Previously, we have discussed the value of Oracle BI apps for PeopleSoft, and we have examined some key implementation considerations. Today, in this final post on the topic, I would like to chat about the biggest buzzword of them all: ROI.
The key question for many customers is this: does it really make sense to buy the BI apps versus build something from scratch? In order to discuss ROI, we first must clear the air about build vs. buy and ROI calculations. In this scenario, remember we are talking not only about the reports, dashboards, metrics and source PeopleSoft system analysis, but also about the data warehouse structure and all of the associated ETL scripts.
When we talk about ROI, we are really talking about two types: “hard” ROI which translates to real, measureable cost savings and soft ROI which is less measurable but still benefits the organization. Hard ROI is a challenging one to pinpoint in a blog post, as it really is very much dependent upon each organization’s specific circumstances. To accommodate this for the purposes of this post, we will generalize some hard ROI statements and focus more on the soft ROI of the BI apps.
No one deploys technology for the fun of it; in the enterprise, it is deployed to solve problems and drive to a business objective. The task at hand is to understand these problems and validate them. For evaluating hard ROI, I suggest you start with these two important questions:
- What will your organization be able to do with the BI apps that you could not do prior to implementing them?
- What problems will be resolved through the use of the BI apps that were unsolvable before the project was started?
By asking these two key questions, it should unlock some real information for hard ROI calculations. Let’s look at a couple of quick examples:
- Based upon better business intelligence as a result of deploying the BI apps, it is estimated inventory can be better controlled and inventory values can be reduced by 10% or $1,000,000, resulting in a better control of cash.
- Based upon better business intelligence as a result of deploying the BI apps, it is estimated to reduce purchasing costs by 5% or $200,000.
Again, these will be very specific for each organization and will take some time to calculate. Regardless of what any vendor will try to sell you, there is no magic hard ROI calculator that’s accurate for every business. I haven’t seen one yet.
Next, let’s look at a small part of the BI apps — the reports. If we look at how many reports and dashboards there are in the Procurement and Spend Analytics app and make some assumptions based upon experience, we can start building out some ROI. Here’s a basic example case.
The Procurement and Spend Analytics app contains: 2 dashboards, 14 dashboard pages, 103 reports, 161 metrics. Let’s run some basic numbers.
- Assume that each report is of simple complexity. Simple is defined as simple formatting and groupings, standard calculations such as totals, sums, averages etc. Standard graphs and charts. 8 hours to design, develop and unit test. (Note: Most likely there will be a mix of low, medium and high complex reports. 8 hours is low if you consider requirements gathering and the source system analysis is included in this time. 8 hours is conservative to get buy in; choose a realistic effort for your organization.)
- If each report is 8 hours then 103 * 8 = 824 hours of work, or 20.6 weeks of effort. This does not include dashboards and dashboard pages. This also does not include any data structure or ETL work or metrics analysis
Make sure you agree upon any “estimates” you utilize with others in the organization so the ROI calculation is accepted internally.
Soft ROI is much more fun to talk about. It can cover so many intangibles that are valuable to the organization. Identify enough of those intangibles, even if you can’t quantify them with dollars, and the ROI discussion becomes pretty evident.
Let’s start out with some general ROI statements about building a BI solution vs. buying one.
- According to TDWI Research, the average data warehousing project costs $1.1 million and takes 10 months to deliver, while a data mart project costs $544,000 and takes six months to deliver. (1)
- One leading BI implementer has estimated that the cost of deploying a custom solution is typically 2.5 to 3.5 times greater than the cost estimate of deploying prebuilt applications. (2)
- When you add everything up, we estimate about 7X the cost/effort to deliver a similar piece of custom-developed functionality as prebuilt BI apps. (3)
These statements in themselves are pretty powerful when discussing the cost and value of building a solution that equates the same functionality that the BI apps provide.
Let’s further explore some of the soft value statements of pre-built BI applications:
- More timely access to information
- Improved decision making
- Improved performance (no reports against the transaction system)
- BI embedded into the business process. With BI apps, users appear to stay within the PeopleSoft application.
- Total Cost of Ownership (BI apps are supported and maintained)
- Baseline data warehouse in place, providing a foundation to add additional data sources and additional content. It’s a great “foundation.”
- Industry-standard defined measurements
Additionally, here are some soft value statements regarding the Oracle BI apps specifically:
Oracle development takes care of the following activities:
- Requirements gathering
- Data structure and dimensions
- Naming standards & industry KPIs
- Change data capture design
- Source system review
- Alerts and triggers
- ETL design and development
- Reports and dashboards design and development
- Support, maintenance and upgrades
- Enabling BI within PeopleSoft or embedding BI into the business process (seamless integration)
Hopefully this makes clear of the potential of building a “soft ROI” business case for the BI apps. There is a lot of value that cannot always be added up monetarily, but many of these soft ROI factors certainly add up in manpower, time and effort to benefit to solving business problems.
This post concludes this three-part series on this topic. If you’re interested in learning more, please email me and I will be happy to discuss your plans with you. We do a lot of BI work here at MIPRO, a great deal of which is focused around planning and intelligently building out BI cases for clients.
(1) From In Search of a Single Version of Truth: Strategies for Consolidating Analytic Silos by Wayne Eckerson, TDWI Best Practices Report, 2004 (www.tdwi.org/research/reportseries). Technically, the numbers are for consolidating data warehouses, but the common approach for consolidation was starting from scratch.
(2) The Business Intelligence Consulting Group, “The Great Debate: Buy Versus Build,” 2007
(3) Jeff McQuigg – Independent consultant. IT Toolbox Blog 3/17/2008
Previously by Larry Zagata:
- The Value of Oracle BI Apps For PeopleSoft (Part II)
- The Value of Oracle BI Apps For PeopleSoft
- The Value of (Real) Integration Between Business Intelligence and MS Office
- Business Intelligence Requirements Gathering: Digging Deeper
- Why Excel Is Not an Enterprise BI Solution
- Art Meets Science: Business Intelligence Requirements Gathering
- Living Together: Oracle BI and PeopleSoft
- Back to basics: Why choose an enterprise Business Intelligence tool, anyway?
- Using BI to Survive the Recession, Part I
- Using BI to Survive the Recession, Part II
- Business Intelligence in the real world: Aligning metrics (Part I)
- Business Intelligence in the real world: Aligning metrics (Part II)
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