Calculating ROI for business intelligence

In tough economic times any project is going to encounter some obstacles, but business intelligence projects that require substantial resources encounter even more resistance. IT or business personnel trying to start up a BI project are desperate for ways to prove its value to the decision makers. Enter ROI. But therein lies a problem: there has never really been a definitive way to calculate ROI for BI projects.

In an article entitled "

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Data Warehouse Delivery: How about 0% ROI?," author Douglas Hackney postulates that purely financial ROI is too simple a measure of the impact of a data warehouse. He argues that there are other issues to consider, such as the criteria and formula used for determining the return on a fluctuating system. What about the investment in relation to the other areas that the money could be diverted to? Or how do you determine the gains or losses that a data warehouse would have on other areas of the business? Often times the financial ROI could be zero, but overall impact on the business could be positive.

But what if you really need to calculate a solid number for the ROI? Jonathan Wu describes a possible solution in his article, "Calculating ROI for Business Intelligence Projects." In it, Mr. Wu lays out a process for calculating ROI, complete with equations and guidelines for cost estimates and sensitivity analysis. Mr. Wu's article is available online at http://www.datawarehouse.com/iknowledge/articles/article.cfm?ContentID=936 or downloaded at http://www.baseconsulting.com/Assets/applets/Calculating_ROI.pdf. The download version also includes a BI ROI case study.

You may feel that a BI project is hard enough as it is and you don't really need all the hassle of this math and reading. Never fear, if you have the resources there are applications out there that claim to calculate ROI for you. One vendor of such an application is CIOview. You can test their application at http://www.cioview.com/case/index.htm.

Whatever your situation, in the current economy it doesn't seem like many projects are going to get the green light if they cannot at least prove some return on investment. Hopefully some of these resources will help make decision making easier for your company.

For more information, check out searchCRM's Best Web Links on Measuring ROI.

Ben Vigil is a technical editor for searchCRM's parent TechTarget.

This was first published in February 2002

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