IC&C’s Sheehan: Simplify Complex Business Reports

February 25, 2008

Doug Sheehan is a man on a mission. This systems and business consultant has spent over two decades working with investment departments during times of change. Because of this, he says the way IT and business people deal with reports is outmoded, outdated and has to change.“From where I sit, I see two departments working against each other instead of working together, in spite of substantial efforts by both to achieve a common objective,” he says. “The result is dissatisfaction on both sides. The business people tell me they can’t get the reports they need to do their jobs and the IT people complain that the business people generate so many different reports that they can’t keep control of things. I think it’s time we got a whole new model that gets the job done for the business people and takes advantage of the talents and experience in the IT departments.”

Doug founded Investment Conversions & Consulting, Inc. in 1993 to solve some of the problems he saw first hand in 25 years of working with the investment departments of insurance companies, municipal bond dealers, and bond investment departments in banks. “I felt there had to be a better way for institutional investors to implement investment management back-office solutions because things just weren’t getting done efficiently and effectively.” he says.

The problem, he says, is that the IT and business sides of the house don’t see things the same way. “The business people need specific data to do their jobs. They need it to solve a specific problem, but they don’t know how to make the system give them the information they need. The IT people think they know how to solve the problem, but don’t. Without the right infrastructure, the business people feel an urgency to create their own solutions – their own spread sheets. . This “work-around” enables them to get the reports they need in a form they can use. Then, as those needs change, they add more columns to that spread sheet. The next thing you know, they have the ‘mother of all spread sheets’. It may work for them, but it drives the IT people nuts and makes any kind of updating of the system a complete nightmare.”

He offers these examples:

An investment manager wants reports that sort investments by his own criteria. The IT department’s already giving him reports that include the Moody’s, S&P and Fitch and Duff and Phelps ratings, but some of his bonds aren’t covered by those ratings. He needs one set of ratings to encompass everything. He wants to assign own ratings and see the report grouping them that way. He goes to his IT department with the request and is told it’s too difficult because the system’s standard reports won’t allow it.

An investment manager needs a report that gives her accrued interest. Her system can give her par value, market value and book value, but that’s not what she needs. “I just want to add a column for accrued interest,” she says to the IT department. “Sorry,” she is told. “The report’s already the width of the paper. You can’t that. Where are we going to put it?

An investment manager oversees a portfolio that includes a growing number of foreign investments. The report he’s getting doesn’t show the foreign exchange gain/loss. That report worked fine before the company had foreign investments, but now the investment manager needs to see the foreign exchange rate on the earned income report. He’s told by the IT department that it will take several months.

The problem is especially acute in the Investment Department. “The number of data elements they need to track is gigantic compared to other departments and they can change on a daily basis,” points out Sheehan. “The information they need to track doesn’t stay constant. Companies buy different kinds of investments. They have different strategies and that means they have to track special things in different ways. Last month’s problems aren’t this month’s. There are ratings, book values, market value, realized gains and loses, deferred gains and losses and accounting changes. You can’t lock everything down. In fact, they need a system that’s built to adapt to change and to make it possible for business person to get their own information.”

And what about the IT department? Control is what they do. In fact, the corporation charges them with that responsibility. And recent legislation, like Sarbanes-Oxley, also puts that accountability into their hands. “So, the systems people say, ‘I’m responsible for reports. I have things under control. That’s my job.’ But, in reality they aren’t answering the needs of the business person. From the systems’ person’s point of view putting the business reporting function in the hands of the business person circumvents the change control process they are responsible for maintaining.”

Those are the two sides of the issue. On one side you have the systems person saying ‘You can’t give business people the ability to create their own reports. The whole process will get out of control. We have requirements we have to meet.’ But, from where the business person sits, they say ‘You’re making it more complicated than it needs to be. All I’m asking for is another column on a spread sheet.’

In Sheehan’s view, the whole approach needs to be shifted because what the IT people create leaves the business person with no ability to respond to changing conditions. In other words, the business person isn’t getting what he or she needs. He offers this example: “We worked with one Midwest insurer where the business people simply weren’t using the system’s reports. Their software produced canned reports that didn’t do them any good because they were hard for the business people to use. Every time they got a report, it had to be reorganized and rearranged. So they’d get the reports and put them into spreadsheets. It wasn’t efficient. What they needed was the ability to run a report, get the answer and move on to the next process. Basically, the reports they needed didn’t meet their needs. When we finished revamping their system, they literally ending up with 400 ways of customizing the reports showing specifically the data they needed to answer the questions they had. Before that they literally had 400 spread sheets that were impossible for IT to maintain and update whenever they had systems changes. Now, they are better organized. Business people can generate exactly the reports they need and maintain them without involving the systems people.”

