity, and Merck Medco.
32,000 employees.

In 1991, AT&T invested $7.4 Billion to


acquire NCR and effectively established the Multiple Views and Silos of Data in a Large Corporation such as GST Inc.
unit as their computer systems division.
That same year, NCR purchased Teradata Behaviors
Purchase History
Corporation for their advanced enterprise Margins Customers
data warehousing technology. NCR became Resources
Demographics
an independent company again in 1997 as Enterprise Preferences
a result of the restructuring of AT&T into Attitudes Payment
Profits
three distinct companies: AT&T, Lucent Inventory Availability
Growth Channels
Technologies and NCR. Partners
New Entrants
Quality
Competitors Delivery
Teradata, founded in 1984, was based upon
Growth
the mission of providing high-performance .com's Products &
Services
commercially viable data warehouse technology Marketing
and solutions. Data warehouse technology
enables large corporations to analyze and act 3

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

Scalability A schematic diagram of a typical data ware- too costly and as a result, data marts
Scalability is the ability to support more house is shown in Exhibit 4a. The typical flow have proliferated. Data marts are smaller
users over time. For an EDW, scalability has of data to information is as follows: operational repositories of information that are for a
multiple dimensions: hardware, support data is generated through customer transac- specific business unit or process. Exhibit 4b
of user connectivity, and from a database tions. Data is then transformed into a consis- is a schematic of a company similar to
perspective the ability to support ever tent format into storage for later use. The GST that does not have a centralized data
increasing expectations for complex as well appropriate information is extracted and warehouse, but instead has a series of
as ad hoc query performance. Demands imported for summarization. The summariza- isolated data marts.
on a data warehouse increase exponentially tion might involve comparing sales across
as data and user volumes grow, update time, across products, and by profit margins. As independent systems, data marts are
frequencies increase, and the operational Similarly, data can be summarized by cus- often considered less expensive to operate.
feeder systems multiply. The Teradata tomer, across time, and across products by This is only true if one ignores many of the
solution has demonstrated scalability. profit margin. Finally, the summarized data is hidden costs associated with data marts. In a
presented as information for use in future 2001 Gartner report, it was determined that
Support for High User Concurrency business decisions. data marts were 70% more expensive to
One of the sure signs of a successful data operative per subject area than a comparable
warehouse is when more and more business The storage component of the data flow is data warehouse.
users want access to it. In some environments, the subject of data warehousing. In most
this demand presents a dilemma: Do you decentralized business environments, Data marts are usually constructed for an
accept all users and suffer performance data warehouses have been considered individual user/business unit because of the
degradation that leads to diminished ware-
house effectiveness and user attrition? Or do
you restrict data warehouse access to a limit- Data Mart and Data Warehouse Architectures

ed number of users, resulting in sufficient


IT Users
warehouse performance but reduced overall
business value? The Teradata solution uses Operational,
Data
massively parallel processing so that many
Data
users can access the system simultaneously Transformation

without loss of performance. Enterprise,


Warehouse &,
Management

Data
BACKGROUND ON Transformation

DATA WAREHOUSE Data,


Marts
TECHNOLOGY

Business users accessing disparate data marts


A data warehouse is not a product but rather
a process. Data warehouses are environments Business
Users
that allow business users to transform vast
amounts of data into useful information Schematic of a typical data warehouse architecture

efficiently and accurately, enabling companies 4a


to “get to know the customer.” Alex Payne, Marketing Specialist, Teradata, a division of NCR and Chiek Daddah, Senior Business Analyst, Teradata, a division of NCR

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

difficulty of obtaining data consensus across the


organization. Data marts often become isolated
Data Mart and Data Warehouse Architectures
data silos. This is primarily because business
users tend to want to tinker with the system and IT Users

customize it to their specific business division


Operational,
needs. As the number of users (tinkerers) grows, Data

the effectiveness of the mart deteriorates.


Data
Different users with differing information needs Transformation

might customize the mart to their unique needs.


Data,
This customization makes it virtually impossible Marts

to share information across the organization.


