What are the “true costs” of Business Intelligence?

EducationSummary: While implementing Business Intelligence can drive revenue and save money, some businesses overlook many of the deployment and ownership costs of BI. Besides the cost of software, they don’t anticipate the fees that crop up during some BI implementations. In this article, we explore some of the “true costs” of Business Intelligence.

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If you own a car, you understand an important fact: The true costs of car ownership extend way beyond the sticker price. You’re paying for insurance, gas, maintenance, parking, car washes, accessories, etc…

If you were to dive into a car purchase without calculating these “true costs”, you’d be in for a rude awakening.

The same is true for Business Intelligence. Too many companies get caught up in the sticker price, and ignore the “true costs” of BI.

More importantly, they ignore the fact that these costs can vary depending on the solution. A BI platform with a high sticker price may actually be cheaper in the long run. On the flip side, a BI tool with lower upfront costs may become more expensive over time.

To truly calculate your Total Cost of Ownership (TCO), you must factor in all of the costs. You must also factor in the differences in fees and licensing structures that may impact your cost over time.

What are these costs? Today, let’s dive into this topic. Here are some “true costs” to factor into your BI decision.

Licensing type

While many BI vendors license their software on a per-user/seat basis, it’s not the only licensing type. You’ll find BI licensing options ranging from per-session to per-database.

Which is best? It depends on your needs. If you only plan to have a few users, then a per-user licensing option fits you best. If you plan to scale it across your business, a per-database licensing option gives you the most bang for your buck.

Now, I realize that these are pretty basic fees. After all, every BI solution has a licensing fee of some sort. However, I bring it up for a couple of reasons:

1. There’s more than one way to license BI software. Some assume that per-user is the only option. This misinformation can lead to overpaying for a solution.

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2. Don’t get tricked by user fees. Per-user licensing costs are often a red herring. Many companies focus so much on the per-user costs they don’t see the other (higher) costs of the deployment, or the exponential cost increase as they scale the software across their business. Of course, BI vendors know this. Many will offer low upfront costs to rope you in. It starts small: One or two users download the software and create reports. They invest time and money learning the software. But, when the business wants to scale the software across multiple departments, the costs skyrocket. But, they’ve already invested so much time and effort into the software, it’s hard to start over.

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When calculating license fees, look past the initial cost. Calculate the cost to spread the software across your entire business. Even if you have no plans to do so, this will insulate you from future costs if you ever decide to scale up.

Distribution Fees

Another point I’d like to touch on: Distribution and run-time fees. This doesn’t apply to every company, but it’s a fee that you can’t ignore.

If you need to distribute reports, dashboards, or BI apps to your customers, you’ll probably face distribution fees. Additionally, if you need to embed your BI applications into your existing software and systems, you’ll probably face distribution fees.

What does this mean? The vendor will often charge a fee for every application you deploy to your clients. Or, they might charge a run-time fee for every time an application is run.

Of course, not every vendor has this fee, and it doesn’t apply to every BI deployment. But, it’s something you should understand before getting into BI–especially if you need to embed or distribute your applications.

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If you need (or will ever need) to embed your BI apps in other software or distribute your BI apps to customers, this is a fee you can’t ignore. The difference between a vendor that charges distribution fees and one that doesn’t can easily climb into the 6-figure cost range.

Customization

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Off-the-shelf BI software won’t always fit your exact requirements. You might need a feature it doesn’t offer, or you might need the backend adjusted to fit your needs. Or maybe you just want the interface adjusted to fit your company branding.

While this customization leaves you with a solution that fits your needs, it can significantly raise the cost of your BI deployment (depending on the complexity of the work).

“Even if your organization chooses an out-of-the-box solution that meets 80% of your key requirements, customization may still be necessary to fulfill the other 20% and meet your unique business needs,” says Puneet Gangal, CEO & Founder of Aciron Consulting. “Plan ahead for these costs to ensure that the selected solution delivers the best value to your organization.”

