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November 21, 2012

A Case for BI: Looking Beyond ROI

By Stefanie Hoffman

It’s no secret business intelligence and analytics are red hot in just about every market segment, from the smallest bakery to the largest multinational corporation.

And like the latest gadget or car, everyone wants it — sometimes without knowing why.

Ostensibly we all know the initial reasons to invest in BI: increased productivity, cost savings, added efficiencies, quicker detection of disruptions or security threats … the list goes on.

But problems occur when justifying the BI investment expenses to upper management, especially if the ability to achieve a high ROI hasn’t yet been realized.

Of course, as with many emerging technologies such as cloud and mobility, there’s an enormous potential for cost savings. But the path to achieving a tangible ROI is usually indirect and complicated – which sometimes can represent a hard sell to executives looking for reasons rule out expenses.

Forrester’s Boris Evelson writes in his blog “While there are many successful BI projects out there with tangible ROI (either cost savings/cost avoidance or revenue/profitability increase), they are indeed just that: Individual projects, solutions, and applications. There is no business case — or at least none that I am aware of — for “enterprise” BI out there with tangible, proven benefits that disprove reverse causality and eliminate all other variables.”

That said, there are ways to get a clearer idea of the financial return you’re getting on your BI tools. One thing that Evelson suggests is that users leverage a Forrester model, comparing themselves to their competitors. From there, they can start tracking the correlations between BI maturity and other key metrics, such as revenue growth, profit margins, stock price and industry ranking.

“If you do find a correlation, you’ve hit a gold mine and your BI project budgets are safe for the foreseeable future,” Evelson writes.

If correlations are difficult to find, users should start asking pertinent questions that attempt to determine why the solution isn’t having any impact on the bottom line, if they’re relying on the right application, and if they’re addressing key business pain points with the tools, among other things, he adds.

Undoubtedly, there are direct benefits to BI that include more efficient access to data, automation of processes, improved efficiencies in various operational groups, shorter budgeting and financial planning cycles, and reduced support costs.

Meanwhile, there are other ways – less obvious but just as real – to determine what you’re getting from your BI investments.

Some of the most salient soft benefits include a single version of the truth, improved customer service, better decision making capabilities, more accurate information, and “what if” analyses – which can all lead to increased productivity, even if an ROI isn’t directly measurable.

Also, keep in mind that BI projects tend to be complex and multi-faceted, involving numerous stakeholders interested in the outcome. And subsequently, benefit calculations could easily come out differently depending on the variables used in the equation.

At the end of the day, there are a myriad of reasons why organizations choose to adopt BI tools. Sometimes the tools will produce a direct and tangible ROI. More often, that ROI will be less clear.

But nailing down specific business objectives – what you want to achieve and then determining if, how and where BI can help you realize those goals, often gives you a foundation from which to start.

Keep an eye on the IBM Cognos TechTalk Intelligence Center. It’s as dynamic as the data, applications and processes it serves to advocate. We encourage you to check it out today by clicking here.

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