Finally, changing the data mart is often slow – Business users accessing disparate data marts

programmers often wait until a large number


Business
of changes are received before they alter the Users

data mart code.


Architecture comprising of isolated data marts and no centralized data warehouse.

The data warehouse architecture Exhibit 4a is an 4b


Alex Payne, Marketing Specialist, Teradata, a division of NCR and Chiek Daddah, Senior Business Analyst, Teradata, a division of NCR
improvement over the data mart environment
Exhibit 4b because it allows business users across
the organization access to a single set of data. The
data warehouse is more readily adaptable to
Data Mart and Data Warehouse Architectures
change as user needs change, and is generally free
from the tinkering that tends to be endemic to
data marts. Furthermore, data warehouses are
External , Type 1,
Data Mart
cost effective because they eliminate redundancy Data

in staffing as well as information.

Type 2,
Data integration is essential to the development ODS Warehouse Data Mart

of a single view of the enterprise. However,


even with integrated data, companies achieve
maximum success if the integrated data is Independent, Type 3,
Data Source Data Mart
available to all business units in a useful form
that is both cost-effective and accurate.
Data, Information,
Enterprise data warehouses can be seen as an Sources Users
Hybrid data mart/data warehouse architecture
important step in this direction.
4c
Alex Payne, Marketing Specialist, Teradata, a division of NCR and Chiek Daddah, Senior Business Analyst, Teradata, a division of NCR

EB-3105 PAGE 6 OF 13
Case Study
ROI for a Customer Relationship Management
Initiative at GST

Like most companies, GST organizes data by


function: customer data, partner data, com-
Data Mart and Data Warehouse Architectures
petitor data, and finally enterprise data. A
schematic of this configuration is given in
IT Users
Exhibit 3. Partitioning data along these lines
obscures many business Operational,
Data
relationships that could be more cost
Data
effective and more profitable. Transformation

Enterprise,
Warehouse &,
Management
BACKGROUND ON
DATA MART SYSTEMS

The typical data mart environment usually Business


Users
includes independent data marts, dependent
data marts and/or hybrid data marts. In an Architecture of an Enterprise Data Warehouse (EDW). The system consolidates all data
independent mart (Exhibit 4b), transactional marts into a single enterprise-wide database. Users then query the database directly,
instead of querying disparate data marts.
data is collected, transformed and then
stored in data marts. These data are then
4d
Alex Payne, Marketing Specialist, Teradata, a division of NCR and Chiek Daddah, Senior Business Analyst, Teradata, a division of NCR
shared with the business users. Eliminating
data redundancy, guaranteeing data Data marts operated separate from the (MPP) to process many user queries
synchronization and capturing data latency business users can create data management simultaneously. The database at the core
are difficult to achieve let alone manage problems down stream. For example, of the Teradata EDW system has much higher
in a data mart environment. business users obtaining data will create performance than competitors such as IBM or
internal systems to consolidate the data and Oracle, and this high performance means that
Dependent data marts (Exhibit 4a) receive to analyze the data. A simple change in the individual data marts can be eliminated.
data from a data warehouse before the data is way the data is reported from the mart, say for
shared with the business users. Transactional example, from weekly information to daily With the new architecture, shown in Exhibit
data is again collected and transformed and information will obviously alter the way the 4d, all data is housed in a single place giving
the information is stored in a data warehouse. data is interpreted. Unless the business users business users access to a single view of the
From here the information flows to data marts. are vigilant about keeping pace with the changes, enterprise and more specifically, the customer.
Similar to an independent data mart environ- decisions could be made using faulty data. Data synchronization is assured since any
ment, redundancy, synchronization and latency changes in the way the data is collected at
are problems in a dependent environment. the transactional level flows directly and
The third environment is the hybrid data mart ENTERPRISE DATA WARE- immediately to the business users.
system, shown schematically in Exhibit 4c. HOUSE ARCHITECTURE
Hybrid systems incorporate features of Unlocking the information content of the data
both independent and dependent data mart The architecture for an enterprise data (data latency) is facilitated since the data is
environments. In addition, the hybrid warehouse (EDW) is shown schematically accessible at a more granular level. Finally, data
environment incorporates the data problems in Exhibit 4d. The Teradata EDW database redundancy is eliminated since the business
associated with data marts. incorporates massive parallel processing users have access to a single source for data.

