Tip

BI ROI calculation: Issues and methodology

When talking about the challenges and opportunities while driving business performance and measuring return on investment (ROI), talking about business intelligence (BI) and business alignment cannot be left out. This aside, it’s critical to understand that there are different opinions about BI and its related ROI calculations.

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Some global case studies claim 1,000+% ROI, while some research analysts claim that 80% of BI initiatives fail to deliver. This is not surprising, because, for the following reasons, BI ROI is difficult to measure in some projects, although it is very evident in others. Here are some of the issues you should look out for when conducting ROI exercises for BI deployments.

 

Ownership: The question of ownership is tricky when it comes to BI. The software is usually co-owned by the business and the technical department. Figuring out the levels of credit given to each entity can be difficult.

 

Cross-selling and complex networks: The mesh of information and influencing factors makes calculations of BI ROI rather complicated.

 

Original purpose: Another impediment while calculating the ROI of a BI solution is that it was never meant to be a performer but an enabler. The benefits which can be derived from it lie in the decisions of the strategists who make use of information coming from it. ROI of your BI deployment depends on the execution of the information generated by the solution.

 

That said, there are at least four ways of calculating BI ROI.

 

Use total cost of ownership: The task of calculating returns on BI is not impossible. If not ROI, maybe a new model could be used for calculating BI ROI. One model could be using the total cost of ownership—correlate the capital invested in deploying the BI solution with the increase in profits.

 

Use a blueprint of goals: Another feasible method is to check if the BI solution has achieved its intended goals. For this, a prior assessment of the situation and the definition of a clear blueprint (of expected progress) are very important. A best practice of sorts is to determine the aspiration level in the organization, and how the solution will help. Using this as a checklist may help in calculating BI ROI.

 

Estimating tangible and intangible benefits: BI can yield ROI through tangible and intangible benefits. The tangible benefits can be calculated by evident increase in profit margins, by the impact that the solution has had on the impacted practice, by the removal of non-performing assets, and by the improvement in customer satisfaction. This will be a way of calculating surrogate BI ROI. The list of intangibles would include technology consolidation, market exploitation, targeting the right customers, data management through surveys, negating non-performing assets, identification of fraud which would harm the company’s reputation, and avoiding money launderers.

 

Leveraging information: Information generated through the BI solution can be used for leveraging research and developing business strategies. This will also help put in place a data system that can be accessed to base new plans of action. The success or failure of these can be considered for calculating BI ROI.

 

About this tip: The tip is an excerpt from a TDWI panel discussion which consisted of Sanjay Mehta, the CEO of MAIA-Intelligence; Yogesh Bhatt, the Consulting Lead (IM), SETLabs, Infosys; Sundararajan Balasubramaniam, Global Solutions Director (BIM), Capgemini; Sanjay Raj, Global Practice Director (BI), Syntel; Aabid Abbasi, BAO Leader, IBM and Monark Vyas, Senior Consultant, SAS.