“We’re often called in by CFOs and investment managers trying to balance the needs of their portfolio managers with the functions provided by their IT department,” says Sheehan. “We’ll see frustrated investment managers coming up with their own solutions which are basically workarounds to get around the restrictions imposed by the IT departments. These business people are generating their own reports out of frustration with the IT process. They’ll do their own cumbersome spreadsheets to get the information they need. At the same time, they put themselves into a position where they don’t take full advantage of the resources of the IT. In the end, no one’s happy. Managers grumble about having to create their own reports and IT people see an administrative nightmare to keep controls on all the reports out there.

“We’ve gone into investment departments and asked how many reports they have. “The business people will tell us, ‘we have a lot’ and the systems’ people will say ‘we have too many.’ What’s happening is that the reports generated by the system aren’t doing the job so the business people are creating their own. In fact, we did an inventory in one of the companies we worked with and found 270 reports. The CFO told us that wasn’t possible, but in fact it was. The fact was that different business people wanted reports sorted by different criteria so they did their own. Those reports spawn more reports and, in the end, no one was happy with what they got.”

What’s the answer? According to Sheehan, it’s a shift in the way each of the players – investment managers and IT define their roles. “Think of it like a supermarket,” he suggests. “The business people want to go up and down well-stocked aisles, picking off the information they need which ends up in a report. Systems people, on the other hand, want to pick information off the ‘shelves’ for the business people and package them together. They’re at loggerheads and nobody’s happy with the outcome. Both parties here can only see the world from their vantage point. System’s people focus on technology not business. Business people understand the business, but not the technology. We suggest that each rethink their roles. We’d like system’s people to stock the shelves with the latest data, and business people do the ‘shopping’ on their own by picking off the shelves what they need. The job of the systems people should be stocking the shelves and making sure they are full, not picking anything off the shelves for the business person.”

The idea will require both members of the equation to change the way they view at their roles. “I want the IT person to provide the infrastructure to allow the businesspeople need to change, too. They can no longer sit back and charge IT with solving their problems for them. They have to take an active role in solving them. They can’t abdicate that role to the IT people because they are not business people.

Sheehan realizes this kind of shift is not easy. “Initially, the project of shifting roles, approaches and even work loads looks daunting, but not changing is getting more expensive every year. That’s because information reporting demands, especially in the Investment Department, are becoming more and more complicated. We use a product we call IRDB. It puts the function of creating those reports in the hands of business people. It allows them to query the database, pull the data they need and create their own spread sheets. What we like about it is that it makes it simple enough so the business person can use it as a tool. It puts them the driver’s seat instead of the passenger’s seat. It gets business people involved with their own reports and figuring out a way to get them to do it on their own.”

Sheehan realizes he’s asking both business people and IT people to shift the way they see their roles. “In a perfect world, the business people would create whatever report they need in an easy straightforward way without having to bother the IT person and without creating a messy maintenance problem. To do that IT, would commit to creating the necessary infrastructure to allow the businesspeople to solve their own problems instead of solving them for them. In other words, the business people would work with the IT people. The IT person’s job would be to provide the infrastructure to allow the business person to solve his own problem. And, the business person would change his relationship with IT to working with them, not stepping back and abdicating the whole reporting process to them. In the end, both would work together to move the process forward constructively. It won’t be easy, but it has to happen.”

Doug Sheehan is president of Investment Conversion and Consulting, Inc.® (ICC). The company helps institutional investors implement investment management back-office solutions. ICC has been called the financial industry’s “merger veterans”, having created and put into play many of the best practices used today in investment accounting systems integrations. Since 1993, they have integrated the investment systems in some of the most high profile mergers in the industry. The firm also offers systems’ consulting services support for the investment accounting and operations functions of major insurance companies and other institutional investors. They provide business analysis, technical analysis, software solution recommendation, vendor selection, and improved processes for management and operations. The firm’s proprietary software tool, IRDB®, enhances management and operations related reports for clients. For more information see www.iccinc.com

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