“Why do we need to build an ROI assessment when it’s so obvious we need to upgrade our analytics solution?”
If you’ve lived through a painful analytics implementation and done due diligence on new modern BI solutions, the statement above will likely resonate. But when you talk to your executives or colleagues in finance, it’s important to convey the costs, benefits, and ROI in a language they will understand. A well understood and clearly defined business case that can show tangible value (ROI) will make it easier to get executive buy-in, give you a well defined plan for execution, and provide a straightforward way track progress towards goals.
Getting Started with Your Business Case
In a recent blog, we discussed the best practices for building a killer BI business case. This included determining if there is a need, and then addressing simpler use cases first for quick wins.
But how do you calculate the ROI behind it? Unlike calculating the ROI for ERP, calculating ROI for an analytics solution more complicated. There are more variables involved such as use cases, integration with multiple data sources, roles with governance requirements, and other benefits like the impact of faster access to data and faster decision making. And then there’s the human component. Once implemented, how does this solution affect the business users who rely on it--how much time does it take to learn how to use it, or build a report and drill down?
Research advisory firm Ovum provides a step-by-step framework in a webinar entitled “Quantifying the ROI of Search-Driven Analytics.” Ovum created this adaptable framework to help anyone calculate total costs and benefits, understand how to determine both quantifiable and intangible metrics and build a clear and persuasive ROI business case.
Applying This to Real World
Ovum illustrated how to use this framework through a real-world example. They applied it to one of ThoughtSpot’s customers: a large global communications provider.
In the example given (which you can read more about here), the customer wanted to have a better understanding of marketing campaign effectiveness and the root cause of customer churn. Its current Cognos BI system had a 30-to-60-day lag on analysis, which didn’t allow the company to be agile in its course correction. Additionally, for its retail distribution segment, this company needed to reduce the amount of inventory stockouts it was experiencing, and couldn’t do that with the three-to-four-day lag of its current system.
Using the Ovum framework, the ROI story for ThoughtSpot is pretty clear:
TCO for five years: $2.2 million
Includes fixed costs such as hardware, licensing and maintenance, and variable costs such as customization and integration. Initial deployment took three employees, but the ongoing maintenance required just 25% of one employee’s time, so costs dropped dramatically in Year 2.
Total Benefits for five years: $17 million
Includes direct benefits such as IT time saved because of automation, and indirect, intangible benefits such as more data-driven decisions:
The customer retention team previously spent 3 to 4 hours per week preparing reports, but with ThoughtSpot this is reduced to 1 hour.
The company’s analysts each saved more than 1 hour each day on analysis, this meant significant savings across the 120-member team.
Instead of waiting 30-60 days for marketing campaign analysis, the marketing team now has information instantly and can respond to issues as they arise.
Sales and distribution managers significantly reduced stockouts and inventory shortages.
Net Present Value: $13.8 million
Standard NPV calculation that illustrates how much ThoughtSpot adds to this customer’s top line based on costs and benefits.
ROI: 175% Year 1; 779% by Year 5
In Year 1, the customer is still paying for the implementation cost and the benefits are just starting to kick in. By Year 5, the maintenance costs will be very low and the benefits high.
Breakeven: (An amazing) less than one year
Tell the Story By the Numbers
The Ovum framework detailed here helps show the ROI for adopting ThoughtSpot in an effective way. By using this methodology, we can clearly see the numbers behind the solution’s intuitive search-driven analytics, ease of implementation, and low ongoing maintenance. With this ROI analysis, the business case for ThoughtSpot is now reinforced with tangible evidence. Watch the webinar to learn how you can apply this framework to your analytics use case, whether you’re working on an existing POC or building a case to start a new one.