Análisis sectorial: El sector no alimentario

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to iteratively improve processes towards a more optimized and efficient state, as well as provide extra opportunities to increase profitability.

6.4  Discussion  of  the  Benefits  and  Investment  Process  

In light of the discussion thus far, it is evident that most organizations tend to grow into real- time BI as they move through the stages of BI maturity. Its implementation however is coupled with potentially high costs, but also potentially high rewards. For this reason, the justification of the investment needs to attract and persuade investment decision makers. While there is considerable literature surrounding IT investment justification, there is still no best practice for doing so, and BI is a particularly difficult technology due to the nature of its benefits (Kilcourse & Rosenblum, 2008). It is not uncommon for an IT initiative’s value, especially real-time BI, to become embedded in a business process where, unless the evaluation technique can measure the system accurately, “managers may only see the resulting system maintenance costs and no real added business value” (Gibson et al., 2004, p. 297). Furthermore, the quantification of intangible benefits is a relatively grey area surrounded by varying opinions as to their role and extent in the business case. It is also apparent that real-time BI implementation is associated with high costs, and this is one of the main reasons why organizations are reluctant to adopt it (Agrawal, 2009).

For an investment, the assessment of value is based on two factors, the cost of the investment and the benefits of its application (Lönnqvist & Pirttimäki, 2006, p. 354). While cost is relatively easy to assess, the benefits of IT, especially BI in general, are much more difficult. The business case suggested by Ward et al. (2008) however, was found to offer a structured approach for doing so and will therefore be used as the basis for real-time BI justification. This section will discuss the planning and approval of a real-time BI investment, and the role that business benefits play in the business case. Co1 and Co2 will be used as examples to illustrate this process.

6.4.1  Requirements  /  Driving  Force  of  the  Investment  

Findings suggest that, as a starting point for the investment, it is important to isolate a financially justifiable business problem(s) that can be alleviated with the introduction of real- time BI (Hackathorn, 2002). This is the business driver of the investment. In other words,

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organizations must first identify the issue(s) that they are facing, as this will give leverage to the rest of the business case. In addition, it serves to put the proposal in context and to describe the bigger picture in a language that business can understand.

Co1: The driving force for Co1 was centred around the high employee attrition rate, and secondly, the difficulty of finding and retaining talent. As a services provider, people are the most important asset for Co1.

Co2: The driving force for Co2 was around the high rate and cost of fraud, and more so, the inability to find it in time. Instead, it was only discovered during audits (after-the- fact), when the transaction(s) had already been processed. It was also often found that fraud was correlated to insider jobs where syndicates would work together to facilitate malicious transactions. Furthermore, as further leverage, Co2 utilized a projection by the ACFE (American Certified Forensic Examiner Association) which estimates 5% of an organization’s turnover to be the amount of fraud.

6.4.2  Investment  Objectives    

After having identified the high level drivers, it is important to state what the proposed investment seeks to achieve for the organization (Ward et al., 2008). These are the objectives of the proposal which state how those drivers will be achieved.

Co1: To decrease employee attrition rates through better management of employee performance, career and growth development, and general work satisfaction. By understanding what the indicators of employee attrition are (likelihood to leave) and being able to monitor their signals in real-time, Co1 can address those situations proactively, before they come into being.

Co2: To decrease the amount of fraud by monitoring user transactions for suspicious behaviour and proactively alerting forensics when signs of fraud are found. With an early warning, fraud is more likely to be stopped before it can materialize.

6.4.3  Investment  Benefits  

Following the objectives, the identification of the expected business benefits is probably one of the most important components of the business case; these are the “advantages provided to specific groups or individuals as a result of meeting the overall objectives” (Ward et al.,

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2008, p. 6). Furthermore, they need to be classified and quantified wherever possible (as shown in Table 8 and 9). This is critical because quantified benefits are used to derive the ROI, which in many ways is the deciding factor when assessing if an investment is prudent or not. In addition, the ROI figure must adequately address how the investment will pay itself off.

Some of the benefits for Co1 included:

Benefit   Degree  of  explicitness   Measure  

Talent Retention Financial Current rate of attrition × cost of re-hiring and training a new employee Reduced impact to project

productivity caused by employee resignation

Observable

Ability to proactively alert the organization when there are concerns of possible attrition

Measurable Estimated rate of finding attrition indicators and their success rate in reducing attrition

Table  8  –  Listing  of  benefits  for  Co1,  following  Ward  et  al.  (2008)  approach  

“… the business case is not that difficult because if we can lower our retention rate, that can be translated directly into the cost to re-hire someone and there’s metrics on that” (I2)

Some of the benefits for Co2 included:

Benefit   Degree  of  explicitness   Measure  

Savings in resources spent on

fraud recovery procedures Financial Number of fraudulent transactions found in audit (which could have been prevented) × average cost of recovery procedure

Savings in fraud that could not be recovered

Financial The total cost of fraud that could not be recovered Change from addressing

fraud after-the-fact

(reactively) to before-the-fact (proactively)

Quantifiable Number of fraudulent

transactions that could have been prevented if the technology was in place New information (the ability

to track user behavior by monitoring transactions)

