First let me start off by defining Business Intelligence as defined by Business Journal International Weekly. “Business Intelligence is a set of theories, methodologies, processes, architectures and technologies that transform raw data into meaningful and useful information for business purposes.” Over the past 10 years business intelligence has soured in popularity to what is now, a $15.8B a year business, with an estimated 55 percent of companies today using some form of Business Intelligence or Business Analytics solutions. According to Gartner, “by the year 2020 researchers show an estimated 75% of companies globally will rely on Business Intelligence to run their companies.” Who would have thought this number would get so high? Continue reading this post>>
ROI, Customization, and Mobility
In my series so far, I’ve tackled questions about buying criteria, cloud BI vs. SaaS BI, and data management. Today is the last installment and tackles the remaining most common questions we hear from SMBs about business intelligence. This series is all about expediting and simplifying BI by dispelling myths and providing practical advice for moving beyond manual processes to automated reporting, dashboards and advanced analysis.
8) What’s the ROI for business intelligence?
This is a question we’re asked more often all the time, as SMBs know they need BI but struggle to justify the investment. BI vendors need to understand that SMBs can’t invest in solutions that don’t quickly generate returns.
Unfortunately, a large percentage of BI projects fail to meet the businesses’ objectives. I don’t bring that up to scare you away from BI, but instead to encourage you to ask the vendors on your shortlist for proof of their ROI. It’s part of your due diligence when it comes to selecting the right vendor. First, ask them about their success rate. Do they have happy and long-term customers? As an example, the average tenure of arcplan’s customers is more than 7 years, the longest of any vendor included in Gartner’s Magic Quadrant for Business Intelligence – an indicator of long-term customer satisfaction. How do the vendors on your short-list stack up?
The next step is to ask your vendor to estimate the ROI you should expect…
At every turn, we’re confronted with the reality that mobile BI is making its mark among modern organizations. Studies are confirming this, with TDWI‘s December research report revealing that 70% of participants see mobile analytics as an important part of their company’s BI strategy. Howard Dresner’s Mobile Business Intelligence Market Study found a similar number – 68% see mobile BI as either “critical” or “very important” to their business. And from my own experience with customers and prospects at arcplan, it seems as though everybody is jumping on the mobile BI bandwagon. Before diving head-first into your own mobile BI deployment, lay out a smart strategy that will ensure the project’s success.
Let’s consider the most basic (and important) factors of any organization’s mobile BI strategy: where the money’s coming from, who the project is aimed at, and what kind of BI applications are appropriate for mobile devices.
1. Return on investment
As with any other business project, your mobile BI strategy must have a discernible return on investment in order to get off the ground. In another article, we explored the 5 types of return on investment and the importance of categorizing a business project into one of these buckets. Revenue enhancement is one of the easiest forms of ROI to prove for a mobile BI project. Here’s an example: one of our customers is a company that tracks the effectiveness of pharmaceutical sales reps on arcplan-powered dashboards. The data has revealed that the average sales call for these reps is only about 3 minutes long, so every second counts. One company instituted a pilot program to switch reps from laptops to tablets, which start up significantly faster, to see if this would have a positive effect on sales. It worked – the switch increased the productivity of the reps in their meetings (allowing them to pull up research studies and email them to physicians quicker). This responsiveness on the part of the devices (and therefore the reps) has led to an average sales call duration increase of over 30%. Consequently, these reps have been able to increase the number of sales for the pharmaceutical company they represent. This pilot program proved revenue enhancement ROI and stakeholders gladly signed off on the larger project (tablets for everyone!) as a valuable investment.
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).
In case you missed arcplan’s webinar on December 13th, Calculating ROI for Business Intelligence Projects, here’s the recording to view at your convenience:
In this webinar, we discuss:
- What ROI terminology really means so you can speak the same language as your finance team
- The 6 kinds of “return” you should expect from your BI project
- The 5 BI projects that never pay off
- A 7-step methodology for calculating the ROI of your BI project
Thanks to everyone who attended, and for those who didn’t, let us know if you’d like to discuss anything you see in the recording.