RESEARCH & RESOURCES

Q&A: Return on Investment for Information Projects

Is ROI for BI projects practical or even do-able? Is there a science to calculating ROI, or should we just use gut feel? Consultant, author, and speaker William McKnight explains what you need to know about BI ROI.

[Editor's Note: William McKnight will be conducting a session at the TDWI World Conference in Chicago (May 5-10, 2013) that will help IT professionals research, measure, and present the economic value of an information initiative. His presentation, Return on Investment for Information Projects, will offer practical advice for calculating ROI, including how to select the right formula. More information is available here.]

BI This Week: Do we really need to show ROI on information projects?

William McKnight: These projects usually require justification from a champion and a business sponsor who believe it is good for the company. Justification can take many forms, but doing ROI, either for the group use to help maintain the correct focus or because it is required for the project, is increasingly important in the formation of an information project. Whether overt or otherwise, I believe showing ROI as part of initial (and occasionally maintenance) justification should be an adopted part of project methodology.

Aren't there better, "softer" approaches such as return on data or something?

I hear about these every once in a while. Ultimately, these approaches fail the smell test at some point. Although they sound elegant to us as information practitioners, these projects must ultimately speak the language of business and show financial impact.

So ROI on BI can be done?

It's done all the time. My course on ROI is going to be about doing it right, doing it well, and getting projects moving for the students and their companies.

Do we need the accountants?

Of course we need them. If you mean for information project justification, they should be involved to whatever degree they want to be. Many times they are uninvolved, but I've done several justifications where the CFO office is heavily involved. They may have a preferred structure for the ROI, such as payback period or net present value, and they may have a preferred structure for the documentation. They also may opine on the numbers that are created and typically they are some of the more conservative contributors to the process.

What is organizational change management (OCM)?

OCM addresses the "people" risks associated with programs to promote successful implementations.

How do we bring people on board?

Certainly not by telling them to "get on board." As the people responsible for the ultimate success of our projects, we need to give the right people the right tasks to contribute to in order to get them "on board." OCM is a series of tasks that gets the stakeholders on board, focusing on people risks, implementation issues, and the realization of benefits and forging collaborative processes for success.

You mean there's science to it, not just using gut feel?

Yes, there have been studies of project success that have generated a set of practices to follow. My implementation experience has put some refinement to the practices to bring them in line with what works in information management projects. If you're about to start an information project, you had better take care of organizational change management. If you're struggling to get more use out of what you feel is a good implementation, there again the answer may be organizational change management.

It is essential that someone on the team -- and it usually falls to leadership -- understands OCM and infuses the project appropriately with the science of OCM while leaving room for the necessary judgment calls, too. My course will take anyone unfamiliar with OCM and make them very effective at it and it may be the difference between project success and project failure.

You're going to review lots of great ideas for OCM. What are some of your favorites?

There's about 20 but I'm going to say I've had great success with the Stakeholder Management Plan, Mapping Future State Job Roles and all the Training activity. We can often forget that, to get usage, users need training in one form or another. OCM has tasks that ensure training gets built and delivered.

William McKnight is the president of McKnight Consulting Group and a frequent contributor to TDWI publications and speaker at TDWI World Conferences.

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