Business Intelligence (BI) Cost Overview
The cost of a BI implementation is always one of the top concerns that associations and nonprofits have when budgeting for an initiative. At DSK, we strive to be honest and clear about how much our clients should budget and how much it will cost to implement a successful BI program. Obviously, the pricing will vary dramatically depending on the amount, quality, and diversity of an association’s data, but we find that a realistic estimate for the explicit cost of a BI initiative is 1% of the annual operating budget for the first year and a quarter of that (.25%) per year going forward for future analytics.
Cost of Not Using Data
Now before you panic, it is important to consider the opportunity cost of not using data to make decisions. DSK has spent years advocating for associations and non-profits to use data to make decisions in everything from daily business operations to fulfilling the organization’s core mission. For example, your association may be overspending on a particular member or prospect segment because the decisions are based on tradition, politics, or instinct. Take a moment and consider the 9 examples listed below. How much would you save if “the report” that took days could be generated in minutes? Or if you find that the event you always held in Vegas could see a dramatic attendance increase if moved to Orlando?
Cost of Software and Hardware
The good news is that BI software tools have become very affordable over the last few years. We often recommend Tableau Software primarily because of the low cost and ease of use. See Gartner's Magic Quadrant Analysis for BI. Depending on your setup, there are additional considerations:
- Are you using centralized data marts to groom and stage your data from multiple data sources (which will be necessary for an enterprise-level BI project) or just connecting to a few internal data files (such Excel or Access)?
- Do you want to host dashboards on an in-house server or are you comfortable in the cloud?
- How many power users (analysts who create visualizations) and business users (who access dashboards and perform data discovery) do you need?
To give you an idea, below is an example of a client that chose not to invest in new hardware. They used Tableau Online (the Tableau Server Cloud service) and DSK’s cloud SQL server to host their data marts. With one power user and ten business users, the software cost was $10,000 (initially and 25% of that per year afterward for Tableau software maintenance).
An alternative to a hosted/cloud solution is an in-house setup, which includes purchasing a SQL server (or using an existing one) to house the Tableau server software and data marts (server hardware and SQL software potentially an additional ~$10,000).
Cost of Services
The fact that DSK is even talking about the service aspect of a BI project is a point of differentiation. We find most vendors are emphasizing their tool and ignoring the most important and challenging aspects of a BI initiative, which are asking the right questions and then collecting and cleaning the data, followed by the necessary culture shifts that an organization navigates through facilitation, education and knowledge transfer. Think back to a big software implementation (maybe your AMS, CRM, or other data management package)…What were the challenges? Similar to other software tools, you cannot point a BI package at an existing data set, wiggle it, and create high-value visualizations for data discovery. At DSK, we want to make the BI tools work for your specific data, which is why we follow a 5 step process to implementing the initiative. Our opinion is that 80% of the work, and appropriately ~80% of the cost, is in the services:
How much can I Capitalize?
There is some ambiguity about what is considered a capital expenditure vs operating expense for large initiatives like a BI project. Certainly the software and the development of the dashboards, which includes the testing and implementation, can be considered a capital expense. However, the line between an investment and expense starts to blur when it comes to some of the important services such as collecting and cleaning the data. Check out this article from IT Project Financial for more on the topic: http://itprojectfinancials.com/insights/2011/06/05/capitalizing-software-development-costs-from-sdcl-to-agile/
A good budget figure for an initial BI program is 1% of an association’s annual operating budget and about a quarter of that (.25%) going forward. However, the net value of a successful data analytics solution is substantially more than the cost, not only from a financial perspective, but also strategically (otherwise we would not be doing it). Like your competitors in private industry, associations will be able to:
- Make data-driven decisions to achieve strategic objectives (http://associationanalytics.com/problem-decision-making-associations-nonprofit/)
- Use data to provide better products and services to their membership (http://associationanalytics.com/the-analytics-convergence/)
- Interact directly with data to discovery new, specific, and significant business questions (http://associationanalytics.com/the-value-of-data-discovery/)
It's worth the investment.