2
Note that marketing research studies may provide additional insights into what constitutes
a reasonable percentage increase in value.
EB-3105 PAGE 7 OF 13 3
This is where some thought will have to be given as to what marketing actions will be taken.
Case Study
ROI for a Customer Relationship Management
Initiative at GST

Potential costs that are either eliminated or


reduced from Exhibit 4b include administration
The Teradata Enterprise Data Warehouse (EDW) Physical Architecture
costs, systems maintenance costs, data movement
Pilot Footprint
costs and data synchronization costs. Simply stated, SMC SMC SMC SMC

AWS
data redundancy leads to staff redundancy, and BYNET BYNET BYNET BYNET
Up to ,
256,
eliminating disparate data marts can reduce BYNET BYNET BYNET BYNET
Cabinets,
,
the staff count. SMP SMP SMP SMP
Up to,
2,048,
SMP SMP SMP SMP
Intel CPUs

The actual Teradata system configuration is UPS UPS UPS UPS

UPS UPS UPS UPS

shown schematically in Exhibit 5a. The bottom UPS UPS UPS UPS

cabinets in the exhibit represent disk arrays. SMC SMC


(2) SMP Nodes,
Disk , Up to,
The disk array can be comprised of either 18GB per cabinet, Options, Disk Array, 100's, Disk Array,
, , (40 Disks) Terabytes (40 Disks)

(4) Intel CPUs, 18GB Drives, Height–77",


drives (1.4 terabytes of data) or 36 GB drives per Node
(1.4TB), Width–22",
, Disk Array, Disk Array,
or, (40 Disks) (40 Disks) per Disk Array
(2.8 terabytes of data.): Disk arrays can be clustered ,
36GB Drives,
together to support 100s of terabytes of data. (2.8TB)

The Teradata EDW architecture consists of 2–512 processing nodes (each node consists of four high performing Intel based CPUs—this is
called a symmetric multi processor (SMP) node with disk scalability up to 100s of terabytes via highly available, hot-pluggable, Redundant
The middle section of Exhibit 5a contains node Array of Independent Disks (RAID) for data storage. Nodes can be aded in pairs to map to the processing requirements of each configuration.
Disk options exist with Teradata sourcing RAID configurations from EMC2 and LSI Logic. The GST data mart consolidation pilot system
would be approximately 20% of the complete EDW, and is shown schematically in the dashed box.
cabinets. Each cabinet has two nodes comprised
5a
of 4-Intel processors. In addition, nodes are
interconnected via Teradata’s BYNET. The processing
cabinets are designed for resiliency with uninter-
rupted power supply units in each cabinet. Up to
The Teradata BYNET
256 cabinets (equaling 512 nodes) can be configured
as a single massively parallel processing (MPP)
system.As of January 2002, a total of 2,048 Intel CPUs BYNET
could be configured in a complete Teradata EDW.

NODE, Cliques,
The top portion of Exhibit 5a presents the adminis- (4) CPUs in a Node,
Up to 512 Nodes
Grouping of 4 Nodes,
Redundancy in case of,
Node failure
tration work station (AWS). This is a standalone
UNIX or Windows based workstation that is the
RAID,
primary operations interface for MPP systems. Redundant Array of Indepent Disks,
Terabytes of Data
The AWS provides a single, graphical view of the
system. Not shown are the thousands of end users The BYNET is a high-speed interconnect that is optimized for parallel processing with the Teradata Relational
Database Management System. More specifically, two BYNETs are configured with every Teradata MPP
with access to the system. Finally, the dotted line (Massively Parallel Processing) System for redundancy, high performance and scalability. These BYNETs
are uniquely designed to provide simultaneous, bi-directional traffic (messages) between the :
¥ Processing Nodes
containing three cabinets (or six nodes) is the ¥ Parsing Engine (PE-checks the SQL statement, access rights and invokes action),
¥ and the Access Module Processors (AMPs) for effective data retrieval and disk management.
footprint for the proposed GST pilot program. The BYNET is the key design feature that enables support for many concurrent users and maximum
system throughput.

