Making Music Business HumBy Alison Diana | Posted 2007-01-22 Email Print
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Trio of integrators deploys Microsoft tools to improve Virgin Megastores' systems.
Making good music is seldom a solo effort. And making complex, sophisticated IT solutions hum harmoniously often calls for individuals with a diverse set of skills.
In the case of Virgin Entertainment Group, reinventing and integrating the 23-store chain's business intelligence, POS (point of sale) and data warehousing solutions required a team of experts from three integrators.
Working together for the first time, the team helped the entertainment retailer earn at least an extra $8 million in 18 weeks, courtesy of a Microsoft-based solution. The project, in fact, was one of the first corporate deployments of Microsoft's Windows Vista operating system.
"We paid back our first-phase investment in 15 weeks," said Robert Fort, director of IT at Los Angeles-based Virgin Entertainment Group, North America, the subsidiary of Virgin Group that operates Virgin Megastores. "It was probably the best ROI [return on investment] I'd ever had in my life. It was amazing."
The first paybackbased on customer trackinggenerated user demand for a far more complex solution based on the integration of POS, BI and warehouse management capabilities.
With each phase, solution providers Xavor and Analysis Team played off each other's strengths to resolve Virgin Megastores' data access and interpretation problem. The two providersalong with a third, JMG Consulting, which specializes in and supported IBM's AS/400 already in place at the retailermade the partnership work, thanks to their dedication to the customer's needs, Fort said.
"We worked very closely as a team," said Ammara Masood, senior vice president of Xavor, which has offices in Irvine, Calif., and an offshore development hub in Lahore, Pakistan. "When Robert came to Virgin, we were already in there as a consulting partner. He wanted to see how we could bring our respective skill sets together. It was actually a very good experience. Here were two companies that had not worked together beforeand who created something seamless. We were both very focused on bringing value to the customer."
Each Virgin Megastore stocks about 255,000 items, including CDs, DVDs, books, magazines and fashion accessories. The retailer carries more than 400,000 active SKUs and processes more than 7 million retail transactions each year. Tracking and managing inventory was a logistical nightmare, Fort said. The company had purchasedbut not yet installeda JDA Software Group solution designed to integrate management, purchasing and receiving tasks. But after further scrutiny, Fort determined it would not meet users' needs.
Within a month of being at Virgin Entertainment, Fort offered the board of directors two alternatives: Hyperion Solutions' Essbase and Microsoft's SQL Server 2005. On paper, it appeared the Hyperion software was superior, but Fort wanted users to put each product through its paces in real-world tests. After employees tested both products, the choice was obvious.
"The needle just flung to Microsoft," Fort said. "It really proved to me the value of doing a hands-on test. I came in knowing Microsoft was playing the game, but I was skeptical."
Realizing Virgin Mega-stores was losing market share and facing lower customer conversion rates, average dollars per sale and total revenue, the company needed to move quickly. But it needed a more permanent fix, so Fort involved members of multiple business unitsincluding finance, store operations, merchandising and ITand discussed what information they needed to optimize their departments.
Just as a singer may turn to a familiar producer for a track, Fort turned to long-time IT partner Analysis Team to provide data warehousing and BI know-how and implementation. In addition to working with the Virgin Megastores group, Analysis Team partnered with Xavor, which had already begun developing portals for the retail chain. The project, called Crescendo, was put in motion.
"I decided to divide and conquer [the project]," Fort said. "Both companies were absolutely phenomenal. They hit it off immediately. They had equal passion and attention to detail. They were committed to working together on-site for a while."
The two integrators were able to quickly and cost-effectively develop the solution Virgin Megastores needed, he said. Xavor's offshore development team reduced programming costs and helped speed development, Fort said. Analysis Team carefully transferred knowledge to Virgin Megastores' 12-person IT department to make them self-sufficient and self-supportive, for the most part, said Dave Stark, president of San Francisco-based Analysis Team.
Introducing both integrators early in the process was key to the implementation's success, Fort said, in that each could carve its own niche within the same long- and short-term vision. "We had a very abbreviated timeline," he said. "We designed for the big picture, but we bit off only a little piece at a time."
Next Page: First cut.
