What is the business rationale for making the technology investment? This is one of the most important questions to ask. Almost all companies depend on some technology solution to deliver goods and services. Investing in new technologies for the sake of having the latest up-to-date systems, just does not seem to cut it in the minds of most industry executives, nor does trying to rationalize a major technology investment solely on the basis of reducing ongoing maintenance costs of the old systems. Information technology usually does not have a direct impact on the bottom line. “IT is applied to business processes, and it is those business processes that increase revenue or reduce expenses” [Berman,Knight]. This implies that an ROI analysis of a technology solution must be done in the context of its effect on the business processes.
The analysis of the article “SOA Case study: How R.L. Polk revved their data engine” reveals a similar dilemma faced by a company whose core business of data aggregation depends on Information Technology. The Southfield, Mich.-based company’s Chief Information Officer Kevin Vasconi realized in 2004 that their existing technology infrastructure was unable to support their business needs in the coming decade. Although the executives at R.L. Polk agreed with Vasconi’s assessment, they were afraid of the risks that came with undertaking massive technology projects. It was this reluctance that resulted in failure during two previous scaled down attempts to upgrade the infrastructure.
Costs and time frame are two of the most pressing issues that cause the greatest anxiety among business executives pertaining to major technology investments. Cost and benefit analyses are best guess estimates and difficult to calculate especially in the case of complex projects. In addition, upgrading or replacing existing infrastructure can negatively impact current cash flows caused by disruption of services. Executives at R.L Polk addressed those issues by creating a subsidiary name, RLPTechnologies, whose goal was to create next generation data aggregation systems. By developing the new solution under the umbrella of a separate company, R.L Polk could better measure the costs and benefits of its new investment. It also helped the company in creating a custom solution for the new business processes without affecting the current business model.
An organization has no single right solution for what technology to choose for its sucess; it depends on the organization, its resources and strategic goals. Whatever solution is chosen the value of a solution depends on the effective convergence of the solution into useful outputs.
R.L Polk & Co. has served the automotive industry since 1922, providing a variety of analytical and statistical data services. The company collects and compiles data from more than 240 different sources, including state agencies, automotive manufacturers, financing companies, and a variety of providers of lifestyle and demographic data. R.L. Polk’s customers require fast access to this actionable data to make important sales, marketing, and planning decisions. The company maintains a four-terabyte data warehouse with data on 500 million unique vehicles and 250 million unique households [Computer World].
With the expansion of the automotive industry the company was faced with the challenges of maintaining ever growing amounts of data while providing high performance data aggregation. R.L. Polk realized it needed to make a change to preserve its competitive advantage in the marketplace amid significant industry, regulatory, and technology change. Previously, R.L. Polk ran its databases on a mainframe, which was very reliable but did not allow the company to deliver data in real-time to its customers.
In late 2004, R.L. Polk embarked on a comprehensive business process reengineering program called re-FUEL and decided to replace its...
References: Karen Berman + Joe Knight: Financial Intelligence for IT professionals,2008
Henry C. Lucas: Information Technology Strategic Decision Making for managers, 2005
Computer World: http://www.computerworld.com/s/article/9004263/Auto_market_researcher_revs_up_Oracle_grid_for_massive_data_
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