Bloomberg terminals in the food services budget? That’s just one error that led a major US investment bank to think it was only spending about $20 million on market data when the real number turned out to be closer to $40 million.

The investment firm had hoped to trim $2 million from its market data budget, explained Mark Prieto, services director within Microsoft Consulting Services (MCS), who is leading the Microsoft Motion practice in financial services. Microsoft Motion is an in-depth analysis methodology that involves taking a detailed look at a company’s capabilities, costs, and opportunities for growth.

“We found Bloomberg in the food services budget because we got down into the books and records, which they would not have done had they not been using Motion. Along the way we realized they did not have a good way of looking at their contracts and the services that came along with those contracts,” Prieto said.

The team from MCS, working closely with key members of the bank, determined that the real spending figure was double its estimate, and despite the high level of spending the bank had some serious gaps in risk management practices that placed it in violation of SEC and Sarbanes-Oxley requirements. While the MCS team did see a clear opportunity for at least the $2 million savings targeted by the project, it was clear that the SEC and Sarbanes-Oxley issues were a much higher priority and the bank was lucky the Motion team found them before the regulatory bodies did. The investment bank has focused its energies on its SOX issues for now.

Ric Merrifield leads Microsoft Consulting Services' Motion Practice which seeks to improve the results of IT investment by helping business users and IT departments understand their firms' work in terms of capabilities.

Microsoft’s Motion methodology enables technology-oriented MCS people to interact with business people, and this interaction exposes a new view of a company’s business processes – what is referred to in Motion as the “business architecture.” Using Motion, the MCS team helps companies identify specific improvements tied to organizational targets and priorities. These improvements can help companies achieve measurable goals. Motion is a departure for Microsoft in that it has no references to technology and uses few acronyms.

Why would Microsoft be doing this? Because Microsoft has seen that poor communication between business users and IT makes it hard for IT to be successful.

“It has been a bit surprising to me that in a couple of very, very simple ways this has led to some dramatic communications improvements,” said Ric Merrifield, the architect of Microsoft Motion and its strategy director. Business people, who might be excellent at their jobs, are often poor at describing what they do to the IT people who are responsible for developing the solutions they need. When the IT staff turns to software companies like Microsoft or application vendors, the suppliers are two steps removed from the business need and relying on poor translation to boot.

“Motion helps us communicate with the business and helps us address the needs of the business users and their technology team, so we can do a more effective job of mapping the business value of our technology in a context that cleanly aligns with their business needs,” said Merrifield.

From Banks to Trucks

Since Microsoft doesn’t have permission from any financial services clients to discuss their results from Motion engagements, Merrifield drew on CH Robinson, a large global logistics company based in Minneapolis.

Although a logistics firm seems dissimilar from finance, the problems are remarkably alike, he said. CH Robinson ships by boat, rail, truck, and partial truckloads (known as LTL for Less Than full Loads).

But shipping is shipping, right? It means putting stuff onto some form of transportation to get it from one location to another. It’s not so simple, said Merrifield.

“Since each line of business evolved at different times, they each had a different language. Even between business units they had a hard time communicating and looking for best practices. It was very difficult for IT to find ways to obtain leverage across the business silos because IT couldn’t tell where the similarities and differences were,” Merrifield said.

The company recognized that it had a problem, and senior executives asked MCS to work with them. MCS consultants interviewed the senior executives in each business for a week and a half, and asked them to describe the businesses and their functions. The MCS team then translated the accounts into capabilities, which showed the similarities and differences between the business units.

“Before we started, CH Robinson expected to find about a 15 percent overlap; in a week and a half we found it was closer to 60 percent,” said Merrifield. “That was a huge win for the business because it gave them a clear path to expose opportunities on the business side and showed the CIO how he could better leverage across the organization.”

One simple example of an issue that was causing problems: there were several words such as destination, drop and delivery to describe the end stage of a delivery. Some business units used unique words like receiver and consignee that were not recognized by other groups but referred to the same end stage processes used across all groups.

Once specific capabilities such as “Capture Order” and “Deliver Load” have been isolated, IT can better understand the makeup of those capabilities. From there IT can determine whether those functions can be supported by a single application with slightly different customizations for the different groups, or whether the different business lines do in fact merit multiple applications.

What makes this work is that it applies the basic concepts of services oriented architecture (SOA) to business models, which allows each line of business to tap into the right application for its specific needs.

“CH Robinson’s CIO wanted SOA,” said Merrifield. “Seeing how business capabilities mapped to SOA was the beginning of the firm’s move to an architectural framework. Because Motion exposed the commonalities in the separate line of business operations, the CIO estimates he can save 20 percent in capital expenditure going forward.”

Merrifield noted the Motion approach looks at companies from a different angle than companies normally look at themselves.

“It is the business model, where the organization puts its emphasis in people, process, and technology that makes up the brand and creates the profitability,” Merrifield said. “Most businesses know at a high level where they make their profit, but they can’t go six or seven levels deep to see where their specific strengths are.”

He cited Sam’s Club and Costco as an example of the importance of understanding business models, separated from business architecture. They look similar, but Sam’s makes its profits from selling goods like a conventional retail business model, while Costco’s profitability stems primarily from its sale of memberships. So while driving efficiency is the right path for Sam’s, at Costco the focus is on providing a great experience for customers so they renew their memberships.

Motion in Finance

A fast-growing international financial services firm has asked MCS to examine its business to better assess what the levers are. If the firm doubled in size, which costs would double and which wouldn’t? How would that growth affect costs and profitability?

“Capturing that information and attaching it to capabilities will help as they make decisions, especially in IT,” said Merrifield. “They are growing so fast that making the wrong decision in terms of scalability and the value of an investment could be costly to recover from.”

MCS gets called into firms from both sides of the business. Sometimes IT asks MCS to come in and help with the business justification of technology decisions. At other times a CEO will ask for a Motion project to get a view of how technology and business should work together across the enterprise rather than silo by silo.

In one investment bank, MCS found that customer views were based on the business unit rather than the enterprise. Whether it was equities, mortgage-backed securities or commercial loans, each had its own process for portfolio analysis and fund analysis. When the bank tried to roll up the reporting from each business unit into a wealth management system that advisors could use, it ran into problems.

“They couldn’t get the net worth of a client easily. If a client’s advisor wanted to see a full net worth analysis for his client to develop an optimized portfolio, it was very difficult and very expensive to accomplish because each business unit had a different way of looking at it,” Merrifield said.

Wealth management is an area where Motion can play a key role. By analyzing existing technology, processes, and organization, it can explore ways to support financial advisors through a business reorganization or a technology infrastructure redesign.

“Once you understand business capabilities, that allows you to evaluate what those capabilities should be,” explained Prieto. “Then when you talk build, buy, in-source, or out-source, you can look across your enterprise to see the capabilities, find duplication in separate silos, and locate synergies between lines of business. It gives you a clear SOA roadmap and lets you move beyond SLA [service level agreement] to ‘service level expectation,’ a less formal, less contractual version of SLA content.”