Part 1 of our BI ROI series examined key questions to consider when evaluating the potential ROI of a new business intelligence project. As a company that’s implemented our solutions thousands of times and gone through just as many ROI justifications, we’ve come to think of ourselves as experts in this area…and not just with regard to what pays off, but also what doesn’t. And never will. Below are the top 5 BI projects that never actually produce a tangible financial return on investment. That doesn’t mean you shouldn’t tackle them ever – in fact, you may be forced to at some point. Read on:
- ‘Rip and replace’ your business intelligence platform.
Replacing your existing platform as quickly as the wind changes poses a tremendous strain on resources to get to the exact place to where you are today. Don’t switch platforms just for the sake of switching. Your new BI project or platform should address a pressing issue or solve a problem. You may hear complaints like “the interface is too difficult” or “it takes too long to run reports” and think that a platform switch is the answer, but there are other investments you can make – like implementing a different front-end, or trying overnight batch processing – that will relieve your pains without costing a fortune (and taking years off your life).
- Regulatory/ legal requirements for reporting.
Reporting standards, such as Sarbanes-Oxley (SOX), International Financial Reporting Standards (IFRS) and HIPPA for example, are mandatory regulatory requirements. A solution that helps make compliance more convenient is nice to have, but in reality these regulatory reports can be summed up as the cost of doing business. If you’re forced to implement BI to meet reporting requirements, you’re unfortunately just going to have to suck it up – this rarely pays off financially.
Cash-strapped and revenue-hungry, companies today are very mindful of their expenses and are making a concerted effort to ensure that projects – business intelligence-related or not – have a return on investment in a reasonable amount of time. As a project owner, business planner or member of a BI competency center, you want to increase the probability that your business intelligence project will be approved. It’s not enough to assume that your BI project has ROI – you must calculate and demonstrate that your proposal can produce positive cash flow for the company in a set time span. You’ve probably realized that your executives are not going to give the go-ahead just because you say that the cost of your BI project is justified because it will help achieve ‘better reporting.’ They’re only going to listen to you if you can give them a real rate of return. Let’s dive into how you can figure this out.
Return on Investment is defined as a measure of the value of an investment compared to the cost of the investment for a predetermined time limit. Your executives are likely asking you to show them how your BI project will produce positive ROI – how your project will save more money than it costs or how it will find ways to increase profits since you’ll have better, more organized data. So let’s talk about calculations. It is relatively straightforward to calculate the cost of hardware, software, the hourly rate of your consultants, and the cost of using internal resources. So outline those items first and come up with an investment number. Then you have to consider the following questions:
- ‘Can I quantify the business value of this project?’
- ‘Will the company see financial returns on this investment?’
- ‘How soon are we going to see these returns?’
If you have stellar answers for these questions, go ahead and present your business case. If not, let’s examine them.