Evaluating the impact of a business intelligence (BI) solution after it has been implemented determines the value and benefits to the organization and assesses the financial rewards that were claimed in the business case. As a project sponsor or project manager, a post- implementation assessment validates the decision to undertake the BI initiative as well as quantifies the success and justifies the investment that was made. Conducting such an assessment can be a time- consuming task and should be undertaken after individuals within the organization are effectively using the BI solution, which typically takes 60 to 90 days after deployment. The first step is to review the business case and determine whether or not the anticipated financial benefits and value have been achieved. The second step is to collect and analyze information from individuals using the BI solution to determine what other benefits or value have been received. These items can be grouped into one of two categories: cost savings or revenue enhancements.
Any activity or event that reduces time or expenses as a result of the implementing the BI application is considered a cost savings. This can be further divided into one of two categories: time efficiencies and cost reductions. The following are examples of significant cost savings that our clients have experienced.
- The reduction in the amount of time it takes to develop a report in the BI application compared to the previous reporting approaches. The cost savings can be calculated by extending the average number of hours reduced by the average hourly development rate by the number of new reports replaced by the BI application.
- The reductions in the amount of time incurred by analysts who maintain or create spreadsheets reports that have been replaced by the BI application. The cost savings can be calculated by adding the extended reduced number of hours divided by the hourly rate for each analyst.
< LI>The reduction in the amount of time incurred by analysts retrieving information from previous approaches that have been replaced by the BI application. The cost savings can be calculated by adding the extended reduced number of hours divided by the hourly rate for each analyst.
- The reduction in headcount associated with supporting and maintaining the previous reporting environment compared to the BI solution. The cost savings can be calculated by totaling the reduced labor costs. In most cases, we see redeployment of resources from supporting and maintaining the previous reporting environment to other initiatives and groups within the organization. This is still considered a cost savings to the organization since it now has the capacity to do more with the same amount of resources and funds.
- The decrease in the number of paper reports which have been replaced by electronic delivery of reports and information. The cost savings is derived by the reduction of paper, printer cartridges, toner, associated postage or delivery, waste removal and shredding expenses.
- Identification of any cost savings opportunities through the use of the BI application. For example, one of our clients was able to reduce the number of supply vendors and negotiate more favorable contracts for volume purchasing because they had greater visibility into the overall needs of their organization.
The analysis of revenue enhancements is more challenging to quantify than cost savings because it requires the identification of new opportunities or assessing the financial benefits of activities and decisions that can be attributed to the use of the BI solutions. Revenue enhancements can be identified as either tactical activities or strategic initiatives.
By using the BI solution, individuals have the capability to identify potential revenue enhancement activities that can be enacted upon within the current business processes or organizational structure. For example, one organization identified a revenue enhancement activity through analyzing their customer- buying patterns and trends by product and by geographic region. With this information, inventory levels were adjusted by geographic region to support demand. In this case, the revenue enhancement was derived from the increase in sales as a result of redeploying inventory based upon customer buying patterns and trends.
As a result of individuals receiving information from the BI solution, greater insight can enlighten them to think about changes to their current processes and operations of the organization. For example, senior management of a financial services firm established a goal of increasing the number of customers to fuel its revenue growth. By examining its interactions with its customers, individuals within the organization were able to better understand the demographics of its customer base and determine the best manner in which to increase the number of its customers in the most cost-efficient manner. The use of the BI solution supported the strategic initiative of the organization and was attributed to the increase in the number of new customers and corresponding revenue growth.
After the costs savings and revenue enhancements that have been quantified, financial measures can be calculated to determine the financial impact of implementing the BI application. The financial measures that are often included in a post-implementation assessment are return on investment (ROI) and payback period. Further information about the mathematical calculations of these financial measures can be obtained at http://www.dmreview.com/master.cfm? NavID=55& amp;EdID=2487.
The value of a BI solution can be quantified and classified as either cost savings or revenue enhancements. Determining the financial impact of a BI solution after it has been implemented helps you to assess whether or not your organization is realizing the full value of its investment in BI.
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