So often when companies are considering a business intelligence project or software purchase, a question arises that seems to stump everyone involved.

“Where is the ROI in this project?”

This question has stopped many a business intelligence project in its tracks. Maybe it’s asked by the CFO or CEO. Maybe it’s brought up in one of the meetings with a vendor or consultant presenting a solution. The sad truth is if you can not answer this question with hard numbers in specific areas, the ROI probably isn’t there.

I.R.A.C.I.S. is a simple acronym that can be used to quantify a business intelligence project’s worth to a company. It stands for the following:

Increase Revenue – How will this application and functionality drive more sales to new or existing customers, shorten the sales cycle, and/or bring down the cost of sales?

Avoid Costs – By far the area most focused on in BI project justifications. How will this application help us improve efficiency, put more information in the hands of our business people and eliminate wasteful processes?

Improve Service – Will this application affect our client base noticeably? Will we be able to provide more timely and valuable information to our customers, prospects, and suppliers?

Many times in a business intelligence effort, there are outcomes that are deemed desirable. Things like ad-hoc report generation, more informed operations staff, and less lag time in financial reporting are nice. But they will not justify the investment in a business intelligence solution from a quality software vendor without direct and secondary benefits quantified in the there areas mentioned above.

Let’s face it, business intelligence solutions are not cheap. There are many scalable solutions on the market today that range from traditional software implementations, to SaaS (Software as a Service), and even open source solutions. Large companies have long embraced the benefits of business intelligence and now with these diverse offerings the small and mid sized companies are also taking advantage. However, any business intelligence project is only as good as the planning, effort, and data that go into whatever software platform you are using. Hence another phrase often heard in many BI projects, “garbage in, garbage out.”

By using the I.R.A.C.I.S. model to quantify the value of the solution to the company, you provide everyone with a clear roadmap to what is deemed a successful project. From the executive sponsor at the company, to the vendor you are working with, there is no ambiguity as to what is expected as a final outcome. I would challenge any company that is considering a business intelligence project of some sort, that if you can’t find a solution that addresses at least one of the three areas above, if not all three, that the project is probably not worth doing at all. And if the solution or software product is incapable of scaling to address all three areas in the long run, then it probably isn’t the best product for you. This may seem like harsh criteria, but in an era where most large companies own 3 or 4 separate business intelligence tools , it’s apparent that more critical thinking is needed before a solution or platform is purchased.

Not only is this acronym a good way to quantify a project’s worth to a company, but it can become a brainstorming tool for the types of applications you are looking to create. Above I noted that the Avoid Costs portion of this acronym is by far the most focused on for business intelligence projects. Why is that? Is business intelligence only good for eliminating waste and making an organization more efficient? Can it not be used to increase revenue by putting valuable information in front of prospects you haven’t been reaching yet?

I would argue that some of the best and most successful business intelligence applications I know of, focus on the first category of Increasing Revenue. Business intelligence is all about putting the right information into the right hands at the right time. For some company’s that might be an internal business analyst. But for so many others it can be putting information in front of your customers, prospects, and partners to provide new insight on a purchasing decision. When companies are selling complex products and services, sometimes you need to track the customer down where they live. You need to reach out to them with a compelling message about your product or value proposition and give them a reason to act on that information.

If you got an e-mail from a major car insurance provider, showing your current car insurance provider and the estimated rate you are paying, and then a graph showing a $700 savings in rate comparisons for the same coverage over one year, that would be a compelling e-mail to receive. It would probably motivate you to pick up the phone or go to a website to instigate further.

This would in turn Improve Service and Avoid Costs. Being able to present this kind of accurate and timely information to a prospective customer shows them that you have systems in place to save them money and provide the best possible service. It shortens the sales cycle and the cost of sales, driving up margin and profitability. It instills confidence in the company from a customer standpoint and also gets people talking about your product or service.

In the Information Age we live in, the data and information that companies have are their most valuable assets by far. Getting this information out in a usable format to the correct audience can be the role of business intelligence in any company. This should be a goal when looking at what business intelligence can do for a company. Don’t limit yourself to just eliminating waste and automating internal processes. I certainly think projects that focus on those topics are worthwhile and valuable to a business. But when you expand your thinking and remember that using the internet to deliver information in a variety of formats is the most cost effective way to reach a critical mass of people, only then can you realize your full ROI on the purchase of a business intelligence solution.

So the next time a discussion breaks out about a business intelligence project or initiative, think of the I.R.A.C.I.S. model as a way to discuss and evaluate a projects worth to your company. You might be surprised what you can come up with when your thinking turns towards revenue generation and service improvement. Just remember, after you’re done creating a new line of business or increasing an existing one, to ask your boss for a commission.