Clearly binding the roi specific business requirements

Applying “Big-Bang” ROI. Just as the implementation of the ware- house as a single, gigantic effort is destined to fail, so too is calculat- ing the ROI for an enterprisewide initiative. What is amazing is that planners continue making feeble attempts at estimating the value of the entire effort. Why would planners attempt to put a dollar value on the enterprise initiative if it is widely known and accepted that estimating specific iterations is difficult? How is that possible? With few exceptions, it isn’t. Don’t do it.

Now that we have established what not to do when calculating ROI, here are some pointers that will help in establishing a reliable process for esti-mating the value of your BI efforts:

Reduce costs and benefits into today’s dollars. It is best to make your estimates based on net present value (NPV) as opposed to attempting to predict future value in future dollars.

The problems listed are the most common ones experienced in the ware-house arena. The insistence by some management that we provide a “Big-Bang” ROI is most mystifying. If you start all your ROI calculations by reducing them into identifiable, tangible parts, you have a good chance at providing an accurate ROI estimate.

Questions for ROI Benefits

■■ What has been the impact of newer and more effective computer environments as a result of what was learned?

If answers to these questions are low, the undertaking may not be worth the investment made. Questions with a high score point to significant value gains and should serve as guides for further investigation. For exam-ple, a high score for process improvements should lead planners to exam-ine how the processes were improved. You may find that some or all of the improvement gains are tangible and therefore a dollar value can readily be applied.