Exhibit 5b demonstrates the proprietary competitive 5b


advantage of the Teradata EDW architecture. Up to
512 nodes, each node contains four CPU’s, can be

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

connect across the message passing layer – this Davis pointed out that with just the three and could be eliminated through data mart
layer is also known as the system bus or as the systems and four access points represented, consolidation potentially saving millions
BYNET. Exhibit 5b also shows nodes sharing a there are 14 redundant processes. For example, in IT expenses. In addition to the expense
common set of disk arrays grouped into what are the “Acquire” step is the bridge between an of redundant systems, there are expenses asso-
known as cliques. The clique grouping provides access point (customer or supplier) and the ciated with the loss of accuracy from any
for data redundancy in case of node failure. firm. In Exhibit 6a, the “Acquire” step in System inconsistencies in the way the data is stored
C is completely redundant. That is, the four and reported across the systems. A centralized
access points have been completely sampled data warehouse eliminates these expenses as well.
DATA MART CONSOLIDATION by systems A and B by the time System C is
PROJECT building its database. To support his position, Davis also created
a revised organization chart for the same
GST is operating fifty disparate data marts. The Company wide, with 50 disparate data marts, region in a data warehouse environment -
manufacturers of the data marts include Oracle, GST had a massive amount of redundancy. Exhibit 6b. In Exhibit 6b, the data sits on top
IBM, Informix, and Sybase. Davis suggested the This redundancy was expensive, unnecessary of the organization giving everyone immediate
consolidation of the data marts into an enter-
prise data warehouse (EDW) for two reasons.
A. Region 4 in the Data Mart Environment

First, the EDW is more efficient to operate Jeff Shoemacher,


CEO,

thereby reducing the amount of money spent VP Region #4

on information management. Second, the EDW Fall Ainina,


CFO
Rebecca Koop,
CIO
Susan Lightle,
CAO
Bud Baker,
ILEC
Paula Saunders,
CLEC
Cathy Kempf,
Internet Services
Michael Edwards,
Data Services
Joe Castellano,
Customer Relations

will provide access to “better” data. Although


cost savings associated with the consolidation Acquire Acquire Acquire Acquire Acquire Acquire Acquire Acquire Acquire

are more readily quantified, the value of the Clean Clean Clean Clean Clean Clean Clean Clean Clean

Store Store Store


“better” data is more difficult to quantify.
Select Select Select

Rather than proceeding with a wholesale Summarize Summarize Summarize

consolidation of all existing data marts, Davis Present Present Present

proposed a pilot study: consolidate a subset System A System B System C

of the existing data marts to evaluate if the 6a


Data Warehousing & Data Marts Terminology Simplified by Doug Ebel, Teradata, a division of NCR
benefits are obtained. Five fully depreciated
data marts have been identified as candidates System A System B System C

for consolidation: four Oracle 8i systems and B. Region 4 in the Data Warehouse Environment

one IBM DB2 system.


Acquire Acquire Acquire

Clean Clean Clean


To pitch his idea for data mart consolidation,
Store
Davis created Exhibit 6a – an organization
chart for Region 4 in the current data mart
environment. The exhibit shows how the Jeff Shoemacher,
CEO,
VP Region #4

organization sits “on top” of the data marts.


