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Five Key Benefits Big Data Can Deliver For Finance: Part 2

Nilly Essaides

Part 2 in a series. Read Part 1 here.

Finance professionals and experts interviewed by the Association for Financial Professionals (AFP) for its upcoming FP&A Guide, How Finance Can Get Ready for Big Data, releasing April 12, pointed out five key benefits finance can achieve from adopting Big Data strategies.

  1. Improved forecasting. The key benefits for incorporating Big Data strategies into FP&A is improving predictability. Big Data validates the assumptions that go into the business forecast, and therefore allows FP&A to come up with a more accurate view of how events in the market and internally will impact the company’s performance, and thus its competitive position. A data-driven finance department can better look forward and identify leading indicators. With that information, the CFO can make more educated decisions.
  1. Better KPIs. FP&A can take also take advantage of Big Data when identifying and understanding value drivers, and then managing and monitoring financial and non-financial KPIs against these value drivers. By nature of its job and role, FP&A is in the right position to examine that and assess whether core planning and reporting models represent the right driver relationships and related KPIs.
  1. More predictable working capital. An existing example for an area where Big Data can play a role is in analyzing and predicting working capital. Traditionally, finance would look up 15 factors that drive working capital and monitor them to come up with a forecast. Now, instead, an analyst can seek statistical correlations between working capital and any number of data points to arrive at a forecast for the organization.
  1. Identification of growth opportunities. One of the areas that CEOs identified as the best thing CFOs can do, according to KPMG’s The View from the Top 2015 survey, is in best leveraging financial data and analytics to identify growth opportunities. While marketing is clearly involved, finance is actually in a much better position – and has better access to data – to analyze the cost to serve across multiple dimensions (products, customers, services, channels) and then analyze pricing strategies and where to optimize profitability and growth.
  1. A stronger strategic role for FP&A. Finally, FP&A already has the basic multidisciplinary thinking and analytical approach. Using Big Data and getting comfortable with some ambiguity allows FP&A professionals to more quickly adjust their thinking, and recommendations, in reaction to changes in the business environment, today and looking forward. Many FP&A groups are already moving their focus from what happened to what’s going to happen and why. In this role, they are becoming a strategic partner to the business and senior management.

According to Allan Frank, chief IT strategist and co-founder of The Hackett Group, Big Data and related new tools present a tremendous opportunity for finance to take the lead, given its core fiduciary responsibilities. “The challenge for finance is how to develop an enterprise view of analytics,” he said. “The first thing is to realize you can find out more. You can ask questions you couldn’t ask before and frame them in the form of business outcomes.”

Over time there will likely be an evolution of the FP&A business analyst into the business data scientist, according to Philip Peck, vice president of finance transformation at Peloton. “FP&A practitioners will review and analyze all of the forward-looking KPIs and data available, dynamically adjust forecasts, make tactical recommendations, and effectively drive that information into operations,” he said.

Peck added that as finance and FP&A continue to extend and expand their business partnering activities across the organization, they have a unique opportunity to spearhead or at least guide Big Data and analytics efforts and become the go-to experts in this area. “Similar to the evolution we experienced when business intelligence became more prevalent, we are starting to see the emergence of analytic centers of excellence or competency centers,” he said.

To benchmark your organization’s forecasting methods and other FP&A processes, take the AFP FP&A Benchmarking Survey, in partnership with IBM. You can also connect with me on LinkedIn or follow me on Twitter.

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Nilly Essaides

About Nilly Essaides

Nilly Essaides is Director and Practice Lead of Financial Planning & Analysis (FP&A) at the Association for Financial Professionals. Nilly has over 25 years of experience in research, writing and meeting facilitation in the global finance arena. She is a thought leader and frequent speaker at industry events, the author of multiple in-depth AFP Guides on FP&A topics as well as monthly articles and numerous blogs. Nilly was managing director at the NeuGroup and co-led the company’s successful peer group business. Nilly also co-authored a book about knowledge management and how to transfer best practices with the American Productivity and Quality Center (APQC).

Real-Time Analysis Tools Critical To Improving Finance Performance [INFOGRAPHIC]

Viki Ghavalas

The majority of finance executives agree that real-time analysis tools are key to making better business decisions, according to a report by CFO Research and SAP titled “The Future of Financial Planning and Analysis.” However, executives polled also believe that their current systems still need more improvement to be able to make a positive impact on the business. Executives surveyed point to four main priorities for their FP&A tools.

