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"Oco provides essential business visibility to help you grow your business by giving you the information about your product, sales, and customer behavior that you've only
dreamed of having. We take any amount of data from any system in any location, integrate and organize it in powerful, easy-to-use reporting and analytics."
Source : OCO Inc.
Resources Related to
Business Intelligence Solutions:
Calculating ROI for Business Intelligence Solutions in Small and Mid-Sized Businesses
Business Intelligence (BI) is also known as:
Business Intelligence Solutions,
BI Applications,
BI Project,
Business intelligence software,
Business intelligence management,
Knowledge management,
Identify Business Trends,
Business Intelligence Knowledge Base,
BI software,
Business Intelligence definition.
Introduction
Successful business intelligence implementations can
unlock key information within a company's data vaults and enable
organizations to operate more effectively and profitably. According to a
recent AMR profile on Small and Mid-Sized Business (SMB) IT spending, the top
business initiative impacting IT decisions was "better utilization/analysis of
data throughout the organization."1
For many companies, a challenging
business event or critical business pain precipitates a conversation about
Business Intelligence (BI).
Challenging business events include:
- Period of
rapid growth
- Recent or pending merger/acquisition
- Introduction of new
products and product lines
- Upgrades to the IT environment (e.g. ERP
upgrades).
Critical business pain points include:
- Sudden decrease or
negative trend in profit margins or revenues
- Unpredictable quarter-end
financial results
- Inventories increasing faster than sales
- Customer
dissatisfaction due to poor product availability or late deliveries
- User
demands for better, more complete information.
These scenarios call for a
precise view of the business situation, which usually involves locating,
extracting, and organizing data into a repository to support analysis.
Value
and Benefits of a BI Solution
Many companies rely on a tangled web of Excel
spreadsheets and Access databases to provide information and manage their
business. These applications are popular because they often allow business
units to design reports to their own specifications without IT resources.
Excel experts can create customized reporting templates and perform amazing
feats of analytics. However, there are many significant risks involved if your
business becomes reliant on user-generated spreadsheets and one-off
databases:
- Compiling the data usually consumes more of an employee's time
than the decision-making it supports
- Spreadsheet manipulation is
time-consuming for the business units and is often prone to user errors
- Spreadsheets created by each functional area propagate multiple versions of the
truth
- Metrics and data about the business should be in the hands of all who
need it, not just limited to the expert data analysts
- Spreadsheets don't
scale! As your business grows, spreadsheets and databases only become more
complex and harder to manage.
When faced with a compelling situation,
organizations must quickly make strategic and tactical decisions. By
implementing a robust BI solution, your company gains:
- One shared view
across your company for ALL associates from executives to functional teams
- A single source system for accurate financial and operation information that is
readily accessible by all departments
- Flexibility and scalability to grow
and change with your company
- Insights to understand your business performance
and opportunities on a much deeper level.
Financial Justification and
Evaluation of a BI Project
Building an ROI is a key component of ensuring
your project is focused on the right areas and the company's investment is
justified. The process should bring both business and IT owners to the table
to jointly assess risks, costs, and benefits to form the business case.
Justifying the project actually serves multiple purposes:
- Helps a company
understand the scope of its implementation and prevents "scope creep" in
later project stages
- Creates a focus on anticipated outcomes and benefits
- Creates a framework for sound financial management and value creation
- Helps a
company monitor their actual results against the expected impact
- Provides
feedback mechanisms to refine and revise business strategies and technical
activities.
Developing the Framework for ROI Analysis of BI Applications
Organizations often struggle to create business and financial cases because they
do not consider all of the costs and benefits, and often lack a good starting
point. We have developed a robust framework to help companies scope, justify,
and measure the benefits of a BI project in order to maximize value and
return. The following framework highlights four key ROI components to
consider when building your business case:
- Business Value
Visibility into
business operations can yield previously-unknown insights. Without having an
integrated view of the business, functional areas make decisions without
having all of the relevant data they need to understand the company-wide impact
of their decisions. With one place to go for one version of the truth, business
units are aligned on the business' performance to make more informed and
timely decisions.
Business intelligence solutions can deliver
extraordinary value by providing the necessary information to make strategic
and tactical decisions in three major areas:
- revenue, pricing, and
profitability
- customer satisfaction, retention, and acquisition
- operational efficiency and excellence.
- BI User Productivity
By
simultaneously providing consolidated business reporting and improving the
quality of data, companies can empower employees with the information they
need to work more effectively. Users no longer need to chase down data,
reconcile different versions, and follow the data trail. Business intelligence
provides business users with self-service access to enterprise data in
real-time.
- IT Effectiveness
With a jungle of dated, home-grown legacy
applications, multiple enterprise and departmental systems, and databases
living in every corner of every office, IT organizations often have to spend
more time maintaining the systems than developing new solutions for the
business. With a robust, self-service BI solution in place, IT departments
can reclaim valuable time that can be spent on strategic initiatives versus
the never-ending daily data requests.
