Cost Justification on Business Intelligence Project

765 pts.
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Business/IT alignment
ROI
I am having some problems justifying the expenses associated with a Business Intelligence project, as our senior management are not really aware of what it entails. They assume it is just basic MI delivered to them via a web portal, but no matter how hard I try to explain that it will enable them to run the business much more efficiently (some think they are running it efficiently enough) and effectively, by giving them the information they need at their fingertips, through improved and quicker information delivery from one source (enabling them to react quicker to situations), sophisticated analytical tools (answering the "how or why did this happen", or "what if this were to happen" type questions) and data mining (data pattern recognition), just to name a few benefits. As they cannot place an actual revenue amount on these benefits, the ROI calculations fall short of any investment, unless we can show that we can reduce Management Information staff, but this is unlikely, as these applications need to be managed. Basically, I would like to know if any of you have successfully convinced financial and senior managers of the strategic importance of having a Business Intelligence tool, or in fact have authorised a Business Intelligence project, where there has been no real cost reduction associated with project. Thanks, Darryn

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You will have to base your cost justification/ROI on either potential revenue increases and/or cost reductions resulting from the improved decision support capability that the BI system can deliver. Pointing to past events/projects that could have been favorably impacted by either quicker decisions or better decisions based upon better information would be powerful examples. In addition, if you could relate quicker/better decisions to inventory reduction (information instead of inventory), increased capacity utilization, reduced overtime and other reactive costs these would be credible examples.

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  • EECOMSOL
    Let me start by saying that your task does not get any easier going forward. It will be a long lot of selling and consensus building process; nonetheless it is not impossible. You can be successful at accomplishing your task. To Answer your question about whether one has successfully obtained approval and successfully implemented business intelligence, Yes I have, so it is not impossible. I will agree with you that it is not as obvious as debit, credit and bottom line, which unfortunately is the only thing the Executive level will see. You cannot convince senior management that the business will run better just because you have more sophisticated tools (even if it is TRUE and you BELIEVE that to be TRUE) Your task here is to bring to the forefront the business value, long term and short term cost saving strategy (NOT necessarily STAFF Reduction). You need to bear in mind that the objective of the business is to MAKE MONEY and how does your initiative fit into that financial goal. Areas of the business most often vulnerable to waste believe or not, is Sales and Customer Service, but it is also how the company earns its income. Since I do not have a picture of your Business Application Infrastructure Landscape, My questions to you are these: 1. Do you have a vendor delivered Business Application Solution or is it Home Grown? 2. If vendor delivered what kind of drill down facility does it provide? 3. Which and how many business units within your organization do you see using this BI Application? (Who are they?) This is very important. 4. What is currently in place (i.e. BI) and how is it utilized? 5. If something is in place why do you want to change it? 6. Is this a big bang or attrition of the old system approach? There are lots of follow up questions to the questions above that you will need to answer, but my last statement on this will be "YOU NEED A BUSINESS SPONSOR" to be successful.
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  • BigBob
    If you are looking for some other hard criteria, try lowering insurance costs. If business processes are in place and compliant (SOX), you can offer this up to the insurance carrier to reduce costs. If your project can be pointed to SOX, great, if not, then find something in it that will. SOX is getting alot of top exec attention right now and does not require expense explanation.
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  • EXPERTJohnBrandt
    Relate it directly to future requirement of head count in the MI/BI IT staffing and overall communications costs. You probably only need a few to get to the ROI over 3 years. Should be fairly simple to do.
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  • Soetkin
    Another sugegstion: list all elements that can influence your ROI and start distinguishing between tangible and intangible elements. The former are more easy to make hard. Unfortunately, their number is ususally smaller for BI projects but, when well founded, they offer a guaranteed 'GO' for your project. Next to my BI job, I'm also teaching at an ecomonic high school. Last year, the students had to make a paper on ROI or other forms of project justification and link teh theory to a real like case. From the information shown there, projects based on intangible results only (like better brand recognition) can be sold, provided you explain the underlying assumptions and how you calculated the ROI based on these assumptions. So, list all parameters/elements than may influence the ROI of your BI project, divide then in tangible/intangible, quantify them and clearly list the assumptions (make it challengeable). Success Dries GEERAERT
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  • Dchodges
    Have you tried to find a "champion" for this project? Someone who sees the intrinsic value this could add without spending the time building a business case? We're basically building a BI project using such a person as our test case. We've found an inexpensive tool to get some dashboard reports out (Xcelsius from infommersion.com) that are very eye catching. The goal is to sell the concept to executive managers, then go back and select an enterprise class tool to solve the problem (after letting the business unit managers say there is a problem - senior management always listens more closely to them than IT, for some reason...).
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  • DaveVincent
    The onlt way I have been to consistently gain acceptance is to relate its impact on specific business processes and specific stakeholders. The corporate departments that are likely to champion, as related to their key stakeholder relationship are: Sales/Marketing: Customer Purchasing/Inventory Management: Supplier Finance: Shareholder and Regulators (Sarbanes Oxely) Human Resources: Employee and Regulators There are typically three main business processes: 1. Develop and bring to market new products 2. Create demand/Get orders 3. Fulfill orders/Customer Service BI can dramatically improve most of the above if used correctly. Relate it to the above with a specific plan (made with the various departments) for how it will be used.
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  • Frage3
    Our Peer EECOMSOL has very rightly mentioned almost ALL the details and pretty nicely too. This problem is virtually universal and almost all of us going in for BI would (or have) face(d) in their work atmosphere. I would however add to what all the other peers have expressed the following: 1. It is possible that in your organisation (or in any org for that matter) IT people are not much given weigtage due to the general lack of awareness of the business process. BUT the scenario is changing very fast / has changed drastically in the recent past. Now this change may not have gone into the Management of your organisation as much as you would like to have. 2. To proceed further maybe you can target ONE of the business process owner, convince him in a one to one session, which would be more simpler for objectionable handling, show him / her the case studies, if possible of the advantages of BI. Show the advantages vide a slide show or a virtual demo (from the vendor softwareof the BI) ----Basically sell the concept and the advantages to ONE person first. then slowly proceed to approach others, preferably similarly, and then later on cash in on the acceptance from those already convinced singularly. 3. All Process personnel look for "then and there" solutions without understanding the technicalities leading to it. This can be addressed by highlighting the "Drilldown" facillities of the BI system. To sum it all, you have to demonstrate that you have the process understanding as well as the knowledge of WHAT is required to run (from IT) to run the process. Good Luck!
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