Finance executives surveyed expect the demand for real-time analysis tools to grow in the coming years. However, the survey also shows that having these tools is not enough and that stakeholders also expect analysis and insights from finance that are simple and actionable.

Data in financial planning and analysis

Learn more about what finance executives are projecting for FP&A by downloading the “The Future of Financial Planning and Analysis” report.

Are you monitoring business performance in real time? If not, read Boosting Efficiency For CFOs And The Finance Function.

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Viki Ghavalas

About Viki Ghavalas

Viki Ghavalas is worldwide program manager for the finance line of business at SAP.

Why Banks Should Be Bullish On Integrating Finance And Risk Data

Mike Russo

Welcome to the regulatory world of banking, where finance and risk must join forces to banking executiveensure compliance and control. Today it’s no longer sufficient to manage your bank’s performance using finance-only metrics such as net income. What you need is a risk-adjusted view of performance that identifies how much revenue you earn relative to the amount of risk you take on. That requires metrics that combine finance and risk components, such as risk-adjusted return on capital, shareholder value added, or economic value added.

While the smart money is on a unified approach to finance and risk, most banking institutions have isolated each function in a discrete technology “silo” complete with its own data set, models, applications, and reporting components. What’s more, banks continually reuse and replicate their finance and risk-related data – resulting in the creation of additional data stores filled with redundant data that grows exponentially over time. Integrating all this data on a single platform that supports both finance and risk scenarios can provide the data integrity and insight needed to meet regulations. Such an initiative may involve some heavy lifting, but the advantages extend far beyond compliance.

Cashing in on bottom-line benefits

Consider the potential cost savings of taking a more holistic approach to data management. In our work with large global banks, we estimate that data management – including validation, reconciliation, and copying data from one data mart to another – accounts for 50% to 70% of total IT costs. Now factor in the benefits of reining in redundancy. One bank we’re currently working with is storing the same finance and risk-related data 20 times. This represents a huge opportunity to save costs by eliminating data redundancy and all the associated processes that unfold once you start replicating data across multiple sources.

With the convergence of finance and risk, we’re seeing more banks reviewing their data architecture, thinking about new models, and considering how to handle data in a smarter way. Thanks to modern methodologies, building a unified platform that aligns finance and risk no longer requires a rip-and-replace process that can disrupt operations. As with any enterprise initiative, it’s best to take a phased approach.

Best practices in creating a unified data platform

Start by identifying a chief data officer (CDO) who has strategic responsibility for the unified platform, including data governance, quality, architecture, and analytics. The CDO oversees the initiative, represents all constituencies, and ensures that the new data architecture serves the interests of all stakeholders.

Next, define a unified set of terms that satisfies both your finance and risk constituencies while addressing regulatory requirements. This creates a common language across the enterprise so all stakeholders clearly understand what the data means. Make sure all stakeholders have an opportunity to weigh in and explain their perspective of the data early on because certain terms can mean different things to finance and risk folks.

In designing your platform, take advantage of new technologies that make previous IT models predicated on compute-intensive risk modeling a thing of the past. For example, in-memory computing now enables you to integrate all information and analytic processes in memory, so you can perform calculations on-the-fly and deliver results in real time. Advanced event stream processing lets you run analytics against transaction data as it’s posting, so you can analyze and act on events as they happen.

Such technologies bring integration, speed, flexibility, and access to finance and risk data. They eliminate the need to move data to data marts and reconcile data to meet user requirements. Now a single finance and risk data warehouse can be flexible and comprehensive enough to serve many masters.

Join our webinar with Risk.net on 7 October, 2015 to learn best practices and benefits of deploying an integrated finance and risk platform.

