IT budgets are facing increased pressure. While large strategic BI projects are still driving a performance management culture based on measures provided by BI, many tactical projects face tough competition, and only those that offer clear quantifiable benefits in dollar terms will progress.
Unfortunately, many organizations do not formalize the benefits case for their BI projects, and this can lead to wild expectations and disappointment with the outcome, or worse no BI projects and an overreliance on Excel-based point solutions.
Organizations that build a business case will find that the costs of a BI project are easily estimated; however, the benefits case often relies on many intangibles that cannot be assigned a dollar value, for example better information or improved decision-making. While these are clearly very valuable to an organization, this is unlikely to be sufficient to secure funding for a project in the current economic environment.
Direct Quantifiable Benefits
Benefits that can be quantified and are directly attributable to the project, are often the only benefits considered. This will typically include things like: Departmental
- Number of days saved automating a month-end process.
- Cost savings from more efficient access to data. For example, data merged together from several sources allowing easier analysis.
- Shorter budget/planning cycle and reduced effort in producing and managing budgets.
- Savings from turning off a legacy system.
- Reduced support costs by consolidating skill sets.
- Savings in online transaction processing application hardware by off-loading reporting to a dedicated environment.
- OLTP report development costs, i.e., bespoke development.
- OLTP performance improvements.
- Legacy/history data migration to packaged enterprise resource planning solutions.
- Rationalization/review of existing reports.
- Delivers a landscape for future projects.
- Revenue generated from selling information to partner organizations. i.e. Sales analysis data.
- Global visibility of supplier spend allows better deals to be negotiated. Such as
- Identifying areas of inefficiency within the organization.
- Stock levels
- Unpaid invoices
- Duplicate invoices
- Failure to secure discounts from suppliers.
Indirect Quantifiable Benefits
Benefits that are not the primary reason for completing the project but will flow from the project and with a few assumptions can be quantified and assigned a dollar value are called indirect quantifiable benefits. They are often outside the scope of the current organizational process and may require new processes to realize them. They may rely on examples from reference sites or on an individual to evangelize about the benefit. Examples include:
- Ability to benchmark against industry standards.
- Able to meet own information needs.
- Improved process adherence.
- Better service of customers (i.e., the business), faster report development turnarounds.
- Alignment to long-term IT strategy.
- Improved customer service resulting in better sales.
- Reduced audit costs as information is managed and access is controlled.
Unquantifiable benefits are the very soft nebulous benefits that are difficult to define before a project and even harder to express in a dollar value. Examples include:
- Better alignment to strategy.
- A single version of the truth.
- Improved communication.
- Improved organizational insight.
To identify areas that may deliver benefits, speak to business analysts who have completed their own modeling or senior managers who can understand and feel how the organization is running. To build a complete benefits case, think of all the possible benefits the organization might receive using the above framework to structure them and then ask so what? Keep asking so what? until a value appears. Then claim a very small percentage of this value as a benefit. Anything too large will look unrealistic.
5 Steps to Exposing the True Benefits of a BI Project:
- Start with the benefit.
- Keep asking so what? until a value appears.
- The percentage represents the amount of that saving that can be attributed to this BI project.
- Complete the calculation.
- Record the benefit.
Case in Point
To solidify your understanding of this concept, consider the following a real-world example from a major utility company.
The purchasing director suspected that there were some issues with their procurement process. They justified the project solely on the cost saving of external consultants to assemble their monthly reporting packs. However, just after going live, the true level of global spend was identified. An additional $28,000 could have gone in their $100,000 benefits case as follows:
- $56 million of expenditure was identified that wasnt managed through central procurement. So what?
- The central procurement team will now target an additional 5 percent of spending that will get managed through central procurement. So what?
- Procurement are targeted at saving 10 percent on list prices. So what?
- Five percent of $56 million is ($280,000 x the 10 percent that procurement saving) is $28,000, a benefit that this project brings by identifying rogue spend.
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