Return on investment (ROI) and total cost of ownership (TCO) can be crucial factors in determining whether a business intelligence (BI) project ultimately succeeds or fails. But business intelligence ROI and TCO aren't the same thing, according to consultant William McKnight, and he said in a video interview recorded at the 2013 Pacific Northwest BI Summit that it's vital for BI teams to understand the differences between the two and how they each relate to specific projects.
"It's a very important distinction to be made," said McKnight, president of McKnight Consulting Group in Plano, Texas, when it comes to the differences between ROI and TCO. "I find a lot of people are going about trying to justify projects and not even considering which [type of project] they are targeting."
While demonstrating potential business value can help sell business executives on BI projects, McKnight acknowledged that sometimes it's necessary to go with gut instinct and approve initiatives even without quantitative predictions of ROI or TCO. "Apple would never have gotten where it's gotten without taking leaps of faith and just working off of the founder's vision," he said. "But underlying that -- maybe at a very deep level, maybe a very vague level -- was the idea of 'we can make money doing this.'" And in most large organizations, he added, having to show a projected payback up front "is the reality, and I want people to understand how to work within that reality."
In the interview with SearchBusinessAnalytics Executive Editor Craig Stedman at the conference in Grants Pass, Ore., McKnight spoke further about business intelligence ROI and TCO and the process of applying them to BI programs. Viewers of the four-minute video will:
- Hear why it's important to define whether a BI project is aiming to improve ROI or TCO.
- Learn specifically what both ROI and TCO mean from McKnight's perspective.
- Get McKnight's thoughts on if and when organizations should take leaps of faith on investing in BI initiatives.