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Mike Russo

About Mike Russo

Mike Russo, Senior Industry Principal – Financial Services Mike has 30 years experience in the Financial Services/ Financial Software industries. His experience includes stints as Senior Auditor for the Irving Trust Co., NY; Manager of the International Department at Barclays Bank of New York; and 14 years as CFO for Nordea Bank’s, New York City branch –a full service retail/commercial bank. Mike also served on Nordea’s Credit, IT, and Risk Committees. Mike’s financial software experience includes roles as a Senior Banking Consultant with Sanchez Computer Associates and Manager of Global Business Solutions (focused on sale of financial/risk management solutions) with Thomson Financial. Prior to joining SAP, Mike was a regulator with the Federal Reserve Bank in Charlotte, where he was responsible for the supervision of large commercial banking organizations in the Southeast with a focus on market/credit/operational risk management. Joined SAP 8years ago.

Customer Experience: OmniChannel. OmniNow. OmniWow.

Jamie Anderson, Volker Hildebrand, Lori Mitchell-Keller, and Stephanie Overby

The lines between the digital and physical customer experience today are largely artificial. Customers shop in retail stores with their devices at the ready. They expect online-like personalization and recommendations in the aisles. They’re looking for instant gratification and better sensory experiences from digital channels. It’s an omnichannel world and companies must figure out how to live in it: delivering a superior customer experience regardless of the entry point.

Luxury fashion brand Rebecca Minkoff, for example, opened its first three retail stores with the intent of taking customers’ best online experiences and bringing them to life. “In the past, you had this brick-and-mortar experience, and you had the online experience,” says company president Uri Minkoff. “There were such great advantages and efficiencies that emerged with shopping online. You could get recommendations, see how something should be styled, create wish lists, access user-generated content. In the store, it was still just you and the product, and maybe a sales associate. But [unlike online] you had all five of your senses.”

Rebecca Minkoff’s new stores still stimulate those senses while incorporating some of the intelligence that online channels typically bring to bear. Each store features a large interactive screen at the entrance, where customers can browse products or order a beverage. Shoppers can interact with salespeople or they can make purchases on a mobile app without ever talking to a soul. Inside a fitting room, RFID-tagged merchandise is displayed on an interactive mirror, where customers can request new sizes or the designer’s recommended coordinates (a real-life recommendation engine).

The company has found that 30% of women ask for additional items based on the recommendations. It has also sold three times more of its new ready-to-wear line than it anticipated. “We were an accessories-dominant brand,” says Minkoff. “But we’ve been able to build this direct relationship with our customers, helping them with outfit completers and also getting a better sense of what they want based on what’s actually happening in our fitting rooms.”

Each piece of technology adds to the experience while capturing the details. Rebecca Minkoff’s integrated systems can remember a customer’s previous visits and preferred colors and sizes, and can enable associates to set up a fitting room with appropriate garments. On the back end, the company gets the kind of visibility into in-store conversions once possible only in digital transactions. “The technology gives us the ability to create the kind of experience each customer wants. She can shop anonymously or be treated like a VIP,” says Minkoff.

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Build Around a Big Idea

Rebecca Minkoff’s approach is a bellwether. It’s not enough simply to provide continuity or consistency from one channel to another. Customers don’t think in terms of channels, and neither should companies. Rather, it’s about defining the overarching experience you want to deliver to customers and then building the appropriate offline and online elements to achieve that intended outcome.

As more goods and even services are commoditized, companies must compete on the experiences they create (see The ROI of Customer Experience). That means coming up with a big idea that drives the design of the customer experience. “Every great experience needs to have a theme,” says Joe Pine, consultant and coauthor of The Experience Economy and Infinite Possibility: Creating Customer Value on the Digital Frontier. “That’s the organizing principle of the experience. It’s how you decide what’s in and what’s out.”

For example, Rebecca Minkoff serves as an image consultant to its Millennial customers, who expect personalization, recognition, and tech innovation, using a mix of online and offline techniques. To stand apart, companies must come up with their own unifying idea and then integrate data and systems, rework organizational models, and rethink key strategic metrics and employee incentives in order to integrate the physical and digital worlds around that idea.

Here are some examples of companies that have created a theme-driven experience using online and offline elements.

Nespresso: Imparting a Sense of Luxury

At the most basic level, Nespresso is a manufacturer of coffee and coffee machines. But the company has successfully turned what it sells and how it sells it into a very specific type of experience. Nespresso strives to impart a feeling of quality, exclusivity, even luxury in a host of ways.

sap_Q316_digital_double_feature3_images2The company has created the Nespresso Club, which maintains direct relationships with thousands of customers. Its customer service centers are staffed by 1,000 highly trained coffee experts who don’t just push products but offer advice and guidance as a sommelier might do with wine. Its 450 retail stores (up from just one Parisian in 2000) are called boutiques; the largely inventory-free showrooms are built around tasting and learning.