Additionally, some customizations can lock you into one software version. If you upgrade to the latest release, you’d have to redo your customizations.

Does this mean you shouldn’t customize the software? Not at all. Every situation is different. You must weigh the costs and benefits of any customization.

Is this the case with every piece of BI software? No. Some give you the tools to customize the software on your own, while others force you to use their services. Regardless, it’s a question that you must ask before you begin your BI deployment.

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Chances are, you’ll need to customize your BI software at least a little. Before you license any software, understand what that entails. Do they give you the tools to customize it yourself? Do they force you to use their consultants? Does customization impact your ability to take upgrades? These are all questions that can keep you from (costly) surprises down the road.

Data Preparation/ETL

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There’s a lot of misinformation floating around about Business Intelligence. One of the most common myths I’ve heard recently: Businesses believe they can place a self-service BI tool over their existing systems, and start creating reports immediately.

The reality: It doesn’t work like that. Successful BI projects depend on clean, well-organized data. If you want your BI efforts to succeed, you must put your data in a format that your BI platform can work with.

That means you must consolidate data from your multiple systems (and whatever spreadsheets are floating around), and put it in one place–usually a data warehouse. This also means that you need a way to pull data from different sources and transform your data into a usable format for the BI tool on a regular basis. In other words, you’ll likely need an Extract, Transform, and Load (ETL) tool in addition to your BI software.

Is ETL something you can ignore? Not at all. As explained below, cobbling data together manually is time-consuming, and can compromise the success of your BI efforts.

“BI is a powerful tool for getting actionable insight from your data, but gathering, cleaning and updating the data necessary to fuel this intelligence can be a costly endeavor that quickly spirals out of control,” says Simon Peel, Chief Strategy Officer at Jitterbit. “Today’s organizations want to gain insight from many disparate sources of data in a wide variety of formats. Cobbling this information together manually in order to run reports is a time-consuming, inefficient process that can be enormously costly and involve delays that end up producing stale information.”

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Now, some BI platforms have ETL capabilities built in. But, others require that you purchase a separate tool. Make sure you know whether or not it’s included in the BI platform before you purchase, as licensing an ETL separately can easily be a 6-figure purchase.

Training

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Every BI solution provider offers training in one form or another. Some offer do-it-yourself training. Others offer an interactive video course. Others offer hands-on training with one of their consultants.

Obviously, this training comes at a cost, and must be factored into the overall deployment costs. Ideally, you should have in-depth, custom training classes, designed for your business. This jumpstarts your BI deployment, and drives user adoption.

However, training is an area where some try to save money. Maybe they train only a few users, and hope those users can train the rest. Maybe they opt for a cheaper training option. Or maybe they forego training altogether, assuming their users can figure it out.

However, this plan typically backfires. In the long run, skimping on training is actually far more expensive than training all of your users at the start.

How so? Here are a few ways:

Wasted time: When an untrained users doesn’t understand how to complete a simple task, they might spend hours floundering around trying to find the solution. Imagine how much time gets lost as users struggle through every task.

Missed opportunities: An untrained user doesn’t know what’s possible with the solution. They could add features or create reports that would help them do their job…but they don’t know those features exist.

Consulting costs: When untrained, users cannot use the system to its fullest potential. You’ll find there are some projects that they just cannot do by themselves. As a result, you’ll be forced to pay outside consultants to assist you with the project–something that could’ve been avoided by proper training.

Abandonment: When users can’t figure out how to use a tool, many will get frustrated and abandon the tool altogether. With low user adoption, your BI project will likely fail.

In short, some view training as an extra expense in their BI project. But, when compared to the cost of untrained users, even the most expensive training is the cheaper option.

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Training is one of the more important elements of your BI deployment. Ideally, you want a live, in-person training class customized to your business. Obviously, the cost of a training class must be factored in, but this is one area that shouldn’t be skimped on.

Maintenance and Support

Obviously, maintenance and support costs come with the territory. You should account for roughly 20% of the license cost going to maintenance, support, and enhancements.

