Calculating ROI on business intelligence

How much can better data analysis help my business?

On paper, automating data analysis processes and converting data into useful and valuable insights is of course beneficial (better, faster decisions based on actual data not just gut feeling). But accurate estimations can quickly become tricky.

Let's try to simplify it and do some ROI (return on investment) calculations. In case of BI, it can be divided into 3 larger categories:

Cost of implementing a BI solution and upkeep (development cost, servicing, licensing)
Direct benefits of BI solution (less time spent on creating and distributing reports, fewer data errors, reduced manual labour, etc)
Indirect benefits of BI solution (this is the tricky part, more on that below).

We've made a simple calculator that helps to visualize the potential cost and benefits of our BI solutions.

Now, let's dive in.

You probably have a pretty solid overview about how much time is spent on gathering, organizing and distributing data. When making the calculator we assumed that 80% of that work can be automated. It really depends, in some cases it's much more, in others maybe a bit less. But this is one measurable result of implementing a BI solution - it's no longer necessary to manually collect data from different sources and to try to compile it into useful forms and then send the reports to specific people. And hope that there aren't any mistakes cause then you'd have to start the process all over, employees will end up with multiple versions of same data and so on...

Going further, it gets a bit more difficult but at least in theory, much more rewarding. The main gains of BI systems will come form so-called indirect benefits. Could you control your costs better if you and other managers have a real-time overview of expenses and a comparison to budget? How much can you increase revenues if salespeople have access to up-to-date overview of their most profitable clients, most profitable products, services, and overview of trends? What if you could see sudden spikes in demand for some products 2-3 days, weeks or even months before competitors and you have an opportunity to increase stock and be the only vendor out there that can fulfill customers’ orders?

It boils down to how much added value you can get from better and deeper insights into your data. In most extreme cases, a BI solution can give you an advance notice of larger trends, so you can move away from unprofitable products into growth areas.

When done manually, generating reports is a time intensive process and thus expensive. Automating this task through a (RoiBot) BI solution enables you to get much more information out of that same data. You only need to define the necessary calculations once and from that point on the reports will update automatically. A good example here is KPI-s like current ratio and acid test. These can be annoying to manually update but creating an automatic report for them (and setting alerts) can let you know when there are issues with liquidity. Or if we take sales, for example - you can display the profitability of your various services and products in a single visual and if their relative importance changes, then you can act on that.

If you plan your finances better or avoid unnecessary expenses, then that could pay for the solution in just a few weeks. Alternatively, if you retain a valued customer before it’s too late, or you can react to sudden changes better, it can net you a nice profit with just one very good management decision.

In the end, an effective BI solution will improve your overall competitiveness. Keep your expenses in check, increase profitability and ability to invest in R&D. It increases sales through better insights, allows rapid responses to new market trends and helps you to hold on to your valuable customers and relationships.

Our offer and our promise is that we have the experience, skill and knowledge to make that happen for you. We can give you a competitive edge compared to your competitors, at least in areas of data and information management.

Though, you'd still need to make the correct decisions based on that information. But this is a much, much larger topic.