Business Intelligence Blog from arcplan
7Feb/120

Types of Return on Investment

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Our series on Business Intelligence ROI has explored the importance of ROI for BI projects, provided examples of the types of BI projects that never pay off, and evaluated the methodology for calculating BI ROI. We saw that if a project has measurable returns it is more likely to get off the ground and get you acceptance for future BI projects.

Many of you who are tasked to calculate the ROI of your BI projects were never taught such a thing in school, so let’s break down another element that will help you do your calculations: types of return. Here are 5 types you should evaluate:

1. Revenue enhancement
Simply put, your organization will generate more money as a result of doing your project. Shareholders appreciate these types of projects – you’re reaching the right group of customers who see value in your project – and are willing to pay.

An example of this type of ROI would be one of arcplan’s grocery chain customers – their arcplan BI solution ties together three separate IT systems (one for sales, one for ordering, and one for inventory) and allows them to get a handle on inventory shrink (the loss of products between the point of manufacture and the point of sale…think brown lettuce or rotten tomatoes). arcplan allows the right people to see how many tomatoes are stocked in stores, how many are coming in from the warehouse, and how many are selling. The system allows the grocery stores to sell more tomatoes since they have better-looking inventory and less rotten tomatoes since they’re only ordering the amount they need in each store.

2. Revenue enhancement/margin protection
This means that your organization will increase profits through better efficiency. This does not necessarily mean more revenue but just higher profitability as a result of streamlining your current process.

The grocery store example from above also fits this type of ROI. The same shrink avoidance system allows stores to not only sell more tomatoes, but also to throw out less, thus protecting their profits (less shrink = more profit).

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