By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
SmartData Collective
  • Analytics
    AnalyticsShow More
    data science anayst
    Growing Demand for Data Science & Data Analyst Roles
    6 Min Read
    predictive analytics in dropshipping
    Predictive Analytics Helps New Dropshipping Businesses Thrive
    12 Min Read
    data-driven approach in healthcare
    The Importance of Data-Driven Approaches to Improving Healthcare in Rural Areas
    6 Min Read
    analytics for tax compliance
    Analytics Changes the Calculus of Business Tax Compliance
    8 Min Read
    big data analytics in gaming
    The Role of Big Data Analytics in Gaming
    10 Min Read
  • Big Data
  • BI
  • Exclusive
  • IT
  • Marketing
  • Software
Search
© 2008-23 SmartData Collective. All Rights Reserved.
Reading: Remedial Math: Understanding TCO and ROI
Share
Notification Show More
Latest News
ai in automotive industry
AI Is Changing the Automotive Industry Forever
Artificial Intelligence
SMEs Use AI-Driven Financial Software for Greater Efficiency
Artificial Intelligence
data security in big data age
6 Reasons to Boost Data Security Plan in the Age of Big Data
Big Data
data science anayst
Growing Demand for Data Science & Data Analyst Roles
Data Science
ai software development
Key Strategies to Develop AI Software Cost-Effectively
Artificial Intelligence
Aa
SmartData Collective
Aa
Search
  • About
  • Help
  • Privacy
Follow US
© 2008-23 SmartData Collective. All Rights Reserved.
SmartData Collective > Data Management > Best Practices > Remedial Math: Understanding TCO and ROI
Best PracticesData Warehousing

Remedial Math: Understanding TCO and ROI

Rob Armstrong
Last updated: 2012/02/20 at 3:28 PM
Rob Armstrong
7 Min Read
SHARE

During my recent travels there were a lot of comments around either the cost of a data warehouse or the lack of value being perceived from the data warehouse.  As I dug deeper into the conversations it became clear why all the questions were being asked.  Quite simply, those posing the questions did not really understand how to calculate or compare “Total Cost of Ownership” or “Return On Investment.”  Although they are two separate ideas, they are closely related and I thought we can tackle them in one blog post.  I will let your comments and questions determine if more

During my recent travels there were a lot of comments around either the cost of a data warehouse or the lack of value being perceived from the data warehouse.  As I dug deeper into the conversations it became clear why all the questions were being asked.  Quite simply, those posing the questions did not really understand how to calculate or compare “Total Cost of Ownership” or “Return On Investment.”  Although they are two separate ideas, they are closely related and I thought we can tackle them in one blog post.  I will let your comments and questions determine if more needs to be devoted to either topic.

Let’s start where the money goes out, “Total Cost of Ownership”.  The most common comment I get is that TCO is high although the real cost is not known or when pressed as to the cost of the alternatives, the alternative cost is not known either.  People are simply looking at a single number and not the complete costs.  Many papers have been written about how to calculate total cost.  One needs to include the hardware, software, and people cost of the warehouse, but they also need to include the costs of the total environment, not just the core environment. 

I like to talk about the “Total Cost of Success.” How much time and money is being spent in moving data around to make it useful?  Are the users getting data directly or are they getting extracts into Excel (where costs are ignored)?  Are the costs associated with the data quality and governance being taken into account?

More Read

predictive analytics and POS use

Predictive Analytics Is Lifting The ROI Of POS Marketing

How Real-Time Analytics Can Help Assess ROI Of Toll-Free Call Support
Measuring Social Media ROI: Leveraging Data To Boost Results
AI Is Empowering Everyone to Become Their Own Branding Expert
How Can I Prove Content Marketing Generates ROI?

If you know the costs, the next question is whether or not you are using the system in the most optimal manner.  Are you using manual process where automated tools are available?  Are you using optimization techniques that minimize data replication and CPU utilization or are you creating wasteful processes that only lead to higher cost with no added benefit?

