This is the final installment in a four-part series. Part 1 examines how companies can use business intelligence to their strategic advantage. Part 2 looks at the features and functionality of various systems. Part 3 offers insights into the total cost of ownership.
While most believe that knowledge is indeed power and that knowing where one stands at any given moment is valuable information, not all companies are eagerly queuing to buy into business intelligence (BI).
“We are increasingly finding that those companies that are putting BI solutions in place for general reporting are coming under increasing scrutiny,” William Copacino, president and chief executive officer of Oco, told CRM Buyer. That’s because building a large data warehouse for the sake of getting all a company’s data together in one place is a cost proposition.
“Driving analytics that will increase revenue, reduce cost, improve customer satisfaction or improve operational performance is a different story,” said Copacino. “Companies are under pressure today to drive the bottom line. The closer a BI solution is to driving the bottom line this year, the better its chances are of getting approved.”
Determining the Costs
Indeed, the more specific the reasoning behind using BI, the easier it is to calculate costs and ROI.
“For example, replacement cost can be a very compelling story,” Laura Madsen, healthcare practice leader at Lancet Software, told CRM Buyer. “I know of a company that had a 2:1 ROI for replacing an enterprise reporting tool just because of the pricing model. Not only was the ROI compelling, but the company actually experienced an upgrade in software.”
The first step, said Madsen, is to determine the cost of the existing software. Take under consideration annual renewals and any special hardware allocation. Then, measure that against the purchase of a new application. “If you are currently paying by a per record or by volume, you may be in for a pleasant surprise,” she says.
Madsen says that because hard ROI is very difficult to calculate for BI implementations, and soft ROI is usually not acceptable, you may be able to use a Cost Benefit Analysis (CBA) calculation. A CBA is a formal discipline used to help appraise, or assess, the case for a project or proposal, weighing the total expected costs against the total expected benefits. “By definition, you are able to use things such as FTE time saved, etc.,” she explained. “This doesn’t help determine the long range return on investment, but at a minimum you are able to put parameters around the initial investment.”
Some cut the initial costs by using BI in Software as a Service (SaaS) form. “Traditional on-premise BI solutions have been costly to deploy, difficult to customize and expensive to maintain,” Quentin Gallivan, chief executive officer of PivotLink told CRM Buyer. “Not only is it important to consider factors like these that comprise Total Cost of Ownership (TCO), it’s also crucial to assess how quickly the benefits will outweigh the costs. This is where SaaS BI provides the most value.”
Point of Failure
While it is difficult to pin a number to the ROI column with BI, failure to realize a return is not always attached to the tool or its costs. Before ditching the idea of using BI, or the BI you now have in place, look for these common problems. Fix the breaks and BI often becomes the solution you wanted it to be.
- Failure to Act: One of the major reasons BI implementations fail is that companies fail to “trust” the data they receive from the dashboard. “They have all the information they need to make an informed decision that will positively impact their performance, yet fail to pull the trigger,” Larry Zagata, director of Business Intelligence Practice at MiPro Consutling told CRM Buyer.
- Stale Mindset: Many companies fail to realize the incremental steps needed to be taken over time to ensure the success of a company-wide BI implementation. “Many times this involves a cultural change within an organization — to break down the departmental and functional silos already in place, and enable true cross-departmental and cross-functional decision making,” Ron Hank, senior executive at Cincom Business Intelligence Solutions, told CRM Buyer.
- Lack of Integration: “Many of today’s BI solutions do not have the needed integration capabilities to capture all data and computation residing throughout the enterprise, regardless of the source system it was created upon,” Peter Chirlian, CEO and founder of Armanta, told CRM Buyer. “This provides a partial view of the needed data and does not present the whole picture, which is critical to sound decision-making. In addition, some tools are not user friendly or graphical, so it’s difficult to encourage widespread user adoption. Lastly, many solutions are not able to scale to meet the more sophisticated needs for vast amounts of data and computation.”
- Losing Sight of the Objective: “Some thought is required upfront to ensure that the system is drawing upon the data that is truly critical to the business and delivering analyses that provide the most impact,” Brad Peters, chief executive officer of Birst and formerly of the Analytics group at Siebel Systems, told CRM Buyer. “Investing in that basic strategic framework makes it easier to hit the target the first time, or to easily adapt later. This is especially important if you’re using a vendor that is not very flexible for changes once implemented.”
- Overreach and Overscope: “When business intelligence solutions started being used by companies, there was a temptation to try to plug in every data source, creating a monumental and monolithic ‘enterprise data warehouse’ and an associated business intelligence implementation that could theoretically do everything,” explained Peters. “Millions of dollars and years of implementation woes later, companies learned the hard way that this is very expensive and complicated. And worse, these older, traditional systems didn’t necessarily solve the problems for which they were created to address.”
“With modern business intelligence solutions, it’s possible to start tactically, addressing key issues, and then expand an implementation as it demonstrates value,” he added. “So a company might start with high level executive dashboards, then do a sales analytics implementation for the sales department, and then do a financial services implementation for the financial department, and so on.”
Business Intelligence, Part 1: Tools of the Trade for Decision Makers
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I’ve enjoyed the series and I have two comments.
First, BI systems as discussed in these articles resides in the world of very large companies with very large IT budgets, yet there is a larger market for the smaller companies, including the much smaller companies.
Second, there always seems to be a tenet of faith or a pre-supposition that decisionmakers need ALL of the data in order to make a decision. This has a knock-on or ripple effect that can be damaging, especially to morale, viz., employees become data-entry clerks. And besides, it is wrong: Not only are most decisions made with less than, say, 50% of available information, most decisions NEED to be made with less than complete data.
we see BI systems being implemented and expanded just because they have not yet collected all the data. That is an approach that will backfire on those system.
Great series, by the way!