Determining the return on investment (ROI) and value of a business intelligence (BI) software investment is often an exasperating task, but not an impossible one, according to one Gartner analyst.
In the early stages of a BI deployment, most companies measure value based on IT-centric, quantifiable criteria, including improved operational efficiency and minimized total cost of ownership, according to Bill Hostmann, vice president and distinguished analyst with Stamford, Conn.-based Gartner Inc. But today, as more BI deployments mature and companies start focusing on optimizing business processes, the metrics have changed and are more difficult to interpret.
No longer just about tactical issues like reporting, BI ROI and value are increasingly linked to performance management frameworks, said Hostmann, who will host the annual Gartner BI Summit in Chicago next month. That means using BI to define new sets of performance metrics, he said, and making more decisions through facts-based analysis. It's not just about getting the right information to the right people at the right time, he said, but determining that the information is in fact being used to make better decisions.
"How do you understand that somebody used information to make a decision that then improved a particular business process? How do you go about quantifying that in some sort of direct financial terms?" Hostmann asked. "That's where it gets more difficult," he said, as there are no ready-made sets of metrics for measuring improved decision-making capabilities.
Gartner advice for measuring business intelligence software ROI and value
What companies can do, however, is measure user satisfaction, based on a set of predefined BI objectives, 18 to 24 months after deployment. This can be done through a simple survey, Hostmann said, zeroing in on user satisfaction with the relevancy, accuracy, consistency and timeliness of data being used to make decisions. He said that companies should then see whether they have answered the question, "Do you have the information that you need to manage your business?"
Another tactic is to consider the risks of not utilizing BI. It costs money to store, secure and archive the stupefying amounts of data floating around a typical enterprise, Hostmann said. If it isn't used to improve business processes, data becomes little more than an expensive liability.
Organizations that aren't using BI are also putting themselves at a competitive disadvantage, as more companies are investing in BI today than ever before. In fact, BI is a top priority for most CIOs, Hostmann said, as they are increasingly expected to support business processes, not just put out IT-related fires.
"You've got a peer over there that has better information for making decisions," he said. "What's the risk of your not making similar investments [in BI]? The risk is that your competitors are making these kinds of investments and are able to react more quickly, manage their business better or respond to changes in the market better and, as a result, perhaps have better earnings than you."
Legal compliance is another key consideration when it comes to valuing BI, Hostmann added. By providing a detailed view of a company's performance, BI allows companies to spot trends and other behavior that may fall foul of federal compliance regulations. The risk of being noncompliant is difficult to quantify financially, he said, but it is certainly important (and will get executives' attention).
Gartner: Business intelligence software ROI, value a "mindset"
Clearly, though, valuing BI is not an exact science and often comes down to mindset, Hostmann said, comparing BI to a college education: It may be expensive and time-consuming, but there are many less tangible benefits, like increased earning power and overall improved quality of life, which come years later.
"It's not easy to persuade someone to go to college based on a purely financial or numbers game, and the same thing goes [for] BI," Hostmann said. "You just have to believe that BI is absolutely essential for you as an organization to investment, that this is a fundamental core competency that you have to have."
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