How to Measure Business Intelligence Software?

It would be dream come true for financial experts if it would be possible to measure ROI for Business Intelligence software. This is very hard to measure since revenue side of BI software impact is problematical for measurement. Cost side is “easier” to measure, at least direct costs in obvious relation with Business Intelligence project costs: cost of analysis and project preparation, cost of employees working on projects, cost of deployment, cost of maintenance, software upgrades, software patches and similar. With the developed of quality cost center or functional cost measurement processes this is not the problem. Revenue side is the problem…

So, what can be done?

“Mark Smith, CEO and executive vice president, research, at Ventana Research, agrees that CIOs need to be sure their BI investments are paying off. “If I spend [IT budget dollars] and deploy tools, does that mean that all of the software delivered to users is in use?” CIOs need to drill down to see how many users log on, for how long, and what information they’re using,” Smith says.”

Source: http://www.microsoft.com/microsoftservices/en/us/article_HowToMeasureBIValue.aspx

This is too narrow information. CIOs and CEOs need such information but this is to small. They need CFOs models for tracking costs and revenues in order to make proper estimation, if it makes any kind of sense.

Business Intelligence software will definitelly make huge business, political, and resource improvement. Certain impacts can be measured like identification of revenue making products (as result of BI tools) or cost reductions in organization or processes.  

With dedication of special BI measures upon products:

• products that are result of analysis that would not be possible without BI software,
• products that are designed upon information that was not known before, without BI software,

it would be possible to track revenues that result of BI software.

On the cost side can be measured following performance indicators (time and or costs):

• reduction of time for creating and producing standard reports,
• reduction of time for making ad – hoc reports,
• substitution of costs for outsourced reporting services

But, all named benefits can be very quickly masked with new organizational forces that can compensate positive effects and make financial model again fuzzy or with inert capabilities of Information Systems to introduce new dimensions that are necessary for BI tracking. Organization can react very quickly on new features with engagement of new business analytics and creating more complex products. Such changes are usually not well tracked in ERP systems, with sufficient meta data about BI project and this is the negative effect that makes calculation very hard, slow and costly.

Information are currently main corporate logistic “energy resources”. In this context ROI of Business Intelligence solution plays little role. Question is, can company survive without any form of Business Intelligence software for longer period of time? What would be the cost of delay for implementation of BI project?

Once again to go back on initial question… perhaps, the best measure is to analyze and calculate on aggregated level value impact on decisions. What is the value (profit or EVA) of decisions made without BI and what is the value of decisions made directly relaying on Business Intelligence solutions. If this is possible to separate then it is possible to calculate BI ROI and additional value that BI tools provide.

But, as already stated…

does such information has any kind of meaning when it is compared with previous question can company survive without any form of Business Intelligence software? In such unequal comparison value of BI is far bigger then calculated ROI.