Each system has its own channel to acquire Fall Ainina,
CFO
Rebecca Koop,
CIO
Susan Lightle,
CAO
Bud Baker,
ILEC
Paula Saunders,
CLEC
Cathy Kempf,
Internet Services
Michael Edwards,
Data Services
Joe Castellano,
Customer Relations

data, clean the data and store the data. 6b

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

access to the same data – this


structure is both less costly and GST Average Annual Salary Data
more consistent. The improvements
in efficiency and consistency are System Administrator $130,000

value-added by the data mart Data Base Analyst $110,000


consolidation.
ETL Programmer $80,000

Query Programmer $70,000

COSTS OF THE GST Network Administrator $80,000


DATA MART
Support Staff $40,000
ENVIRONMENT
Benefits 40% of salary

Susan Lightle, CAO of Region 4 was Expected Inflation Rate:


asked to identify the costs associated Salary and Benefits 4%

with the data marts. She offered 7


the following information – Each
Oracle data mart requires one
GST System Staffing Requirements, Maintenance, and Support Costs
system administrator, two data base
analysts, two ETL programmers, GST Individual Data Marts Teradata EDW
three query programmers, one
Staff / System Oracle 8I IBM DB2 Best Case Most Likely Worst Case
network administrator, and two
System Administrator 1 1 1 1 1
people working as support staff. In
addition, non-personnel support Data Base Analyst 2 3 6 8 9

costs for each Oracle system was ETL Programmer 2 2 3 4 8


approximately $1,000,000 for the Query Programmer 3 3 8 10 15
next year. This did not include
Network Administrator 1 1 0 0 0
$80,000 per year per mart for
Support Staff 2 2 2 3 4
maintenance and upgrades.
Maintenance per node $80,000/yr $110,000/yr 10% of HW and software list price per yr

An IBM data mart required one Non-personnel support $1,000,000/yr $1,800,000/yr $125,000/month after the data marts
costs are decommissioned
system administrator, three data
8
base analysts, two ETL programmers,
three query programmers, one network number and type of GST employees required for reductions. The most likely scenario for
administrator, and two people working as each Oracle and IBM data mart, see Exhibit 8. staffing the proposed enterprise data
support staff. Non-personnel support costs warehouse is one system administrator, eight
for the IBM system was $1,800,000 per year. data base analysts, four ETL programmers,
Maintenance and upgrades for the IBM mart COSTS FOR THE ten query programmers, and three individuals
total $110,000 per year. TERADATA SOLUTION serving as support staff. Exhibit 8 also
summarizes the best, worst, and expected
Lightle gave Davis GST employee salary and The staffing requirement for the Teradata case scenarios for staffing the new Teradata
benefits information, see Exhibit 7. She also system depends, in part, on how GST system. The exact probabilities for the
gave Davis a summary breakdown of the management decides to handle the personnel GST staffing changes were not known,

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

however the GST team urged Bob to use


Teradata Cost Sheet
20%-60%-20% as the probabilities for the
Hardware and Software
staffing scenarios best case, most likely
case and worst cases, respectively. Item 1st Node 2nd Node 3rd Node 4th Node 5th Node

Hardware $175,000 $225,000 $200,000 $200,000 $720,000

The list prices associated with the acquisition Software $90,000 $190,000 $190,000 $190,000 $500,000

of the data warehouse are included in Exhibit Training and Professional Services Costs for the Teradata Solution
9. The consolidation of the five data marts will Expense Year 1 Year 2 Year 3
require five nodes. Although the first four Training See Exhibit 11: $15,000 per month -$0-
nodes are sold as individual units, nodes $15,000 per month
starting in May
beyond the fourth are only sold in pairs. The
Consulting See Exhibit 11: $125,000 per month $125,000 per month
prices quoted in Exhibit 9 are per node. The $125,000 per month
proposed system (nodes, software, and disks) after implementation

