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Measuring Data Warehouse ROI

By anita ·
I read your article on data warehouse ROI with interest, since this is a topic that I've been focused on for nearly 3 years.

In my work with a number of F1000 clients, I've seen a wide range of understanding and capability (or lack thereof) when it comes to measuring the ROI of their data warehouse. Despite the desire of an organization to be more effective at this, there are no commonly accepted methodologies or approaches. However, a growing number of organizations have developed an effective and consistent approach to measuring data warehouse impact in quantitative terms, for the purpose of evaluating investment opportunities as well as post-implementation assessment. A body of best practices does exist and in fact, data warehousing organizations have begun to include it among award categories for implementation excellence.

In fact, these organizations have done a creditable job of measuring ROI resulting from:
- cost savings
- productivity and business process improvements
- revenue enhancement

ROI is calculated as the total project benefits divided by the total project costs. We see companies calculate estimated ROI prior to implementation (most common), post-implementation assessment, and both (least common).

For one client, we developed a 3-year Total Cost of Ownership (TCO) estimate, with specific quantified goals and measurements for each of the three years. At the end of the first year, they conducted a formal audit of the results, collecting and comparing the before and after data, and measuring against the initial metrics. Based on those results, the executive committee approved funding for their proposed expansion of the data warehouse. ROI justification and 3-year TCO are now included in every IT project request.

IT is now expected to meet the same standards of risk and reward as other enterprise expenditures. Thus they need to manage their projects like and investment portfolio, and as one of our clients puts it, "be as adept at projecting and assessing ROI as they are at using the OLAP tool."

Another client secured funding by signing up to the goal that the data warehouse project would fund itself. The initial revenue generated covered the implementation cost and the sustained revenue more than covers all costs of the system. The implementation won The Data Warehousing Institute's 2003 Best Practice Award for Best Data Warehouse by a Government or Non-Profit Organization.

Our experience is in contrast with your statement that "making a case with no numbers attached, but said with confidence has no reasonable refutation," and your further contention that predicting and measuring ROI in any meaningful way is not possible. Our clients regularly find unquantified requests refuted, and so they have found a way to predict and measure ROI in a way that is disciplined and revealing.

I would welcome the opportunity to talk with you and share some of our experiences in working with companies who are leading practitioners in all aspects of data warehousing, including ROI measurement.

Vickie Farrell,

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