Neil Raden Hired Brains, Inc'

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BI ROI Analysis
Business Intelligence ROI Strategies and
Approaches

• Neil RadenHired Brains, Inc.

www.hiredbrains.com
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ROI Analysis for BI

• ROI analysis for BI is useful, but only if it is
  rigorous
• Best of breed requires integration many separate
  pieces
• Accounting for the true costs of BoB is tricky
• BoB ROI calculations are often slanted to favor
  short-term cost savings and overlook long-term
  maintenance and integration costs
• Lets define our terms first

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Two Approaches to BI Architecture
Single Architecture and Best of Breed
Single Architecture
Components are assembled and integrated one time
and implementations are configurations. The
vendor may supply standard models, extraction
connectors, reports, analyses and other functions
as part of the core product. Version upgrades are
single releases of the entire structure.
Best of Breed
The BI architecture is composed of several
products from different vendors and all
integration is done as part of the initial
implementation. Designs are typically rigid and
require many destructive iterations. Version
releases are not coordinated and the overall BI
lift is unpredictable.
Single architecture approaches are relatively new
and there is resistance in the market from
vendors and practitioners who have a large stake
in the status quo.
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Typical BI Technology Stack

• Extraction, Transformation and Load (ETL)
  software
• Data Profiling, Scrubbing, De-Duping tools
• Metadata Repository
• Database Design/CASE
• Relational Database Management Systems
• Reporting Software
• OLAP
• Packaged Analytics (BPM, Financial, Line of
  Business verticals)
• Data Mining
• Portal Software

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Lets Do the Math!

• Basic ROI Calculation
• ROI (Benefits Realized) / (Cost to Deliver) ?
  100
• ROI/DCF Analysis
• ROI NPV(B1, B2, B3,) / NPV(C1, C2, C3,) ? 100
• ROI at Points in Time
• ROIYr2 (0 2.5m) / (5m 100,000) ? 100
  49
• ROIY5 (0 2.5m ? 4) / (5m 100,000 ? 5)
  ? 100 182
• Alternative ROI Calculation
• ROI (Benefits Realized - Cost to Deliver) /
  (Cost to Deliver) ? 100

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Breakeven Time
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Accounting for Costs

• Direct Costs
• Acquisition Costs
• Infrastructure Costs
• Implementation and Deployment Costs
• Support and Lifetime Costs
• Uptime, Reliability and Performance Costs
• Indirect Costs
• Shadow IT
• Compatibility Costs
• Lost Opportunity Costs
• Poor uptake of BI and limited use of tools
• Attrition
• Functioning well, but too expensive

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BI Adoption
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Shadow IT Why BI ROI Is Often Overstated

• It is very difficult to get requirements for BI
• BoB is conditioned on understanding the
  requirements before the bulk of development takes
  place
• BI is disappointing in most organizations for
  this reason
• When the DW/BI efforts fails to solve business
  problems, business people reach for what they
  know best Access and Excel
• The time and of non-IT staff doing IT work is
  Shadow IT
• Its HUGE, often a MULTIPLE of total recognized
  IT costs
• But when the DW/BI solution PLUS the Shadow IT
  effort combine to show a solution, the WHOLE
  benefit is claimed in the ROI calculation, but
  not the Shadow IT costs

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Comparison of Cost Categories
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Accounting for Benefits

• Benefit dilution unless the organization can
  leverage the investment with all of the other
  investments in the technology portfolio, the
  gains may be short-lived
• Benefits at the operational level are relatively
  easy to capture and measure, but they tend to get
  drained by creeping inefficiency at higher levels
• It is also unlikely that a BI effort can be
  solely responsible for a benefit
• On the plus side, informing business decisions at
  the right moment has an almost incalculable
  positive impact on an organization, but it
  requires a process to turn into a financial gain
• Rule of thumb take no more than 20-50 of the
  projected benefits into an ROI calculation

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Conclusion

• ROI formula is unimportant assembling the costs
  and benefits is the key to a useful analysis
• BoB is based on the assumption that optimal
  decisions about the pieces leads to an optimal
  whole
• BoB efforts rarely have the funding to do a
  thorough enough integration job, leading to
  patchwork and maintenance problems
• Single architectures have the potential of
  solving these problems, but only if they are
  well-designed
• The market is starting to move away from BoB, but
  there is a great deal of vested interest in the
  status quo
• Organizations are turning their attention to
  enterprise solutions and insisting on
  integration. This bodes well for the single
  architecture approach

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Questions?

• Neil Raden
• President
• Hired Brains, Inc.
• Delivering Business Analytics
• http//www.hiredbrains.com
• 2777 Exeter Place
• Santa Barbara, California 93105
• 1-805-682-1062
• nraden_at_hiredbrains.com