Observable

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“I looked at everything that was reported to forensics and from that I isolated the items that I believe a good enough technology could [have] picked up” (OC18) “But the biggest win for us is more the new information that is coming to the fore so that we could look at what syndicates are doing” (I38)

In light of this, it is evident that there is often a mixed bag of business benefits. As such, it is crucial to categorize them based on the degree of explicitness and, where possible, outline how they can be measured (Ward et al., 2008). In demonstrating the value of the investment, there needs to be a positive ROI that is supported by quantified business benefits. While this is common practice, BI projects offer many intangible benefits that are not as easy to quantify financially because they are non-monetary in nature (Lönnqvist & Pirttimäki, 2006). Findings suggest that, regardless of their nature however, they should always be included in the business case. This is because “the limitations of financial appraisal techniques are well known and, given the many uncertainties of IT projects, even those organizations which apply them rigorously appreciate that basing decisions solely on estimated financial values will limit the types of business investments it makes” (Ward et al., 2008, p. 12).

Organizations must also remember that they should try to be conservative about their ROI projections so as to minimize the risk of falling short of those targets. Failing to reach these targets can compromise the trust in current and future projects (I59; I60). This supports the findings of Ward et al. (2008, p. 10) who state that “over 50% of the less successful organizations admit to often overstating the benefits to gain funding”.

6.4.4  Costs  and  Risks    

The decision to build or buy the technology is one of the main cost factors that warrant financial analysis. This is because it is important to establish whether building a system internally, or buying it, is more financially prudent given the organization’s circumstances. The consensus, from organizations that are not in the software development industry, is that it is a lot cheaper to buy solutions than it is to build them. This is because of the resources that go into building an entire solution, such as human resources and time spent on maturing a product internally. For example, Co1 had to include the cost of capital in their ROI calculation due to the labor and time that would be spent on development as opposed to working for clients and earning revenue. Co1 was able to justify these costs with the decision to offer the system as a solution to clients once it had been matured.

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While there are many costs associated with real-time BI implementation, the majority are relatively easy to calculate. For instance, costs for hardware and software, implementation, systems development, upgrading infrastructure, consulting fees, training, etc. The costs associated with making business and organizational changes however, are less predictable (Ward et al., 2008). Organizations should also outline the cost of not implementing the proposed system in order to assess what kinds of losses they stand to make, given their current situation.

It is also important to outline the possible risks associated with the endeavor that could prevent the realization of all / some of the benefits. Some of the risks that surfaced in this research include user resistance, limited existing change management capability, the scale of the required business process re-engineering activity, confidence in the evidence of some of the benefits, confidence in some investment costs, and the complexity of the technology.

6.4.5  Investment  Committee  and  Stakeholders    

After completion of the business case, it will then be sent for review. Many organizations have investment committees dedicated to reviewing investment proposals, whereas some bring together the necessary stakeholders on an ad hoc basis. Typically when an IT initiative is proposed, stakeholders from the business area(s) being affected will be involved in the project; these are the people who are going to benefit from it. Furthermore, directors such as the CEO, CFO, CIO, and COO, are typically present for an IT proposal. In addition, it is important to have a mix of stakeholders from both IT and business; IT people may include system owners, process owners, and business analysts. Multiple stakeholder input is important because one needs to ensure that there are people that understand the business and and how technology can support the business’s needs.

6.4.6  Summary  of  the  Investment    

Although a real-time BI investment may be associated with high costs and major business changes, there is sufficient evidence of the credible business benefits it can offer. For example, Table 10 shows the various benefits that emerged out of this research; all of which can assist organizations in cutting costs and risk, and subsequently increasing profits and opportunities (Watson et al., 2006).

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Real-time Business Information Increase visibility  

Deliver actionable information   Improved decision-making   Decentralized decision-making  

Learning and Discovery New information  

Prediction Accurate forecasting  

What-if scenarios  

Proactive Responses Proactive alerting  

Proactive decision-making   Lower risk, Maximize opportunity  

Automation & Adaption Information into action  

Anomaly detection & automated alerts   Business Process Improvement Adapt to changes in business

environment  

Better use of resources  

Table  10  -­‐  Summary  of  real-­‐time  BI  Benefits

Nevertheless, the bottom line seeks to assess whether the proposed investment offers adequate quantifiable value to justify the costs of the project. While it is true that BI is difficult to justify, given the nature of its benefits, such as improved quality of information, better decision-making and business knowledge, real-time BI is somewhat different. This is because real-time BI is a specialized form of BI, with benefits that are generally more defined and less ambiguous. This also implies that it may not be beneficial to every organization however, because not all require low latency data (Hackathorn, 2002, p. 8).

For this reason, it is critical to first identify high-level drivers for real-time BI, and then break that down into objectives and benefits. This will help to formulate the justification for its investment through the demonstration of credible business benefits. In doing so, a business case not only assists with obtaining funding, but it shows the types of changes that are needed in realizing the business benefits, gaining commitment, as well as allowing the success of the investment to be judged objectively (Ward et al., 2008).  

6.5  Discussion  of  the  User  in  a  Real-­‐time  BI  Environment  

To understand how the deployment of a real-time BI system affects its users, an assessment was conducted at strategic, tactical, and operational levels of the organization in order to