- Total Cost of Ownership (TCO)
When
evaluating different solutions, it is important to consider all the upfront and
ongoing fees associated with your Business Intelligence implementation,
including consulting, software and licensing, hardware, training,
maintenance, upgrades, and support. Often companies focus on the upfront
hardware and software costs but neglect to consider the substantial costs of
Extract, Transform, and Load (ETL) work, database configuration, enterprise
architecture management, and user training when the business grows or changes
requirements. For small- and mid-sized companies, a Software-as-a-Service (SaaS)
implementation can yield a lower total cost of ownership and a more compelling
return on investment. By choosing SaaS, companies can shift implementation risks
to the software vendor and scale more quickly since hardware, software, and data
architecture expansions require minimal internal IT resources. (See Appendix A)
Our framework quantifies the value creation of Business Intelligence for your
organization's "shareholders" by detailing opportunities to increase revenue,
lower costs, and improve asset utilization. Following, we share some specific
value drivers that provide line item benefits (and costs) for the ROI
calculation.
Business Value
Business
Value
Revenue
Cost
Assets
Revenue / Pricing /
Profitability
- Identify profitable and unprofitable customers to
make necessary changes
- Identify opportunities to cross-sell products
and services
- Reduce lost sales from out of stocks
- Optimize pricing
across products and product lines
- Understand customers service costs
to adjust pricing or service levels
- Gain clear, accurate view of
different cost centers to understand savings opportunities, including
vendor consolidation or low-cost material or service alternatives
- Understand inventory positions and holding costs for different products
or customers to align with target service levels
- Monitor cash
conversion cycle to achieve target levels
- Understand maintenance and
costs for major fixed assets/ capital equipment to lower total cost of
ownership
Customer Satisfaction / Retention / Acquisition
- Better selling of products and services to increase lifetime value of
customers
- Meet or improve target service levels to customers in order
to become a higher value vendor/partner
- Provide customers with
accurate information quickly, resulting in higher retention and sales
- Reduce marketing efforts/costs to retain customers
- Reduce costs related
to expediting, error correction, and customer dissatisfaction
- Reduce
penalties for delayed shipments
- Increase customer acquisition
effectiveness
- Better monitor and align inventory and customer support
teams to desired customer service levels
Operational Efficiency /
Effectiveness
- Improve order-to-cash process through better visibility
- Pursue lean process (e.g. manufacturing, engineering) targets through
better visibility into process status, bottlenecks, and key issues
- Optimize direct and indirect procurement
- Reduce overtime costs with
greater visibility to upcoming labor demand
- Reallocate labor
resources
- Lower inventory holdings
- Utilize manufacturing lines,
warehouses, plants, trucks more effectively
BI User Productivity
Business Value
Revenue
Cost
Assets
BI User
Productivity
- Gain additional time to focus on customers and business
growth initiatives
- Access required information more quickly
- Fewer
Excel experts needed to manipulate data and manage spreadsheets
- Consolidate reporting one place to go for information; fewer reports
to review
- Ability for users to interrogate data and find root cause,
reducing business/IT disruptions
- Reduce data marts, Access databases,
and servers that are maintained by the business units
- Reallocate
individuals tasked with managing and manipulating multiple data sources
IT Effectiveness
Business Value
Revenue
Cost
Assets
IT Effectiveness
- Offer
consolidated reporting as a service to vendors/suppliers
- Reallocate IT
staff onto higher value, strategic projects that impact company growth
- Lower staff turnover
- Spend less time retrieving and massaging data for
the business
- Decrease business requests, resulting in less
maintenance and utilization of hardware
Total Cost of Ownership (TCO)
Business Value
Revenue
Cost
Assets
Total Cost of Ownership
- Reallocate IT
funds to corporate growth initiatives
- Reduce initial implementation
costs including data architecting, database design, systems
integration, data cleansing, data mapping, and tool configuration
- Reduce cost of initial software license procurement and ongoing
maintenance
- Reallocate IT staff that maintain and operate current
systems
- Reduce training costs and on-going user support resources
- Scale cost-effectively for more reports / business units
- No capital
expenditures on hardware for servers, storage, and back-up
- No need to
capitalize massive costs of implementation
Parting Thoughts
As your organization builds a business case for BI,
consider these final thoughts from a holistic point of view:
- The framework
that has been outlined is exactly that a framework. However, it does
provide cost and benefits to calculate, questions to ask, and business areas to
consider. Each company's pains and opportunities will be different; let the
business context dictate the ROI model.
- Business intelligence is an
enabler, not a panacea. However, it does allow an organization to leverage
its own data with greater sophistication and precision. Organizations can
better understand and manage the business by unearthing root causes and
monitoring actions and results.
- Do not underestimate the "soft" benefits.
Many companies later find that the increased accessibility and visibility to
business information allows employees to generate insights via increased
innovation, learning, and collaboration.
APPENDIX A
Sample TCO
Calculation for a Software as a Service (SaaS) vs. Traditional BI
Implementation
TCO
Traditional BI
SaaS
Annual TCO After Year
One
SaaS
BI/PM Application License
BI/PM Application License (Maint.)
Data Integration License (ETL)
System
Integration Costs
System Integration (Maint.)
Database
License
Database License (Maint.)
Infrastructure/Hardware
Internal T Personnel
Training
Support/Subscription Fees
TOTAL
Cost-savings over
5-year horizon for a SaaS vs. Traditional BI Implementation
Traditional BI cost
SaaS cost
$ Savings of SaaS
% Savings over Traditional BI
Implementation / Year 1
Years 2-5
About Oco
Oco, based in Waltham, Mass., provides essential business
visibility, delivering one integrated set of actionable reports from any
source to any user in just six weeks. Oco's comprehensive solution
dramatically reduces the timeframe, cost and risk of traditional business
intelligence implementations with deployment on a fixed-cost, fixed-time
basis and a money-back guarantee.