Calculating your Return on Investment in Business Intelligence

Calculating your Return on Investment in Business Intelligence

Why doesn’t anyone talk about return on investment (ROI) on a business intelligence (BI) project?

It’s crazy, right? Because a lot of time and resources can be committed to a business intelligence project; you might even have an ongoing managed services fee attached to your business intelligence solution. But before you pay your next software instalment or renew an annual subscription, take a moment to think: Am I getting value for money on my installation as it sits today? And, What could I do improve returns on our business intelligence investment?

You can start understand the value analytics with some simple observations.

Why Calculate ROI on Business Intelligence?

Calculating the returns on your investment in BI isn’t just about measuring the success of your project in meeting expectations.

Depending on how you cut your budget, you’ve probably capitalized the initial cost of your BI investment. That is, you’ve spread the cost of the project over a period of time so you can either delay recognition of the full cost of the implementation, or amortize or depreciate the value of that asset.

For this reason, it’s imperative that you seek to determine if that asset is generating revenue or giving you bang for your buck!

Another reason that you should assess ROI is because a BI installation is rarely ‘set and forget’. Rather, a BI application is attached to ongoing costs and involvement like software support. You may also have customizations underway, and possibly further stages of the implementation or roll out.

How to Your Measure ROI in BI?

Before you even reach for your calculator, a very quick and easy way to measure return on your BI investment is: how many of your intended user base are actually using the BI tool? If it’s anything less than 75%, it’s a cause for concern.

Another red flag: your target audience aren’t using the tool as they should. Are they reverting to old or unofficial reporting processes, re-working analytics output? If so, it’s time to start asking your intended users why the product is failing to take hold. And then you can address the issues that stop them from using your BI application.

Measuring your ROI in BI is not that tricky

Calculating these core ROI metrics is pretty easy. They can be gathered with a quick poll of your user base (try something like Survey Monkey – it’s free!). If your users aren’t as open and honest with you about how, or if they’re using the BI tool however, you can always go and check logs on user activity.

Ongoing Costs Vs Ongoing Savings

A BI solution is usually implemented to do one of two things. It either saves money, or makes money by providing insights that improve business performance.

Another really easy way to assess the return on your BI investment is to look at how much time is being saved or continues to be wasted on regular reporting.

If you were so diligent to write one, take a look at your business case. Maybe you tallied up the cost of inefficient reporting tools and processes: (X number of staff perform X hours on reporting administration every X reporting period. They are paid an average $X per hour, accumulating to $X each year on inefficient reporting.)

Now, what are the figures today? Cross reference this tally with the total you’ve spent on the BI project, and you can see how much time you’ve saved the business.

Remember to consider the following items in your BI Cost Assessment:

  • Software licenses or subscription costs
  • Software maintenance fees
  • Managed service fees
  • Ongoing custom project costs

Are there Unexpected Costs that affect your ROI? Some other factors to examine in calculating your ROI include:

  • Unexpected training
  • Hours of ongoing administration
  • Hidden costs that weren’t obvious when you initially engaged with the BI Vendor.
Go on – don’t be afraid to investigate hidden costs.

These unexpected costs or previously hidden fees are very important to consider, in particular. Add them up, assess them and discuss the matter with your BI Vendor.

Income Attributed to BI Insights

Alternatively, you may be able to trace a new product line, or process that has been born out of the insights provided by your analytics solution. How much revenue, or time saved can be attributed to that single metric? Are there other metrics that changed behaviours and optimised performance?

Solid Insights will Improve Profits

When’s the best time to perform a BI ROI Calculation?

12 months after your BI implementation, you should hope to see some returns on your investment.

This makes the anniversary of your BI project handover a good time to assess how the solution is performing according to objectives. The annual measurement, in fact, is the easiest and most exciting assessment of your BI implementation; it should be easy to assess changes in strategy and performance, and to calculate your project costs.

Using your ROI Investigation to Improve Value

This may all sound fairly daunting. And like you’re going to definitely find issues with your implementation.

Fear not! If you do have issues on uptake, or with your provider, you may as well face them.

The ROI investigation is a brilliant way to identify some small items that may suddenly pump the value you receive with minimal time or investment. It may just be another training session for a small segment of users that will improve uptake of the product. Or it could be a minor customization that will provide single-click reports that have your users singing praises of your business intelligence tool.

Either way, a small investment in time on these quick and easy measures is more likely to help you to identify ways to extract more value from your business intelligence implementation.

I’m not yet sure why it’s rare to find anyone working out the value the business is receiving from their analytics installation.

Regardless, hopefully these tips have demonstrated that calculating your ROI on a BI investment doesn’t have to be a precise science, or a long process. And although not a long and detailed task, it is certainly an important way to reflect upon the investment made and to identify opportunities to make improvements that will deliver more value for individuals, departments, and the business.

Blueprint Intelligence offer a very efficient, software agnostic BI ROI Calculation service. To find out more, click here.

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