would be depreciated using the MACRS 5-year Data Storage Disk Costs

class life schedule assuming the mid-year $650,000 (For 2.8TBytes of data)
9
convention. The total cost for disks is estimated
Adapted from Steven Weber, Pricing Director, Teradata, a division of NCR
as $650,000. Maintenance/upgrades for the
nodes and software is 10% of the list price. ments of the total enterprise (including the
Professional services costs (business requirements associated with the remaining
Finally, the first year non-personnel support consulting) for the three years of the pilot 45 data marts). In addition, Davis was
costs for the Teradata warehouse, once the study are quoted at $125,000 per month suggesting GST begin work on the development
system is operational, is projected to be once the implementation project is complete. of customer relationship management programs
$1,500,000 (paid in monthly installments.) Exhibit 11 gives the detailed break down of the that would be possible with the more complete
professional service costs during the estimated view of the customer. The professional services
On behalf of Teradata, Davis can offer an 12-month implementation schedule. costs in years 2 and 3 were associated with
installed price for nodes and software at 30% the design of the data warehouse under a full-
Consulting costs decline dramatically after
off the list price. In addition, Teradata is willing consolidation EDW scenario and for the
to provide a $400,000 equipment credit against the first year because GST was being urged to development of CRM programs.
the purchase price if GST commits to the purchase the hardware and re-architect the
consolidation pilot study. However, the disks data structure at the beginning of the process, Training costs, separate from business
for the data storage would not be eligible for which front-loads the consulting fees. This was consulting, would be $15,000 per month for
the 30% discount. an alternative to acquiring a node, migrating the first two years – see Exhibit 11 for the start
the data, and re-architecting the system date of the training. Some of these costs were
sequentially. Davis was convinced the related to training the existing employees on
Summary GST financial assumptions former was in the best long-term interest the new system as well as training dislocated
Required return for project investments 14% of GST. Davis was also encouraging GST existing employees for other internal positions.
Corporate Tax Rate 38% to engage Teradata’s team of consultants Training would commence once the data marts
Inflation Rate: Non-personnel costs 5% to commence work on the development are loaded into the warehouse. For this ROI
Inflation Rate: Personnel costs 4% of a logical data model to address a analysis, the training costs would be expensed
10 holistic look at the information require- as incurred.

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Case Study
ROI for a Customer Relationship Management
Initiative at GST

IMPLEMENTATION
PROJECT
Data Mart Consolidation Project Baseline

Exhibit 11 is a high-level schematic 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter

of the proposed data mart consolida- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

tion implementation project. Phase 1 3 wks


Phase 1: Data Capture and Planning,
– data capture and planning should Data Capture and Planning •Understand the data structureC
6 wks in each martC
•Identify ETL processesC
take approximately 2 weeks. Although Migrate Datamart 2
•Specify amount and frequency of C
4 wks
updatesC
much of this work is done as part of Migrate Datamart 3 •Scope amount of data
4 wks
the proposal, many details of the Migrate Datamart 4

existing system must be understood 4 wks


Migrate Datamart 5
prior to data migration. Phase 2 – 6 wks
Phase 2: Data Migration, Datamart Testing
moving data to the Teradata system •Forklift data from marts intoC 16 wks
data warehouseC
will involve between 3 and 4 weeks •Transfer scripts, C Programs C
Engineer EDW
and PL/SQLC 8 wks
per data mart (15 to 20 weeks for 5 •Migrate 3rd party Applications C Test EDW
•Test data marts
data marts.) This represents the
physical migration of the data, tables, Phase 3 & 4: Enterprise Data ,
Warehouse Architecture Pilot Study,
and processes highlighted in Phase 1. •Develop logical modelC
•Testing

After the fifth data mart had been


migrated, all the original data and Data Mart Consolidation Project Budgeted Cost of Work of Schedule

many applications would be again


Expenses Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
available to the end-users and the Professional, $220 $255 $270 $290 $290 $290 $270 $270 $270 $270 $270 $270
data marts could be retired. However, Services
Training
once all the data and applications $15 $15 $15 $15 $15 $15

were copied to the warehouse, GST Non-personnel,


Support $125 $125 $125 $125 $125 $125
required a 6-week test and validation
process be conducted to guarantee All dollar amounts are in thousands.,
Professional services costs include: Data capture and planning data migration, scope of complete C
that, from the user’s perspective, EDW–consolidating the remaining 45 data marts, and scope of future CRM applicaions.C
Training costs include: Training existing employees on Teradata system, and training dislocated C
the warehouse was identical to the employees on other internal systems.C
Non-personnel support costs include: Travel, subscriptions, overhead allocation, etc.C
original data mart. Bob believed the C

