Introduction
Successful business intelligence implementations can unlock key information within a company's data vaults and enable organizations to operate more effectively and profitably. According to a recent AMR profile on Small and Mid-Sized Business (SMB) IT spending, the top business initiative impacting IT decisions was "better utilization/analysis of data throughout the organization."
For many companies, a challenging business event or critical business pain precipitates a conversation about Business Intelligence (BI).
Challenging business events include:
- Period of rapid growth
- Recent or pending merger/acquisition
- Introduction of new products and product lines
- Upgrades to the IT environment (e.g. ERP upgrades).
Critical business pain points include:
- Sudden decrease or negative trend in profit margins or revenues
- Unpredictable quarter-end financial results
- Inventories increasing faster than sales
- Customer dissatisfaction due to poor product availability or late deliveries
- User demands for better, more complete information.
These scenarios call for a precise view of the business situation, which usually involves locating, extracting, and organizing data into a repository to support analysis.
Value and Benefits of a BI Solution
Many companies rely on a tangled web of Excel spreadsheets and Access databases to provide information and manage their business. These applications are popular because they often allow business units to design reports to their own specifications without IT resources. Excel experts can create customized reporting templates and perform amazing feats of analytics. However, there are many significant risks involved if your business becomes reliant on user-generated spreadsheets and one-off databases:
- Compiling the data usually consumes more of an employee's time than the decisionmaking it supports
- Spreadsheet manipulation is time-consuming for the business units and is often prone to user errors
- Spreadsheets created by each functional area propagate multiple versions of the truth Metrics and data about the business should be in the hands of all who need it, not just limited to the expert data analysts
- Spreadsheets don't scale! As your business grows, spreadsheets and databases only become more complex and harder to manage.
When faced with a compelling situation, organizations must quickly make strategic and tactical decisions. By implementing a robust BI solution, your company gains:
- One shared view across your company for ALL associates — from executives to functional teams
- A single source system for accurate financial and operation information that is readily accessible by all departments
- Flexibility and scalability to grow and change with your company
- Insights to understand your business performance and opportunities on a much deeper level.
Financial Justification and Evaluation of a BI Project
Building an ROI is a key component of ensuring your project is focused on the right areas and the company's investment is justified. The process should bring both business and IT owners to the table to jointly assess risks, costs, and benefits to form the business case. Justifying the project actually serves multiple purposes:
- Helps a company understand the scope of its implementation and prevents "scope creep" in later project stages
- Creates a focus on anticipated outcomes and benefits
- Creates a framework for sound financial management and value creation
- Helps a company monitor their actual results against the expected impact
- Provides feedback mechanisms to refine and revise business strategies and technical activities.
Developing the Framework for ROI Analysis of BI Applications
Organizations often struggle to create business and financial cases because they do not consider all of the costs and benefits, and often lack a good starting point. We have developed a robust framework to help companies scope, justify, and measure the benefits of a BI project in order to maximize value and return. The following framework highlights four key ROI components to consider when building your business case:
Business Value
Visibility into business operations can yield previously-unknown insights. Without having an integrated view of the business, functional areas make decisions without having all of the relevant data they need to understand the company-wide impact of their decisions. With one place to go for one version of the truth, business units are aligned on the business' performance to make more informed and timely decisions.
Business intelligence solutions can deliver extraordinary value by providing the necessary information to make strategic and tactical decisions in three major areas:
- revenue, pricing, and profitability
- customer satisfaction, retention, and acquisition
- operational efficiency and excellence.