Previously, Virgin Megastores would receive information about store traffic and sales several days after the fact, said Steven Humphrey, senior consultant at Analysis Team. "It wasn't actionable, and it wasn't in context," Humphrey said.
Using Microsoft's Analysis Services, Analysis Team built a BI platform that integrated seamlessly with the client's SQL Server database, running on an AS/400. Simultaneously, Xavor created portals with Microsoft's SharePoint Server, which enabled managers to access reports on store traffic every 15 minutes, Humphrey said. The solution also included sensors installed near store entrances, which reported the number of shoppers entering each store.
Having this nearly real-time information was invaluable, since it allowed store managers to move slower-selling items closer to hot sellers, for example, Fort said. The data also gave employees insight into traffic patterns: One store determined it had a rush of customers at a particular time each day, so it added a sales clerk to improve customer service and revenue, he said.
Training costs were minimal, Fort said. Via Web conferencing, the IT department spent about an hour with staff at each store, outlining the solution.
Excited by the first phase of the rollout, store managers and corporate executives wanted more. The second phaseintegrating the POS solutionwas more complex, since it required the synchronization of line-item information on cost, price and marketing event data that had been pulled from the AS/400.
Tapping Microsoft's Vista and SharePoint Server, Xavor created easy-to-use portals for the entertainment retail stores.
"There were a lot of customized Web pages integrated as part of the SharePoint portal," Xavor's Masood said. "We ensured the point-of-sale system was integrated with the data warehouse. It was then up to the business users to determine how they wanted to slice and dice the data. Once that was implemented, as business users started to use it, they found certain aspects were very, very useful."
Having this data at their fingertips was a far cry from business users' prior attempts to glean data, Masood said.
"They were really not utilizing it before," she said. "Information was on the AS/400, but they didn't know what to do with it. Now they get information in real time. Any authorized user in the company can get the information and use it for marketing or planning."
Xavor further enhanced the user experience by tying in portals to traditional Microsoft Office applications, such as Excel, which employees already were using, Masood said. "We used Office Web components as part of the portal so they could use the same tools they were use to," she said.
This tacticcoupled with the ability to access so much vital datasped user adoption of the POS solution, Masood said. "The adoption in the organization was very quick," she added. "The Virgin team did a great job in making the solution available in a format people were already familiar with."
Working in collaboration, yet somewhat behind the scenes, Analysis Team further enhanced the data warehouse and BI solution. "Throughout the project, Analysis Team performed extensive analysis to validate the input data as well as the results of the warehouse processes," said Stark. "This put many of Virgin's systems, processes and business rules under a microscope, revealing more than a few issues."
At that point, Analysis Team sat down with Virgin Entertainment's IT group to explain the problem and recommend short- and long-term solutions, according to Alan Flaesgarten, senior manager of applications and development at Virgin.
Analysis Team's Humphrey mentored IT staff and developed detailed documentation for Virgin Entertainment's internal group. The integrator also created several reporting tools to help departments best use the now-accessible data. "We really train the company's employees to be able to troubleshoot and, hopefully, solve any problems," Humphrey said.
To further improve performance, Virgin Entertainment is currently upgrading its servers from Intel-Microsoft hardware to Hewlett-Packard blade servers, Fort said.
Just as a team of experts created the technical ensemble behind Virgin Megastores' improved sales, so, too, did a team of marketing professionals, sales executives and other employees, Fort said. Therefore, he said he took a conservative approach to determine the effect the IT changes had on the company's improved sales.
Back in front of the board of directors againthis time, with better news in handFort said he suggested conceding that 20 percent of the gross margin could be attributed to Crescendo's role in Virgin Megastores' enhanced financial performance.
"You can see every single one of those stores made an improvement in conversion," Fort said. "[Crescendo] has absolutely changed our culture."
The experience also changed Xavor and Analysis Team. Both companies, which hope to work together again on future opportunities, both within and apart from Virgin Entertainment, realized the importance of communicating, sharing a vision and consistently putting the customer first.
"I think the people skills are every bit as important as the technical skills [in making] partners out of competitors," Humphrey said.
In this case, that combination of communication and technical savvy resulted in musicclanging registers and the hum of shoppersfor Virgin Entertainment.
Alison Diana is a freelance writer and editor in Merritt Island, Fla. She can be reached at email@example.com.