Online, the focus is on efficiency and service. Customers who prefer digital interactions can order through the web site or mobile app, which offers the option of courier delivery within a two-hour window. The company also recently introduced a Bluetooth-enabled coffee machine, which when paired with a smartphone app, can track a customer’s usage, simplify machine maintenance, and as Wired pointed out, enable remote brewing.

Success didn’t happen overnight, but today Nespresso is one of Nestlé’s fastest growing and most profitable brands, according to Bloomberg.

QVC: Using Online to Complement the Experience

The theme that has driven television-shopping giant QVC’s customer experience for decades has been “inspiration and entertainment.” Traditionally that was delivered through the joy of spontaneous discovery while watching the channel.

Matching that experience online has been difficult, however. At a digital retail conference in 2015, QVC’s CEO explained that in the past the company had failed to deliver the same rich interactions online that it had developed with its TV audiences, according to Total Retail. So the company decided to rethink its use of digital tools to focus on complementing the experience it delivers through TV screens, according to RetailWire.

For example, after enticing TV viewers with products, QVC introduces the next step in the buying journey—“impulse to buy”—in which viewers are spurred on with televised countdown clocks or limited merchandise availability. Online, the company has been experimenting with second-screen content (for instance, recipes that compliment a cooking product being sold on TV) to further propel purchases. The QVC app features the same item that is on-air along with a prompt that reveals all the items featured on TV in recent hours. On Apple devices equipped with Touch ID, customers can check out in less than 10 seconds with the fingerprint-enabled “speed buy” button. The third phase—“purchase and receive”—is complemented by a simple and reliable online browsing and purchasing platform. The last stage—“own and enjoy”—is accompanied by follow-on e-mail communication with tips on how to use products.

Last year, the company reported that 44% of total QVC sales came from online channels (up from 40% in 2014), and nearly half of those were completed on a mobile device. In fact, QVC is currently the tenth largest mobile commerce retailer in the United States, according to Internet Retailer.

Domino’s: Focusing on Speed and Convenience

sap_Q316_digital_double_feature3_images3Domino’s Pizza built a fast-food empire not necessarily on the quality of its pies but instead on the experience of getting hot food delivered quickly. What started out as a promise to deliver a pizza within 30 minutes to customers who phoned in their order is now a themed experience of efficient food delivery that can be fulfilled a number of ways. Domino’s AnyWare project enables customers to order pizzas from their TV, their Twitter account, their smartwatch, or their connected car, for starters. The Domino’s app features zero-click ordering functionality: Domino’s will start fulfilling the usual order for customers who opt in 10 seconds after opening the app.

Domino’s Australian stores are piloting GPS tracking whereby employees begin working on an order only when the customer enters the “cook zone”—a dynamically updated area around a given store that results in the customer arriving to a just-prepared order. The tool builds upon previously developed GPS-based technology for tracking delivery drivers, according to ZDNet. And the company that came up with the corrugated pizza box and the Heatwave Bag to keep pies warm is now building the DXP—a delivery car with a built-in warming oven. All in the name of the fast- and hot-food delivery experience.

Mohawk Industries: Using Social to Streamline Customer Interactions

Mohawk Industries grew to become a US$8 billion flooring manufacturer by relying on customers to visit its dealers’ retail locations to see, touch, and feel the carpet, hardwood, laminate, or tile they planned to purchase.

sap_Q316_digital_double_feature3_images4Today, instead of waiting for customers to find Mohawk, it has redesigned its experience to find them. It has adopted new technology and reworked its sales processes to reflect that new focus. The company’s 1,200 sales representatives have access to a 360-degree view of each customer, complete with analytics and sales tools on their tablets, enabling them to capture and follow through on leads generated through social media engagement.

