Innovation. Over the past few decades some companies with major market share have suffered serious market share erosion and revenue loss. These organizations were sitting comfortably with a loyal customer base and made minimal investments into forward planning.
As they existed in a steady state, the competition was able to over take a large portion of their market share. If they had made an investment into a BI solution, they may have recognized warning indicators earlier. BI has become more critical in the past decade due to the changing market place across many industries.
Level of Service. Many industries, over the past several years, have been forced to provide more aggressive levels of service from the market place and their customers. For example, in the consumer products industry, service levels range from same day delivery, to next day delivery, etc.
The ability to measure the level of service your organization is performing and the ability to understand the root cause of why exceptional conditions occur is key. Once the measurements are available, this input goes a long way in resolving issues that help stabilize your organization’s ability to perform higher levels of service consistently. The byproduct of this event is a happier customer who will be more loyal.
Productivity. Operating costs is usually a focus point of the CFO, especially in competitive markets. One major component of operating costs is the cost of labor. Sometimes in BI implementations, some workflow can be optimized or even possibly omitted; reducing labor requirements and cost.
In some cases, companies find the big savings come from a better understanding of each customer’s individual needs. An example of this is when a company starts to customize service offerings in an attempt to build their customer base. This process is very labor intensive and needs to be properly staffed since its part of an assembly line process.
When a BI drill-down occurs, the data received could show that only some sporadic low volume customers order this service. This information could drive the company to no longer provide this customized service, which causes the company to lose a small percentage of low-volume customers having a negative impact of $X. However, the savings could be $2X, which in turn would contribute to a lower operating cost which helps drive a positive ROI for the BI investment.
Planning & Management. A mature BI implementation fosters proactive planning, not reactive doing. This helps in stabilizing the planning process and a quicker identification of the business environment changes so the reaction to these changes can be phased in with a well managed structured approach.
Information Technology Investment. Today there are many BI solutions to choose from. Your IT department will need to work closely with key stakeholders from your business to determine which solution will best meet your company’s most current and potential needs.
Once a solution is identified your IT group will need to invest in the infrastructure to support the hardware and access capabilities to your new BI application. Most BI solutions out there today support extract, transform, and load (ETL) & online analytical processing (OLAP) processes to prepare your data that will be presented. Your IT staff will need to support your BI application as new requirements are identified.
Management Investment. Management must be strong sponsors of your BI program to take advantage of the benefits. They will also need to be clear on your company’s strategic direction to maximize the data extracted out of your BI tool.
BI is a tool, and if used properly by the user it will be invaluable; however, on the flip side, if it is not taken seriously or not used properly by your management team the ROI will be severely impacted.
Staffing Resource Investment. In some organizations BI will have their own group to support the business. In any case, there needs to be a balance of staff verses the benefit and ROI of the BI program.
If a company takes too many short cuts then the benefit of BI can be diluted and users will quickly become frustrated leading to the sabotage of the BI implementation. If the staffing investment is too high then the ROI will be impacted. BI investment should initially be in high visibility low risk areas. As benefits are recognized, the program should be expanded and scaled accordingly.
Standard Cost. Some of the standard costs for a BI implementation are capital investment (infrastructure, hardware, etc.), labor (in-house), consulting labor, licensing fees (software, tools, etc.), leasing (HW, facilities, etc.), as well as, training, maintenance agreements, support, SW & HW maintenance and operations staff.
Hidden Cost. As your company’s BI program begins to gain interest, some additional functionality or customization may need to occur. When planning the initial investment it should be understood that the total cost of ownership (TCO) may need to be padded during years one to three as your company starts to understand the benefits of BI information.
The exception here would be if your company has expertise and experience to guide an optimal implementation. If this is the case, this expertise will only help reduce the costs during years one to three but will not eliminate the cost. This cost savings however, could be offset with the expense of a larger initial investment that contains a more robust scope.
Best Practice = Cost Reductions. There are a few good rules of thumb when embarking onto a BI implementation. First, educate your users on the intent and potential benefits of a BI implementation. Provide several demos with potential vendors upfront to allow a growth of their understanding and appreciations.
You will find this step invaluable if done correctly. The key to this step is to have the project sponsor control the scope of the discussion by keeping the focus on key business areas. Second, if you do not have expertise in-house then leverage outside assistance to optimized lessons learned from other organizations implementation.
If your organization is ready and willing for a BI implementation then there is a higher probability of ROI benefit than a company who has not bought into the concept.
The financial investment into a BI implementation can start to add up quickly when you begin to look at the individual components, which can include a knowledge management, data mining, data warehouse packages, SW customization, infrastructure, out-side resources, etc.
The intent of this article was not to explore these equations & calculation, but to put some parameters and examples around some of the benefits of BI and potential investments.
David Roy is a consultant with Delta Corporate Services, a business and technology consulting organization servicing the federal government and fortune-level companies.