Business intelligence ROI, The Mind Game
Justifying the value of business intelligence (BI) investments is uniquely challenging,
according to analysts and end users -- particularly because there's no straightforward ROI
equation. Unlike some IT systems that replace more expensive systems, manual processes
or headcount, BI's benefits are often "soft" or intangible. While there may be some ROI
metrics that support a business case, BI projects often require a bit of faith on the part of the
people writing the checks -- and some savvy selling by IT and business users.
Here's my 5 cents about calculating ROI and effectively justifying BI investments.
1. Collaboration between IT and business is essential.
It's difficult to justify BI's price tag as an IT overhead cost .IT needs to work with business
users to figure out the business value of a BI application. That's exactly what BI Champion
does. While his team provides guidance and estimates resource usage and technology costs,
they look to business users to justify the project's value. We can say how much it will cost,
but someone in the business ought to be able to quantify that benefit.
2. Don't get hung up on hard metrics.
One of the biggest challenges in BI projects is determining accurate before-and-after
metrics. If you don't know where you're beginning from, it's difficult to work out the benefit
at the end -- what your ROI is. You need accurate metrics at the beginning and accurate
metrics at the end. But then some organizations run into a chicken-and-egg problem.
Without a BI system, they don't have accurate metrics. Without accurate metrics, they have
trouble justifying the potential ROI of a new BI system. So organizations should do their
best to find some hard measures, such as where BI deployments will reduce costs or
increase sales, but the real focus should be on soft benefits.
3. ROI calculations are difficult -- and not always necessary.
The BI projects always have some kind of ROI calculation, he said. Some projects enable
obvious cost reductions by eliminating manual processes. But most initiatives require
collaboration with business people to determine ROI metrics, asking questions such as,
'How many clients will this new reporting tool help us gain or retain?' The calculation is
different for each project.
There's not a magic ROI equation for BI. There's clearly value and benefits, but that doesn't
really get to the ROI. What you need to focus on is: 'What is the business value?' 'How am I
driving the business forward? Pushing ROI justification problems back to a potential BI
vendor. Vendors may be able to provide references from customers -- in similar industries - that can share their metrics. The supplier should be a source of ideas and best practices,
and if they can't help you justify the investment, you really have to question whether you
want to go with that supplier.
4. The "soft" benefits of BI are the most important.
While hard metrics are important, organizations should sell their executives on BI's soft
benefits. The main benefits you get from BI are intangible benefits of strategic value, such as
faster reporting, better management information, better decision making and more
productive users. And even without hard metrics, there are often soft benefits that
executives can appreciate. For example, a recent corporate performance management
project at FMCG enabled the company to get rid of a manual, spreadsheet-based planning
process -- improving visibility and accountability More than that they were able to identify
KRA they need to focus and improve their brownie points.
5. Executive sponsorship really helps.
I know of a BI champion who was first trying to sell his management on the concept of an
enterprise data warehouse, he wrote a white paper explaining the potential benefits and
circulated it widely. This document made its way to an executive who promised to help the
champion make the project a reality. Executive sponsorship makes it much easier to sell
these kinds of soft, intangible benefits. It helps to find somebody with credibility and a lot of
political capital and attach yourself to them if you're trying to get buy-off for the first time