By analyzing online discussions in real time, representatives can jump into the conversation and help customers find the product they may be searching for and direct the consumer to a retailer to finish the sale. In one episode, a woman was posting about her interest in a particular leopard rug on Twitter. Mohawk’s team surfaced the tweet, passed it on to a channel partner who contacted the woman and closed the sale within two minutes. Today, the company boasts an 80% close rate on sales started and guided in social media and has made $8 million on 14,000 such social leads. Mohawk Industries expects an increase of $25 million in sales year-over-year, thanks to its new customer-centric approach.

Customer Experience Design: Where to Begin

Developing a unique, valuable, and relevant customer experience that combines the best of offline and online capabilities is a huge undertaking. All corporate functions, including marketing, customer service, sales, operations, finance, and HR as well as product or business lines—all of which typically have competing metrics and agendas—must buy into the experience and collaborate to make it happen. And the ideal mix of digital and physical components will vary by company. But there are some best practices to get companies started on their own journeys.

Start at the Top

Without leadership buy-in, changes will not happen. “Customer experience is not a feature, it’s not a shiny button. It’s a concept that sometimes is tough to grasp. But we believe that if done right, it will keep customers loyal. And so we put a lot of effort into it,” says Kevin Scanlon, director of total customer experience at tech company EMC. “That’s why having that top-down support is paramount. If you don’t have it, you’re spinning your wheels. It’s going to give you the resources, the focus, and the attention that you need to design that consistent experience.”

To demonstrate its commitment, every VP and above at EMC has a customer experience metric as part of their quarterly goal.

Begin with the End in Mind

Companies can take a page from the design-thinking approach to product development, starting with the experience they want customers to have with their company and then putting in place the people, processes, and systems to make that happen across various touchpoints. Uber didn’t start by buying 1,000 cars. It started with a completely new customer experience it wanted to deliver—straddling the digital and physical—and then built the organization around that. Uber ultimately leveraged people, process, and technology to bring that to life, but it started with a unique customer journey.

Design for the Customer, Not the Company

sap_Q316_digital_double_feature3_images5To date, most corporate processes have been designed for internal efficiency or cost savings with little consideration for the impact on the customer. Companies that want to design for consistent experiences have to reexamine those business processes from the customer perspective. In order to deliver a standout and consistent experience, enterprises must bring together an assortment of data from a variety of systems—including POS transactions, mobile purchases, call center activity, notes from sales calls, and social media.

The average retailer has customer data in more than a dozen different systems. But it’s not just the front-end customer-facing systems that need orchestrating; back office systems and processes, from your supply chain to fulfillment to customer service, must be designed to deliver the intended experience. For example, Nespresso has to orchestrate a number of back-end and front-end systems to offer customers premium courier delivery within two-hour windows.

Put Someone in Charge

Companies that are truly invested in creating integrated, standout customer experiences often create a centralized function that can bring together the people, processes, and technology to bring them to life. Sometimes there is a chief customer officer or head of customer experience. But unless these people are really empowered, they’re toothless.

EMC’s Scanlon is empowered. He heads up a function that has been transformed from focusing on product quality into a centralized customer experience center of excellence staffed with 60 full-time professionals. The center has translated into “more focus, more energy, more insight to our customers,” says Scanlon. “And we can deliver that insight to our internal stakeholders, which trickles down to our account teams and lets them have more meaningful conversations that benefit our customers—and benefit the company over time.”

Centralize Customer Data

Even if there is no central customer experience function, there needs to be a central data repository and analytics system: a digital foundation that everyone can use to improve their piece of that experience. EMC’s customer experience group has a data governance function that maintains a single source of customer truth. “They’re able to pull all relevant data sources into one location and get past the typical customer data challenges,” says Scanlon.

Invest in People

Companies that care about the customer experience invest in the people who deliver it. Human beings are the clearest signposts on the customer journey. Companies must hire the best, train for desired outcomes, and reward based on experience metrics: for being brand ambassadors and for going above and beyond on behalf of the customer.

sap_Q316_digital_double_feature3_images6Rethink Metrics and Incentives

One major bank was having trouble driving adoption of its online banking tools. The customers that used the tools loved them, but the tools weren’t getting traction. The problem? The branch managers had no interest in promoting digital banking. They wanted to drive as much traffic as possible to their physical branches because this was one of their key performance metrics.

