How to measure ROI of Business Intelligence?


Before we answer the above question, we need to look into finding why are we even asking this question. The reason is very obvious i.e. failures. Yes, failure in implementation of BI Projects drives us to this question “How to measure ROI of Business Intelligence

According to research analysts around 80% of BI, Implementations fail to deliver, due to various reasons. One of the most important reasons for failure is “Cost Incurred”, for example, a BI implementation was delivered on time, but the cost of generating the same set of reports are even costlier than the previous method used. This drives us to our next question -what are the cost involved in BI implementation?

The cost involved in Implementation of BI tool can be broadly categorized into 2 categories.

  1. Deployment / Initial Cost.
  2. Maintenance/ Ongoing Cost.

The implementation process involves the following expenditure.

  1. Software/ License Cost.
  2. The cost of Deployment.
  3. Traditional Project Management Cycle.
  4. End User Training Cost.
  5. Cost of Administration
  6. Operations & Maintenance

Most of the benefits of a fully implemented BI tool are not measurable (intangible). To name a few that fall into intangible measure are as follows.

  1. How quick employee can access/ move date from high-level data to granular level
  2. What is the turnaround time for generating any specific report?
  3. Is the data reliable, is the data integrity intact after BI tool implementation?
  4. Was change accepted by employees/ users of the organization
  5. Do we have a centralized data or are we going through multiple?
  6. Are decision makers able to make the better business decision based on reports?

All of the above points and many more factors can be used based on the company’s goal as a checklist before starting the Project and once the implementation is done for monitoring. Success or failure of these can be considered for calculating BI ROI.

Since we have seen the importance of Intangible factors, let’s look into tangible factors with a small example.

Assumption: following are some of our assumptions and considerations.

  1. BI tool: Tableau Self Service BI.
  2. Previous Tool: Microsoft Office Excel
  3. Employee Rate: 3. 50$/ hour
  4. Vendor Rate: 4. 50$/ hour.

Before BI Implementation Cost

Let’s say the company generates in total 15 Sales reports for the various user starting from CEO, Sales VP to Project Manager. It takes 4 users 40 hours each per month to prepare this report in a legacy system like excel. Though the License cost of Microsoft office will be comparatively very cheap, but the total cost of creating these reports month on month for a years’ time is way too high.

Assumption: It takes 4 users take 40 hours each to generate the report.

Initial Cost:

  • Microsoft Office Excel: $230

Ongoing Cost:

  • Employee Salary: $96,000/ year

Total Cost: $96,230/ year

After BI Implementation Cost

When we compare any legacy reporting system with self-service BI tool like Tableau, we should be comparing the Cost over a period of time. In the given below cost break-down though the Initial cost is comparatively on a higher side, but the cost over a years’ time goes down to nearly 70% (ref fig: 1.1) in this case.

Assumption: It takes 1 users take 10 hours each to generate the report.
Initial Cost:

  • Implementation Cost: $20,000 approx. (1 resource for 8 weeks).
  • Tableau Server License Cost: $800
  • Tableau Desktop License Cost: $1600

Ongoing Cost:

  • Tableau Server Maintenance: $400/ year
  • Tableau Desktop Maintenance: $200/ year
  • Employee Salary: $6,000/ year

Total Cost: $29,000/ year

Clearly, we can see the difference in terms of a measurable factor.

We have done some Analysis with the limited data set used above.

Fig 1.1: show detailed cost incurred on various Item based on cost type and category.

Fig 1.1: show detailed cost incurred on various Item based on cost type and category.

 

Fig 1.2: show comparison between of Initial and Ongoing for before and after Implementation.

Fig 1.2: show comparison between of Initial and Ongoing for before and after Implementation.

 

Fig 1.3: clearly show that after implementation the cost has gone down by more approx. 70%

Fig 1.3: clearly show that after implementation the cost has gone down by more approx. 70%

In case you are looking for Demo of Business Intelligence tools such as Tableau, SpagoBI, JasperSoft, email us on sales@bistasolutions.com

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1 Comment on "How to measure ROI of Business Intelligence?"

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Sourav Saha
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Sourav Saha
1 year 4 months ago

how do you calculate implementation cost for BI(with 1 resource for 8 weeks) to be 20000$ and similarly how do you calculate employee salary for both the cases?

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