Who among us hasn't experienced the fear that behind the known expense we made, there are hidden costs that we weren't told about?
This is true in the IT field in general and BI in particular. The fear of hidden costs in the ever-changing market prevents companies from investing in BI, and the need for ongoing maintenance prevents potential users from utilizing the capabilities.
Aberdeen Group distributed a report stating that leading companies in the global economy achieved better results with lower investment by implementing and deploying BI solutions. The report found that leading companies consistently achieved good results when they implemented the following rules:
Automation of data collection and integration processes.
Focusing on end-user needs and adapting BI tools to user capabilities.
Exploring options to reduce costs with service providers.
Despite limitations (including employing fewer workers to perform tasks), leading companies completed BI projects within the defined timeframe and budget constraints while distributing the solution to many users.
A study conducted in February 2008 found that the reasons for reducing BI costs are the desire to overcome challenges inherent in data integration and the need to provide BI to many end-users. The latest study conducted in 2009 revealed that improving end-user information accessibility is the leading reason for the need for efficiency. The change in reasons can be attributed to the longevity of BI solutions and the experience users have gained with the applications.
If, in the past, BI tools were mainly exposed to management levels as a management tool for analyzing and illustrating trends in the organization and industry, today's economic situation opens the door to using BI to improve operational performance.
As with other software, deploying BI technology includes hidden costs. A department, group, or organization's specific information and analysis needs may involve unexpected costs, both economic and in terms of time and resource allocation.
To calculate the actual cost of implementing BI, it's essential to define and understand the following factors:
Best-in-Class Strategies
The following criteria are used to distinguish a company in terms of leadership:
Completion of projects while staying within budget, measured over time
BI implementation cost per user, measured over time
Time to complete a BI project
Flexibility to make changes
Most leading companies in BI implementations prioritize end-user needs. This is especially important when determining the required permission level for each user group. A typical scenario is when an organization, often on the advice of IT departments, purchases a BI tool and only after implementation attempts realizes that most end-users haven't adopted it. It's important to know that one of the main complaints from end-users relates to the tool's ease of use.
Most organizations will look for the fastest and easiest way to get a return on their investment (ROI). Leading companies will typically focus on identifying specific business processes and try to optimize them for maximum improvement. Most interviewees for the study indicated that without structured processes and precise analytical requirements, the chance of achieving rapid ROI is low. The interviewees also noted that the best way to implement a BI project is through a temporary, multi-functional team that will be established at the beginning of the project and disbanded when the project is implemented. This approach provides flexibility and is suitable for cost reduction possibilities.
Required Criteria for Success
From the end-user perspective, the ability to identify, track, and manage all cost factors related to BI implementation begins with the direct cost of software licensing, implementation consulting, user training, and optional additional hardware costs. Indirect costs enter the calculation at the time of purchase, which are essential to address ease of use, user requirements, and challenges involved in data integration.
Additional factors besides direct and indirect costs are important to consider. The need for a significant portion of the costs involved in implementing BI becomes apparent over time, for example, ongoing maintenance and support, upgrades, changing requirements, growth in data volume, integration of information resulting from mergers and acquisitions, and integration of BI applications existing in different parts of the organization.
Throughout a BI project's lifecycle, many factors, both direct and indirect, should be considered. For example, licensing cost is a typical charge for purchasing the application and during the project's life when users join. However, the study notes that additional hardware costs (due to server and network load) are not charges that most companies consider at the beginning of the project.
The ease of use of the chosen tools is an even more indirect expense. Many organizations task professionals and leading users with evaluating BI tools and, in the end, realize that end-users are not skilled enough, analytically and technically, to perform operations in the new programs.
Capabilities and Enabling Factors
The research found that the combination of organizational and process knowledge, performance management, and capabilities will encourage cost reduction in BI implementation.
Here's a breakdown of the factors:
Process Management
Leading companies in the market demonstrate better capabilities in data integration and refinement. The challenges involved in information integration were found to be central to driving BI projects. As expected, the information integration capabilities of leading companies are better than those of average and below-average companies. For these companies, the challenge of information integration leads to budget and timeline overruns. A secondary result is the potential disappointment of managers who previously supported the project.
Organizational Change Management
End-user training is critical in any technological implementation, particularly in BI applications. As with most technological applications, end-users use a small percentage of all system capabilities. Companies that invest in employee training tend to see improvement in how users adopt the system and in the speed at which the system is implemented. Therefore, it's unsurprising that leading companies invest more in user training than average and below-average companies.
Knowledge Management
A structured survey process meets organizational requirements and improves user satisfaction with BI tools. However, most research participants don't have a structured mechanism for collecting information. For comparison, nearly half of the leading companies in their field collect data on user requirements, usage patterns, and knowledge needs. However, requirement gathering sounds obvious, and many companies skip this step. It's important to emphasize that despite possible resource shortages, leading companies invest substantial resources in this action while using customer-oriented suppliers. At the same time, these companies continue to systematically sample their customers to maintain satisfaction and provide good service.
Technological Management
As we described at the beginning of the review, information integration involves many challenges. It's crucial to analyze the capabilities of existing support systems in the organization. The technologies involved in setting up a BI solution include initial data collection, integration and refinement, metadata management, model-building tools, and technologies for implementation, consulting, training, and service. The vast majority of companies invest in various technologies and tools. Before managing the information, it's essential to improve its quality, leading companies to invest in data quality improvement. There is also variation between different companies regarding the level of investment in systems that are supposed to provide information to employees of the organization. In this area, leading companies invest more in these systems than others.
Licensing and Technology Deployment
Software licensing costs do not affect company performance. Although the standard licensing method is still "per head," new methods are penetrating the market. Standard methods are server-based licensing and multi-participant licensing. Although most research participants stated that multi-participant licensing is their preferred method, some solution providers do not allow this method. Since this method is economically efficient, many leading companies present this as a criterion for conducting activities with them. Open-source licensing has become more accepted recently, even if it's not yet the most common. Leading companies have begun to adopt this method, especially in using data refinement tools and dashboard solutions based on this method. This method is relatively new and is adopted by leading companies as part of a leadership strategy.
Performance Management
The detailed capabilities will not produce real added value without quantifiable and measurable results. Companies with leading performances manage to track BI implementation-related expenses more efficiently. To achieve good performance in a BI project within the time and budget available to the organization, decision-makers need to be exposed to activity managers, understand the activity, promote it, and measure its progress.
Required Actions
When a company tries to reduce the overall management cost, several actions can improve the situation:
Investment in back-end technologies, integration capabilities, refinement, and data adaptation.
Dedicating time to understanding end-user needs and adapting the technology and required training system.
Re-examining the licensing and deployment options of the system, including multi-participant licensing and implementation in open-source technology.
In conclusion, the research shows that the leading players in the BI market are familiar with the existing tools, have matured with the development of technology, and understand what information they need to manage, maintain, and support.
These companies invest in long-term solutions that meet daily needs rather than temporary solutions. They need to adopt solutions that fit their needs but tend to adopt innovative solutions to reduce costs.
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