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BUSINESS PROBLEM-SOLVING CASE: Can HP Mine Success from an Enterprise Data Warehouse?

Hewlett-Packard, the $98.5 billion manufacturer of personal computers, server computers, printers, and provider of consulting services, is in the middle of a business transformation. The company is trying to reduce yearly spending by its information technology department by 30 percent over five years. HP expects information technology expenditures to drop from just over $3 billion in 2003 to $2.1 billion in 2008. HP is reducing its information system applications from 5,000 to 1,500 and consolidating 85 computer centers to six. HP’s current IT infrastructure employs between 19,000 and 22,000 servers. The consolidation will decrease the total by 8,000 to 9,000.

The success of HP’s business transformation may hinge on one particular project. HP is building a 400-terabyte data warehouse to serve the entire enterprise. If successful, the data warehouse will dispose of 17 different database technologies and unite 14,000 databases currently in use. If the initiative fails, HP would join a long list of organizations that have been confounded by the complexity of implementing enterprise-wide databases.

From an internal perspective, HP’s data warehouse aims to give its workforce access to data in real time with no departmental or geographic boundaries. HP’s numerous systems and applications had serious data management problems. CEO Mark Hurd had difficulty collecting and analyzing “consistent, timely data spanning different parts of the business.” Some systems tracked sales and pricing by product, while others tracked sales information geographically. Commonly used financial information, such as gross margins to measure profitability, were calculated differently from business unit to business unit. The company was obtaining information from more than 750 data marts.

Lack of data consistency dragged down sales and profits. Compiling information about the business from various systems could take up to a week, so managers had to make decisions based on relatively stale data. Seemingly simple questions, such as how much the company was spending on marketing across its different businesses, were difficult to answer. Without a consistent view of the enterprise, senior executives struggled with decisions on matters such as the size of sales and service teams assigned to particular systems.

HP CIO Randy Mott began consolidating the data marts in November 2005 into a single data warehouse serving the entire enterprise. He created a team composed of 300 people who were running the data marts and charged them with modeling the enterprise wide database that would be the foundation of the data warehouse. They had to make sure that the data would always be up to date, consistent for the entire enterprise, and complete.

The company launched its enterprise data warehouse in May 2006 to coincide with its consolidation of applications and data centers. To date, HP has consolidated hundreds of data marts into just over 200. The data warehouse contains 180 terabytes of raw data and 75 terabytes of functional data. At some point in 2008, the size should double and the data warehouse will be complete. Fifty thousand HP workers will utilize the data warehouse. All HP financial data will be able to be accessed via the data warehouse.

HP believes so strongly in its development of the system that the company is trying to sell its expertise to other companies that are seeking data warehouse technology. HP is marketing a product called Neoview, which has been developed from the proprietary work that the company has done in creating its own data warehouse.

More than 100 database specialists and software developers at HP are perfecting the system’s dexterity with table joins and giving it the ability to perform analysis functions at the same time that it is managing new incoming data. HP is also enhancing Neoview’s management and monitoring tools.

The servers employed by the Neoview system utilize Itanium processors from Intel, so they meet industry standards and are far more versatile than servers with proprietary technology. The system is also highly scalable and promises availability 99.999 percent of the time.

HP’s first customer for the Neoview database system was Bon-Ton Stores, which operates 272 department stores and 7 furniture stores in 23 states. Bon-Ton purchased a 7-terabyte Neoview system for a data warehouse that includes merchandise, customer, and supplier data for merchandise analysis and marketing. One of the database tables for the warehouse has more than 4 billion rows. Bon-Ton’s CIO James Lance reported that the Neoview system exceeded expectations.

Wal-Mart signed up for Neoview to work with its strategic Retail Link system, which allows its 20,000 suppliers to access data about the movement and sales of their products in its stores. For over a decade Wal-Mart has operated one of the largest commercial data warehouses in the world with more than 1,000 Terabytes of sales information on every item sold in its stores.

Wal-Mart uses the data warehouse to analyze in-store sales, but it would like to do more with the data to determine the ideal mix of items for each store’s customers and to place these items in stores where they are most likely to be purchased.

HP has been able to sell the Neoview technology by differentiating it from typical data warehouses, which are costly, use proprietary technology, and tend to focus on one area of a business rather than an entire enterprise. For example, airlines have data warehouses for yield management and telecommunications carriers have data warehouses to minimize customer attrition. A true enterprise data warehouse would have all these entities plus data on employees, customer service, marketing campaigns, and financial reporting—in other words, all of the data used by the company.

Wal-Mart had been using Teradata’s data warehousing platform to support Retail Link. It will continue using Teradata, but will allow Neoview to shoulder some of the workload. Wal-Mart’s chief technology officer (CTO) Nancy Stewart reported that selection of Neoview was a “price-performance decision.” After several months of testing production loads and accuracy of query results, Stewart reported that “Neoview fits right into that environment of extreme high availability and high performance.” Wal-Mart put Neoview into production in early June 2007.

Very few companies have built an all-inclusive data warehouse serving the entire enterprise. They require enormous work to organize and integrate all the data as well as knowledge of database technology and design principles. Businesses are changing constantly due to corporate mergers and global expansion, making today’s data warehouse out of date tomorrow. There are also political turf issues. Not all departments want to depend on a central data warehouse supported by a centralized information systems staff for their data-analysis needs. All of HP’s departmental users initially resisted the idea of a central data warehouse.

HP will emphasize cost and flexibility. Neoview’s hardware can be used to run other applications aside from those connected to the data warehouse. The company does not see a current product that serves as the comprehensive enterprise data warehouse that it intends Neoview to be. Other data warehouses in use do not come close to incorporating 100 percent of a company’s data, which is HP’s goal for its own data warehouse and Neoview.

HP anticipates luring companies to Neoview that have not been previously interested in such technology by beating the competition on price and simplicity. Using industry-standard hardware should complement this strategy. Most information technology managers should be able to work with the familiar components of Neoview, whereas the pool of people with the knowledge to run most data warehouses is quite shallow. According to database expert Jim Gray, “Right now, it takes far too much expertise to install and use the systems for data mining.”

One way in which HP intends to address the issue of complexity is to pre-configure Neoview installations for a particular industry and the workload and applications that the industry requires. Neoview will be a complete solution in a box with on-site management and remote support from HP. Mott hopes to convince potential customers that the cost of running multiple data marts is equal to or greater than the cost of a data warehouse, which will ultimately be a better solution for a business.

1. Describe three problem(s) discussed in the case study. What management, organization, and technology factors may have contributed to each problem? Identify the type of each problem with some rational of why you selected that type.

2. What is the strategic business direction of the HP relative to the Neoview system? Use the competitive forces model to analyze and describe how the data warehouse systems that HP is developing support their strategic direction. Which of the four basic competitive strategies should HP use to support its Neoview systems strategic business direction most effectively? Explain your rational, pro or con, for each strategy.

3. If you were in charge of developing an enterprise-wide data warehouse for your company, describe the steps you would have to take to complete this project. List and describe all of the people, organization, and technology issues that must be addressed to build an enterprise-wide data warehouse successfully.

4. Describe how each the five moral dimensions of the information age from Chapter 12 in the text can apply to the HP data warehouse application. Provide some rational to support your position. Also, describe how, and why, each of the six candidate ethical principles applies or does not apply to the data warehouse application?