Determining the ROI for business intelligence initiatives can be a pretty squishy proposition, as Lyndsay Wise, principal of BI consultancy Wise Analytics, told me earlier this year. She said:
Whenever I talk to customers, I ask them how they determined their ROI. And they'll often say they haven't yet, or it's very difficult. With BI, companies will see the benefits of BI and keep on investing in it, because it's helping them with certain efficiencies and with performance management issues. But at the same time, it's hard to actually quantify the value in dollar terms.
Now that the slumping economy has companies prioritizing IT investments with a hard, fast ROI and scaling back on others, does this mean BI investment will suffer? Back in April, Gartner predicted BI spending would grow at a double-digit clip until 2009, then slow a bit due to vendor and product consolidation. In contrast, Forrester Research forecast that BI would play a key role in kicking off an extended period of increased IT investment, beginning in 2009. Both of these pronouncements came before the economy began to head south, so now both bets are likely off.
Companies need to remember that BI can be good for their bottom lines, writes Michael Corcoran on TDWI's Web site. While Corcoran is chief marketing officer for Information Builders, a provider of BI software, and thus has a vested interest in convincing folks of this, he nonetheless offers four specific examples of how companies used BI to save money and make money. The examples:
- Financial services company SwiftTrade boosted employee productivity by introducing a database that automatically updates whenever predetermined revenue and trading milestones are achieved. Reports also show which traders are the top performers, encouraging them to keep it up and letting their more average peers sweat the possibility of being laid off as they try to match or better their colleagues' performances. A little motivation by fear involved there, I'd guess.
- About 600 sales reps use a BI application at the Hillman Group to track their sales transactions and determine if they are meeting their quotas. The process used to take weeks but now takes just minutes, so they know when they need to close more sales. The company also uses BI to analyze revenue, orders and freight costs. This allows it to, for instance, more proactively respond to changes in raw-material costs before they nick product margins. BI has also enhanced visibility of order and shipment data across the company. In one instance, writes Corcoran, Hillman pulled a report to prove that it had not short-shipped a customer, saving $131,000 in fines.
- A U.S. automotive manufacturer saves $60 million a year with a BI system that identifies excessive repair costs by monitoring how much each dealer's warranty performance varies from the average performance of other dealers in the same geographic area.
- Air Canada created reports to calculate revenue and yield for each of its major markets, sorted by week and month, helping it spot trends such as chronic overbooking. The airline added some snazzy visualization technology to make it easier for personnel across the company to examine data on bookings and sales, spot problems and react accordingly. The airline's director of network optimization says this kind of on-the-fly analysis is preferable to data mining because it's better at highlighting the kinds of discrepancies and anomalies that can negatively impact business.
To more clearly connect BI to business benefit, I'd suggest following some of the good advice from another real-world company, Rush Health Associates, that I shared in a post last month. Among the tips: Don't become so enamored of the technology that you lose sight of the business objectives it's meant to enable. Create a roadmap outlining specific goals and measurable success metrics. Bring folks from business and IT together early in the process.