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The 4 Hidden Costs of Business Intelligence
A new Aberdeen Group report contends that BI could cost your organization more than you think, but some investments can help avoid budget blunders.
Posted Jun 1, 2009
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Business intelligence (BI) has been shown to help organizations do more with less. But it's also possible that a BI initiative will cost your organization more than you expect. In a recent Aberdeen Group report, analyst David Hatch has outlined four potential cost factors likely to arise in a BI initiative if an organization isn't paying attention. The report also notes, however, that best-in-class companies manage to mitigate these risks while achieving operational excellence in BI. The research can be accessed as a free download on the Aberdeen Web site.

"The overall cost of ownership is not about the costs of purchasing the software," Hatch says. "The real cost factors are the hidden or the soft ones that have to do with indirect and ongoing factors." Hatch contends that a justifiable fear of such factors hinders adoption. "People are finding [that] the resources the company needs to acquire to properly implement, deploy, support, and maintain a BI solution are far greater than the solution providers lead [users] to believe or that [users] assume on their own."

The four potential pitfalls are:

  1. Year-after-year budget increases: The typical best-in-class company sees a drop in year-after-year BI budgetary costs. Average and laggard companies, however, can witness increases in BI expenses that range from 2 percent to 9 percent.
  2. Cost per user: Best-in-class companies lower per-user costs by 4.3 percent whereas average performers and laggards often see increases ranging from 1 percent to 7 percent.
  3. Time to complete projects: Best-in-class achievers complete BI projects, on average, within 14 days. Average performers take nearly three times as long (approximately 39 days) to complete a project, and the typical laggard company takes more than 12 times as long (177 days).
  4. Modifications to BI software: Altering a BI program takes less than a day for best-in-class companies; three days for average performers; and up to eight days for laggard organizations.

So what are best-in-class companies doing to achieve such substantially higher returns and to avoid additional costs of ownership? Hatch says that these top performers are treating BI as more than a mere reporting capability -- instead viewing the technology as a core enterprise asset. He writes: "The level of pervasiveness of BI capabilities throughout an organization is a clear indicator for measuring how well a company can deliver BI to more nontechnical end-users." Additionally, top performers avoid the soft costs incurred by improper integration and failure to listen to end-user needs.

Aberdeen suggests that investments in the following areas will maximize results from a BI initiative:

  • Data integration and cleansing: "Companies are finding it difficult to bring data together from multiple, disparate sources," Hatch says. Investing in tools for data management can be of help in this regard. Best-in-class companies are twice as likely as their counterparts are to institute data integration and cleansing capabilities.
  • End-user requirements: "You really have to stop and think about why…so many companies have deployed tools that so many aren't able to use," Hatch says. Companies must understand that end-users -- especially nontechnical, non-data-guru types -- may need different approaches. Hatch advises companies to focus on end-user needs before deploying a solution.
  • Training: Top performers are 37 percent more likely to invest in extensive user training on BI solutions and 40 percent are more likely to have formed formal user committees to encourage adoption. Additionally, best-in-class companies are twice as likely as laggards and average performers are to sign up for vendor-provided services.
  • Operational BI: Successful users of BI use the technology on an everyday basis rather than merely getting a summarized spreadsheet version of performance and high-level trends. Hatch says that operational BI seems to be gaining traction as companies look to make comparisons over shorter time spans rather than just examine large-scale trends.

The growth in pervasive BI that Hatch points to as a key indicator of success is just one of the emerging trends revealed by the study. The research states that 68 percent of best-in-class companies use BI to support enterprisewide performance management initiatives. In the laggard and industry-average groups, only 35 percent of respondents are deploying BI enterprisewide. Hatch suggests that pervasive BI has caught on due to increased integration between BI and other enterprise applications.

The research also reveals that the majority of survey respondents list two common areas for BI investment:

  • finance and accounting; and
  • customer service and support.

Another emerging trend, Hatch says, is a shift toward open-source software for BI purposes. Of the best-in-class companies that reported using open-source applications, 83 percent said they were doing so for data cleansing and data quality solutions.

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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