Spend Matters would like to welcome another guest post from NPI Financial.
Business Intelligence (BI) has been rated by analysts firms as one of the top technologies in recent years. While the technology is still maturing, when properly implemented, BI has been shown to deliver several benefits. These include information enabled, fact-based, quick decision making by drawing on multiple data sources, as well as obtaining valuable historical and now increasingly predictive insights into business operations. However, Business Intelligence initiatives can cost organizations more than expected if there is a lack of knowledge regarding Fair Market Value costs and Total Cost of Ownership (TCO), if the BI strategy is not well tailored, or if best practices in governance and implementation are not followed.
NPI finds that a typical BI projects for a large enterprise cost between $125,000 and $350,000 in the first year, including software licenses and maintenance. An enterprise-wide large Business Intelligence initiative often runs into millions of dollars. Companies may also pay huge services fees in addition to the software license and maintenance fees.
NPI has identified four key costing pitfalls associated with deploying BI initiatives. These include:
- Overpaying for software licenses
- Increased implementation timelines of the BI initiative and increased time-to-market
- Year-on-year cost increases, either though subscription renewal costs or through maintenance and support costs, and,
- Burgeoning services costs associated with changes to the BI functionality or reporting based on changing business needs.
Based on this market data, organizations that are considering investing in a Business Intelligence initiative should consider the following to rein in their BI Costs:
- Determine the delivery model and licensing model best suited for the project, on premise (subscription or perpetual licensing), open source or SaaS. The appropriate delivery model may change project to project, and companies often fail to demand a clear analysis of options. Ask the BI vendor(s) about various licensing and delivery models. These days, many vendors offer multiple delivery model choices. The right model can reduce the overall cost of the BI project.
- Take the TCO view of BI – While BI project decisions are (and should be) driven by ROI, which measures the expected returns of the project over a period of time, once an organization has chosen the delivery model for the BI initiative, they need to determine the total cost of ownership as well. This will help to map out costs and expenses over the given term and help to manage, monitor and thereafter reduce the evident upfront costs as well as the hidden costs.
Our data shows that a surprising number of clients don't calculate the actual total TCO of the whole project, instead stopping their analysis at the software license costs, maintenance and implementation services to measure TCO. We recommend taking into consideration related infrastructure costs (servers, storage, and memory), data integration and cleansing costs, system integration, software upgrades, training, application support, and management costs.
- Determine Fair Market Value of the software licensing, maintenance and services costs to reduce overspending on upfront costs. You can do this through benchmarking current market pricing.
- Anticipate Changing Business Requirements – Changing requirements can prove especially expensive in a BI project. Follow best practices with regards to business and end user requirements gathering.
- Factor in Financial Impact of Data Management – This includes data cleansing and integration. This ensures successful deployment of the Business Intelligence project. The "garbage in garbage out" phrase is particularly applicable to BI projects where the analysis and reporting effectiveness is based on clean data. Many organizations exceed timelines in a BI project due to lack of data integration and cleansing prior to BI implementation. This increases the cost of the BI project.
Effective spend management and governance in a BI initiative can thus lead to successful BI deployment, reduction in TCO and a higher ROI.
-- NPI Financial