A recent news release reported a 2,000% ROI resulting from a Data Quality Center of Excellence. How did Richard Trapp pull off this amazing feat? His answer caught me off guard when I asked him; “I never talk about data quality.” Pardon me? Isn’t that what you do? Richard’s response is that “Business people are not excited about good data quality. Business people are excited about good marketing, increased sales, supply chain efficiencies, and reduced order-to-cash cycles.”
By the way, you can meet Richard at the upcoming GIS. Visit www.globalintegrationsummit.com for more information about the event and how you too can learn to create compelling business cases. In the meantime, here are two secrets for how he did it.
The first secret for a 2,000% ROI is to speak in the language of your customer. In the case of the DQ COE, the customers are business leaders so it is critical to speak in the language of their function and to translate technical activities into the universal business language – money. As IT professionals we need to spend less time talking about “how” we do our work and more time talking about “what” the outcomes are in business terms.
The second secret for developing compelling business cases (that get approved that is) is to do the math. In other words, do the hard work to translate qualitative benefits into measurable business results. “Better, faster, cheaper” sounds great – but if you can’t measure it then you can’t manage it and you are in effect asking management for approval on faith.
For example, as a business executive, which of the following proposal summaries would give you greater confidence?
- This project will improve the Product & Account Architecture, covering business strategy, business architecture, and technical architecture for optimal product sales and fulfillment, service enrollment and fulfillment, account closing/service discontinuation, account/service change, and selected account transactions.
- The cost for this project is $10.3M with annual savings of $12.5M resulting in a 10-month payback. The Net Present Value over the next three years is $37.6M which represents a return on investment of 33%. In addition to the hard benefits, this project will increase customer satisfaction, improve data accuracy and enhance compliance enforcement.
Note that in the first example, the author felt the architecture was an essential enabler – and I’m sure it is. The problem is that business executives don’t care about architecture. It also talks about “improving” and “optimizing”, which doesn’t say anything useful and could be applicable to any boilerplate proposal.
At a conceptual level, we all know how to build solid business cases; translate the costs and benefits into quantifiable terms, project the benefits based on an analytical model, and bring future dollars to the present using time value of money calculations. Even a 2,000% ROI is not that difficult. Most of us don’t go to the trouble of doing the math to calculate the benefit of some of the efficiencies we drive every day.
Let me provide a simple example. Let’s say that your company does several dozen projects per year that have a similar pattern of data extraction and transformation (some companies have hundreds of integration projects per year, so two dozen is not a big number). Furthermore, let’s say that by investing one month of time (160 hours at $80/hour = $12.8K) you can create a re-useable process that will save each project 40 hours (at $80/hour this comes to $3.2K per project x 24 = $76.8K per year).
If you project the savings out over five years, the Net Present Value formula in Excel using a 10% discount rate looks like this:
=NPV(.1,-12800,76800,76800,76800,76800,76800) = $253,029
If you divide the Net Present Value by the original investment of $12.8K the ROI is 1,977%. Voila!
The 2000% ROI that Richard Trapp delivered at Avaya through the Data Quality COE is real. While this might be a bit of an extreme case, these kinds of benefits are not out of line. We just need to put the effort into doing the math and advertising it.
The reality in today’s world is that integration practitioners need to be equipped with business skills. To learn some of these skills, I suggest you attend the www.GlobalIntegrationSummit.com and get the straight scoop from Richard’s presentation. Even better, you should attend my pre-summit workshop on June 2nd where I will be spending a good part of the day on a methodology and tools for developing compelling business cases for COE’s, ICC’s or any kind of shared infrastructure investment. If you’re interested, you can learn more and sign up at www.globalintegrationsummit.com/Pre-Summit_Workshops.