first test phase would be complete, 11


and the data marts could be retired, Source: Alex Payne, Marketing Specialist, Teradata, division of NCR and Cheik Daddah, Senior Business Analyst, Teradata, a division of NCR

as soon as May 1 or it could take as


long as September 1. However, it was most likely enterprise re-architecture will eliminate the The complete transition from data marts to
that the data marts will be decommissioned redundant systems producing significant an enterprise data warehouse was expected
on July 1. performance improvements. Testing to take twelve months to achieve. Phases 1
represents the final phase, Phase 4, before and 2 could be accomplished more efficiently
Phase 3 – model design, re-architect model, the warehouse was fully operational. or take longer that expected. In total, the
and update will take 3 to 4 months. Although Bob was rather certain that Phases 3 transition could take as few as ten months
the end-users have access to the data and 4 will take a total of six months or as long as 14 months. For each month the
and tables, it was during Phase 3 that the to complete. project goes over or under the 12 month

EB-3105 PAGE 12 OF 13
Case Study
ROI for a Customer Relationship Management
Initiative at GST

base-line the professional service implemen- of 38%, expected an inflation rate for non- ANALYSIS
tation cost would increase or decrease by personnel support costs of 5% annually, and
approximately $270,000. Davis had experi- expects salaries to increase 4% per year Following are some questions to consider with
enced 9 similar data mart consolidation across-the-board. In addition, GST was your analysis:
projects. Of these, 2 had come in under time considering retaining one Oracle mart for • What is the project ROI and the pay
at 10 months, 3 had taken 12 months, and 4 an internal training program. These data back period?
projects had run over to the full 14 months. are summarized in Exhibit 10. • Of the best, worst, and expected case

Davis wanted to make sure his team calculated


best, worst, and most-likely cases for the project
ROI, and were realistic in their numbers.
The existing data marts and the enterprise Davis was in contact with Johnson, and they which should you present to GST?
data warehouse would be operated simulta- concurred that the analysis of the pilot study • How much upfront capital is needed
neously until the fifth data mart has been should be conducted utilizing a three-year for this project, and what financing
successfully moved. Hence, following the investment horizon. The three-year horizon options would you recommend?
base-line plan, by early June the original begins with the start of Phase 1 and runs for • How would you recommend dealing
data marts could be decommissioned. 36 months. Phase 1 would commence on the with Richards personnel concerns?
However, GST required the data marts would first day of January 2002. • If you were Johnson and Richards,
continue to operate until July 1 during the would you move forward with the
data mart test phase (see Exhibit 11) to consolidation project?
ensure the data and application validation BUSINESS IMPACT
were completed. MODELING TEAM

Davis planned to give this ROI problem to the


ADDITIONAL DATA Business Impact Modeling Group at Teradata.
He wanted to make sure they would be thorough
GST used a weighted average cost of enough to calculate best, worse, and a most-
capital (WACC) of 14%, had a tax rate likely case for the project ROI, and be realistic
in their numbers. As members of the team,
help Davis make a recommendation to GST.

© 2002 by Mark Jeffery. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any for by means -
electronic, mechanical, photocopying, or otherwise - without the permission of Mark Jeffery. Teradata is a registered trademark and WorldMark is a trademark of
NCR Corporation. All other brand and product names appearing in this release are registered trademarks or trademarks of their respective holders. NCR continually
improves products as new technologies and components become available. NCR therefore, reserves the right to change specifications without prior notice. All fea-
tures, functions and operations described herein may not be marketed in all parts of the world. Consult your NCR representative for further information.

© 2002 NCR Corporation Dayton, OH U.S.A. Produced in U.S.A. All rights reserved.

www.teradata.com www.kellogg.nwu.edu

EB-3105 PAGE 13 OF 13