The solution was to change the compensation approach in order to reward employees for the entire customer experience, including online banking adoption. Branch managers were measured on online and offline customer behavior in their regions. That became a single and critical KPI, and it boosted the desired behaviors and improved overall customer satisfaction.

Create a Single View of the Company

For years, companies have talked about the importance of understanding the customer. And that remains true, particularly when it comes to delivering a valuable customer experience online and off. But successful customer experience design is just as much about giving customers a clear understanding of the company through coordinated experiences that deliver on the brand’s theme and bring it to life in various ways in bricks and mortar, through devices, in online interactions, and everywhere in between. D!

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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Is The Internet Of Things And Wearable Technology The New Black?

Fred Isbell

The Internet of Things (IoT) is a classic hype cycle phenomenon. Besides forecasts of high growth, it is capturing a large share of interest and overall mindshare.

One thing is clear: The elements of the IoT are here to stay. Once we get past the definition of IoT, which is commonly referred as sensor-based devices and machine-to-machine communications, businesses can open themselves to enormous potential.

When trying to understand new things, I prefer to embrace them as a part of my daily life. When tablets first emerged, I didn’t go anywhere without my trusted iPad. In fact, I sometimes leave my laptop home knowing that I can do most of what I need on this device. And based on that experience, I took my own advice when it came to wearable technology recently – and the results were eye-opening.  I’m now onto my second-generation wearable device, showcasing just how quickly this is all changing.wearable-1

But first let’s jump into the time-travel machine back to February 2015. I was attending the MIT/Sloan School Sports and Analytics conference in Boston, and it seemed that everyone was mentioning wearable technology. The buzz was verified weeks later when I attended the IDC Directions Annual conference, where wearables made the short list of technology ubiquity. A year later, I returned to the MIT/Sloan School Sports and Analytics conference in Boston a little bit wiser. At that point, I invested in a Fitbit and started tracking my own personal statistics for exercise, sleep, and more. Needless to say, the geek in me was in full force as I wore both a Fitbit and a sports watch at the same time. I didn’t want to miss anything, and my middle-aged eyes appreciated the help.

One of the benefits of working for a tech company is the opportunity to adopt new technology in every aspect of my life. My employer, SAP, kicked off a new wellness program, incorporating wearables in how its employees track their health and wellness. I took advantage of this opportunity, replacing my sports watch with a second-generation Fitbit and consolidating two devices into one.

My wearable journey is certainly not complete yet, but it’s become integrated into my life in a very nonintrusive way. Just as my tablet has become an extension of me, so has the wearable device. I even exchange screen shots of my results – such as when I rode my first charity JDRF bike ride over the summer – to friends so we celebrate our achievements.

Very soon, our interactions with the IoT and wearable will become the norm, and we won’t think twice about it. But at the same time, it’s becoming a big business. Market watcher CCS Insight sees this as a US$14 billion market growing to over US$40 billion by 2020. All of these devices will generate even more data, making Big Data bigger than anyone could have predicted.

wearable-2

All of that data will generate increased demand for applications – especially analytics – to understand, interpret, and use this information. And if you think about it, my Fitbit app on my phone is really a personal business intelligence tool and the ultimate example of the consumerization of IT.

Not surprisingly, tech leaders such as SAP talk about the fusion of business-to-business (B2B) and business- to-consumer (B2B) into what some call “business-to-business-to-consumer” (B2B2C). The proliferation of wearable technology is a great example of this. The market for applications and solutions will increase exponentially – supported by cloud-based delivery and unprecedented demand for the infrastructure to deliver real-time intelligence and much more.

Wearables are indeed the new black as it becomes mainstream and part of society. I’ll come back shortly with a further discussion of how we can apply this technology in sports and analytics. In the interim, I need to head to the gym to get my 10,000 steps and the fitness equivalent to make my Fitbit – and me – happy!

For more on the impact of connected devices, see How Tech Changes Up Health In The Workplace.

Join Fred online: TwitterFacebookLinkedInsap.comSAP Services Hub

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Fred Isbell

About Fred Isbell

Fred Isbell is the Senior Director of SAP Digital Business Services Marketing at SAP. He is an experienced, results- and goal-oriented senior marketing executive with broad and extensive experience & expertise in high technology and marketing. He has a BA from Yale and an MBA from the Duke Fuqua School of Business.