However, not all maintenance and support programs are created equally. To calculate the true cost of maintenance and support, you must look at a few areas:

The support staff: Some vendors outsource their helpdesk while others staff it with product experts. An outsourced helpdesk means that problems aren’t resolved quickly, as you’re stuck talking to people with minimal product knowledge. This adds to your total cost, as it wastes your time.

Turnaround time: How quickly does the vendor resolve issues? As mentioned above, the quality of the helpdesk plays a large role, but it’s still a question that needs asking. Make sure you ask what percentage of support tickets are resolved the day they’re submitted.

Upgrade policy: A good Maintenance & Warranty plan will include new product enhancements. However, some vendors also charge you for product upgrades and new features as well. Make sure you know what’s included in the M&W plan before you dive in.

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Ask to speak with current customers to get a better feeling for the maintenance and support offered by the vendor. Additionally, I recommend that you set up a trial of the software, and call their helpdesk to see how knowledgable and helpful they are.

Internal Support

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While external support is important, you cannot overlook the importance of internal support. Who do your users turn to with issues? Who is in charge of training end users? Who is in charge of driving adoption within the company? Ideally, you need a point person (or people) in charge of internal support within your business.

Why is this so important? Without good internal support for your users, your BI project will likely fail. On the flip side, if you provide great training/support for end users, user adoption goes up. As a result, you get more value out of your BI investment.

“Beyond license/maintenance or subscription fees and the initial BI software implementation, the largest ongoing expense is the internal support costs as the tool(s) become more pervasive in the organization,” says Bob Katz, CEO of Financial Analysis and Control Technology Services (FACTS) LLC. “To recover its initial costs and generate a positive return on investment, BI must extended to all aspects of the organization so that decisions/information captured from the BI are communicated widely and part of an ongoing decision process. This effort requires the organization have an evangelist and/or internal support to drive the use of the tools into more and more functions/activities of the company.”

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Your internal support should accomplish two goals: First, they must provide support for end users to make sure their questions are answered promptly. Second, they must drive awareness and adoption within the company. If you succeed in these two areas, the costs of an internal support staff will easily pay for themselves in the value that your BI solution brings to the business.

Hardware costs

Of course, you can’t ignore hardware costs. If it’s not cloud-based, you’ll need a server and a database at the very least. Then you must also calculate the costs to keep the hardware running, and the growing need for storage space. These costs should come as no surprise to anyone.

However, there is one area to watch out for: You must understand whether or not you can run the solution on your current hardware, or if you need specialized hardware. As explained below, some vendors require specific hardware.

“Some BI tools also require the purchase of very specific hardware, which can add considerable amounts to TCO,” explains Andrew Pearson, Founder and Managing Partner of Intelligencia Limited.

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Another factor to consider is portability. For instance, suppose you plan to host it in the cloud, but later decide to host it in-house. Does the software allow for portability? Or, is it limited in what hardware it will work over? These are important questions to consider, even if they don’t apply to your business at the time.

Planned obsolescence

According to Wikipedia, “Planned obsolescence, or built-in obsolescence, in industrial design and economics is a policy of planning or designing a product with an artificially limited useful life, so it will become obsolete (that is, unfashionable or no longer functional) after a certain period of time. The rationale behind the strategy is to generate long-term sales volume by reducing the time between repeat purchases (referred to as “shortening the replacement cycle”).”

Unfortunately, this applies to Business Intelligence (and software as a whole). Some vendors design software for obsolescence. Why? If the software becomes obsolete in a few years, you’re forced to upgrade or buy the next version. It’s a shifty practice, but it happens more than you think.

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How can you avoid this? Look at the shelf life of past products from that vendor. See how often they update, issue new versions, add features, etc… Additionally, talk to current users and see how often the vendor delivers updates.

Summary

These are just 9 “true costs” to watch for in BI deployments, but the list could be much longer. If you would like to add anything to this list, I’d love to hear it. Feel free to share in the comments.

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