Calculating the return on investment (ROI) of business intelligence projects

It’s been said that information is the oil of the 21st century. Massive amounts of information are already being generated, captured, and parsed to eliminate uncertainty and improve business decisions. With the emergence of the Internet of Things (IoT), immense numbers of everyday objects are acquiring network connectivity, allowing them to send and receive data. In 2008, there were already more “things” connected to the Internet than people, and by 2020, the amount of Internet-connected things is expected to reach 50 billion¹.

However, making sense of the plethora of information streaming at us is another question entirely. This is where data visualization comes in. Sophisticated business intelligence tools that represent data visually are emerging to help people make sense of the flood of data. As a result, spending on these tools is projected to grow to $114 billion by 2018².

That said, a responsible business will want to carefully weigh whether a business intelligence solution makes sense for them. Calculating the return on investment of such a project is a key part of this process. It’s not enough to present pie-in-the-sky anecdotes of BI projects returning 100, 200, or even 300 percent on ROI. But, how do you prepare a prudent analysis of the value of business intelligence?

Business intelligence projects – costs

The ROI of a project compares the cost of doing the project to the financial benefits that will be achieved by the successful completion of the project. Although it makes sense that a robust BI solution will represent an advantage to an organization, it’s actually a difficult task to prove it with hard numbers. This is because while it’s easy to calculate the costs of implementing a BI project, it’s difficult to quantify the benefits. Costs include software and hardware costs, maintenance, upgrades, support, and the implementation process, including consulting.

And then there are personnel costs—often the greatest expense of a BI project. A typical undertaking includes a project manager, IT manager, several data owners, a network agent, trainers, IT security staff, operation & monitoring staff, a business analyst, software developers, and a QA engineer.

Business intelligence projects – benefits

In other words, these projects are costly, and you want to be sure if you embark on this journey, you’ll be rewarded. Let’s look at some of the direct and indirect benefits of a BI solution.

Direct benefits 

Time savings—Manually integrating data sources such as databases, web services, and CSV files is time-consuming and error-prone. In addition, data has to be prepared well in advance, meaning it’s stale by the time a report is actually generated. Rather than the hours or even days needed to collect reporting data, BI intelligence software sorts data and prepares reports instantly, making it possible to analyze large amounts of information in real time. Imagine being able to optimize customer journeys across all marketing channels, and to do it in 80% less time.

Indirect benefits

FlexibilityToday’s BI tools offer 100% flexibility when it comes to analysis. Rather than being constrained by the limits of the IT system, a business analyst or manager can decide on the fly what kind of analysis he wishes to make. In other words, these tools foster creativity—a significant yet difficult-to-quantify benefit.

Productivity gain—With IT freed up by the BI tool, employees can switch from maintaining rigid legacy systems to focusing on productive and creative tasks that will grow the business.

Accurate and timely reports—The instantaneous nature of BI reporting means that reports are based on current information. Decisions can be based on up-to-the-moment, or even same-time data. Accurate and timely customer insights result in a precise, sensitive, and customized marketing campaigns that result in increased revenue—not to be overlooked when calculating the potential benefits of a BI project.

Calculating the ROI

Clearly, BI solutions can be significant game-changers. To get closer to a determination of the actual value of the BI project, however, you must ask the following questions:

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In all likelihood, you will be able to answer these questions in the affirmative. It can also help to try to concretize the use case before implementing a BI solution. Do this by measuring the number of hours you estimate spending on tasks before and after implementing a BI solution. Consider the number of employees that will need to be involved to complete the project.

As you make your decision, consider the significant indirect benefits of a BI solution. If there’s a chance revenue can rise by 30% as a result of a highly targeted and timely marketing campaign, add this to your calculations.

As you’re implementing your BI project, measure for ROI every month. Update the model with key learnings as you proceed to ascertain the true value of your BI project.

While it’s challenging to calculate the ROI of a BI project in hard numbers, consider that ROI may not be the pressing issue when evaluating whether or not to embrace BI. More important is expressing your vision to the various stakeholders of the project. While difficult to measure, the fact is, having the tools at hand to make accurate and impactful business decisions is priceless. Ultimately, it comes down to your company’s philosophy. In today’s digital era, do you want to be data-driven and able to leverage relevant, real-time information as you make decisions? The answer to this question reveals the real value of business intelligence to your company.