And then you need to make a comparison to not having the environment.  What are the costs of alternative solutions?  Are the savings of the removal of data marts, cubes and replicated data being subtracted for a centralized solution (or accounted for in the alternative)?

Before one complains about the total cost of ownership make sure that your facts are straight.  If that is done then you can realistically start to remove cost.

The other side of the coin is that while the cost is “high” there is little value perceived as coming from the data warehouse environment. Many questions are being asked around ROI and the first step in remembering some basic math:  If “R” is unknown then “I” better be small.  Of course if “R” is infinite then “I” almost does not matter

Many people are unable to even take a guess at the return from the data warehouse.  They know it is busy and users are generating a lot of reports.  They know that if it was turned off people would not be happy, but what value is actually derived from having the environment?  It is very important that a solid plan is in place for the measurement and communication of the “return” from your “investment.”

If you have a plan, then are you executing against it?  Did you have a business case that justified the environment and how are you doing against that business case?  What metrics were you trying to focus on and how have they changed over time?  Can users point to specific actions they have taken that lead to new revenue, saved expenses, increased the timeliness of their actions, or in some way created measurable benefit?  Are you even talking with the business owners to understand this value?

In absence of a plan I would suggest the following mantras that are easy to ask and quickly get to the heart of the matter:

  • If you are not making decisions, then stop asking questions – simply put, what reports and processes are being run that drive no new insight or value?  Get rid of them.
  • If you are not taking action, then stop making decisions – again, where are you making a decision but due to politics, infrastructure, third party actions, or simply authorization you are not able to act on that decision?  Understand your roadblocks and remove them
  • If you are not measuring your result then stop taking your action – any significant action should be accompanied by a simple plan that states when and how you are going to measure its effect.  Is this something simple that can be measured in customer response next week or is it a longer term strategic action that needs months to understand the impact?  Know this up front and you will build in a ROI calculation in your process.

 Before you start questioning the value of your environment, and complaining that it “cost too much,” get some simple facts in place.  This will put your problems in perspective and make your decisions and actions much clearer.  It will also help you when someone else comes along questioning the viability of the data warehouse environment.

TAGGED: roi
Rob Armstrong February 20, 2012
Share this Article
Facebook Twitter Pinterest LinkedIn
Share

Follow us on Facebook

Latest News

ai in automotive industry
AI Is Changing the Automotive Industry Forever
Artificial Intelligence
SMEs Use AI-Driven Financial Software for Greater Efficiency
Artificial Intelligence
data security in big data age
6 Reasons to Boost Data Security Plan in the Age of Big Data
Big Data
data science anayst
Growing Demand for Data Science & Data Analyst Roles
Data Science

Stay Connected

1.2k Followers Like
33.7k Followers Follow
222 Followers Pin

You Might also Like

predictive analytics and POS use
ExclusivePredictive Analytics

Predictive Analytics Is Lifting The ROI Of POS Marketing

6 Min Read
call center support
AnalyticsExclusivePredictive Analytics

How Real-Time Analytics Can Help Assess ROI Of Toll-Free Call Support

8 Min Read
leveraging social data for ROI
AnalyticsBig DataExclusiveSocial DataSocial mediaSocial Media Analytics

Measuring Social Media ROI: Leveraging Data To Boost Results

19 Min Read
artificial intelligence AI disrupting marketing and branding
Artificial IntelligenceBusiness IntelligenceExclusive

AI Is Empowering Everyone to Become Their Own Branding Expert

6 Min Read

SmartData Collective is one of the largest & trusted community covering technical content about Big Data, BI, Cloud, Analytics, Artificial Intelligence, IoT & more.

ai is improving the safety of cars
From Bolts to Bots: How AI Is Fortifying the Automotive Industry
Artificial Intelligence
AI chatbots
AI Chatbots Can Help Retailers Convert Live Broadcast Viewers into Sales!
Chatbots

Quick Link

  • About
  • Contact
  • Privacy
Follow US

© 2008-23 SmartData Collective. All Rights Reserved.

Removed from reading list

Undo
Go to mobile version
Welcome Back!

Sign in to your account

Lost your password?