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Calculating Total Cost of Ownership for Business Intelligence

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Calculating Total Cost of Ownership for Business Intelligence

Calculating TCO for business intelligence is complicated. This article simplifies it with an example about a gym and offers a formula to calculate your BI platform's TCO.

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Imagine you're comparing gym memberships to figure out which one offers the best value. Sure, you could simply look at the monthly fee and go for the cheapest, but that wouldn't tell you everything you need to know about the total cost of ownership.

For starters, you'd want to know what the cost includes. Does it offer all the machines and classes? Do you have to rent/buy extra equipment? Then there are the less obvious considerations. Do you need to pay a trainer to get true value? What's the price of travel? Is there enough capacity to cope with the crowds, even during peak hours?

Loosely speaking, the approach to buying a new gym membership should be, for the majority of savvy businesses, the same approach they use for price comparisons when weighing up different tech solutions for their business — especially with a solution as powerful and intricate as business intelligence.

Business Intelligence Pricing: There's a Catch

There are many things to consider when pricing out the total cost of ownership of BI. To really get a feel for the cost of implementing a BI solution, start by making sure that the platform in question does everything you need and has enough capacity for all of your data — or if not, how much you'll need to spend on additional technical infrastructure, tools, or the necessary consulting/IT expertise manpower to tailor a solution version that does work for you.

Try to estimate how much you'll need to commit in terms of internal budget and resources, whether you'll need to pay to take on new staff, and the opportunity costs of taking existing personnel off revenue-generating projects to ensure smooth deployment and daily use.

Then, once you've tallied up all the hidden costs of rolling out and operating a workable solution, choose the option that offers the best value for the price tag.

Sounds sensible, right? Well, yes — in 99% of cases, this formula works just fine.

But BI is different. To work out the real cost of using your BI platform, you have to take a final, vital step: calculate the value that a BI solution gives you — it's the cost of new analytics.

Considering the Cost of New Analytics

Let's look at the gym membership example again. Imagine that you spot in the small print that one of the gyms is only open on weekends, whereas the other one is open every day.

Until this point, you'd thought Gym A offered the better deal. You'd calculated the total cost of ownership at $820 per year, while Gym B worked out at $1,200 per year.

But if you can only visit Gym A a maximum of twice a week, even if you take every available opportunity to go, you're still paying a significant amount of money per session. The gym is only open 104 days of the year, so the absolute minimum you pay per workout will be $820 / 104 = $7.8.

Gym B, on the other hand, might be more expensive, but it's open seven days a week. In fact, it's only closed on two days out of the whole year. If you took advantage of this and went there on every possible day, the minimum you'd pay per workout would be $1200 / 363 = $3.3.

Suddenly, Gym B looks like a much better option, right?

This is precisely how you need to approach your value assessment of a BI platform, too.

That's because BI platforms vary wildly in the time it takes you to submit a new data query, generate results, and present them in a format that makes sense — for example, an easy-to-process dashboard showing progress on your KPIs.

Upon first look, it might seem that the annual total cost of ownership of one product is much higher than another. Once you factor in the turnaround time for a data analysis project, though, and divide your number by the maximum amount of data projects you can process in a year, this could quickly start to look very different indeed.

That's because BI tools aren't best measured by the total cost of ownership per annum, but by the cost of running each individual analysis.

How to Calculate the Cost of New Analytics

In short, it's putting a concrete number on the actual value you and your team are going to be getting from a BI solution.

Since we have already established that upfront costs are just one aspect of a bigger equation, businesses are now using a newer, more clever and accurate way of measuring the total cost of ownership of a BI solution by incorporating the full value potential of BI — How much will you and your team benefit from BI? — that's by calculating the cost of new analytics.

Ask yourself: What is the cost of a new analytics report for my team? This is precisely how you need to approach your value assessment of a BI platform because the cost of new analytics essentially calculates how quickly your team can churn out (and benefit from) new analytics and reports, which actually measures how much value for how much investment you are getting from your BI tool.

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Topics:
big data ,business intelligence ,data analytics ,total cost of ownership

Published at DZone with permission of Elana Roth Katzor, DZone MVB. See the original article here.

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