TCO + ROI - crunching the numbers, so you don't have to!

Hello,

Welcome to the next comparison of data tools! I'll be happy to assist you in finding the best BI tool for your company needs with some fictional, but based on real-life experience case study.

Company Overview: DataVision Inc.

Industry: Retail

Size: Large-scale enterprise with over 1,500 employees

Market Presence: DataVision Inc. is a prominent retail company with a strong online and physical store presence across the country. Known for its wide range of products and customer-centric approach, the company has been growing steadily over the past decade.

Challenges Faced by DataVision Inc.

1. Data Overload: With its expansive operations, DataVision Inc. is grappling with vast amounts of data generated from various sources, including online sales, in-store transactions, customer feedback, supply chain logistics, and marketing campaigns. The sheer volume and complexity of this data have made it challenging to process and analyze efficiently.

2. Siloed Information Systems: Different departments within DataVision Inc. use varied systems and tools to record and manage data. This has led to siloed information, making it difficult to gain a unified view of the business operations and impacting decision-making processes.

3. Inefficient Inventory Management: Fluctuating market demands and a lack of real-time data analysis have resulted in inventory mismanagement. This has led to either overstocking or stockouts, affecting sales and customer satisfaction.

4. Inadequate Sales Forecasting and Marketing Strategies: The inability to effectively analyze past sales data and market trends is hampering the company’s ability to forecast future sales accurately and devise effective marketing strategies.

Objectives of DataVision Inc.

1. Enhanced Data Analysis and Reporting: To implement a robust Business Intelligence (BI) solution that can consolidate data from various sources, providing actionable insights through advanced analytics and real-time reporting.

2. Improved Inventory Management: To leverage predictive analytics for efficient inventory management, aligning stock levels with market demand, and reducing instances of overstocking or stock shortages.

3. Data-Driven Decision Making: To enable data-driven decision-making across all levels of the organization, fostering a culture that bases strategic decisions on data insights rather than intuition.

4. Increased Sales and Customer Satisfaction: To use data insights to enhance customer experience, tailor marketing efforts, and improve sales forecasting, thereby driving sales growth and customer loyalty.

5. Scalability and User Accessibility: To adopt a BI solution that is not only scalable as the company grows but also accessible to different user groups within the organization, including those without technical expertise.

Approach

DataVision Inc. is evaluating three leading Business Intelligence tools - Qlik, Tableau, and Power BI - to address these challenges and achieve its objectives. The company plans to conduct a thorough analysis of the Return on Investment (ROI) and Total Cost of Ownership (TCO) for each tool to determine the most suitable solution for its needs.

1. Qlik: ROI & TCO Analysis

Initial Setup

1. Software Cost:Capacity Model License: $2,700/month for 10 Power users and unlimited recipients.
2. Annual Software Cost: $2,700/month * 12 months = $32,400

Implementation Costs

• Similar to previous analysis.

1. Training: $10,000
2. Integration & Setup: $15,000

Running Costs

1. Maintenance & Updates: Included in the monthly fee
2. Additional Support: $5,000/year

Total Cost of Ownership (TCO) for Year 1

• $32,400 + $10,000 + $15,000 + $5,000 = $62,400

2. Tableau: ROI & TCO Analysis

Initial Setup

1. Software Cost:Tableau Creator (Expert): Assuming premium pricing, let's say $70/user/month for 10 users.Tableau Viewer: $15/user/month for 400 recipients.
2. Annual Software Cost:Tableau Creator: $70/user/month 10 users 12 months = $8,400Tableau Viewer: $15/user/month 400 users 12 months = $72,000Total: $8,400 + $72,000 = $80,400

Implementation Costs

• Similar to previous analyses.

1. Training: $10,000
2. Integration & Setup: $15,000

Running Costs

1. Maintenance & Updates: Included in the monthly fee
2. Additional Support: $5,000/year

Total Cost of Ownership (TCO) for Year 1

• $80,400 + $10,000 + $15,000 + $5,000 = $110,400

3. Power BI Premium Per Capacity

Initial Setup

1. Software Cost: Power BI Premium Per Capacity (assuming a suitable tier for 410 users).
2. Cost Estimate: Let's approximate a cost, considering the large number of users and data requirements. For the sake of this analysis, we'll assume a monthly cost of $5,000 (as an estimated figure for a mid-tier capacity plan).

Implementation Costs

1. Training: $10,000 (considering a large group of users).
2. Integration & Setup: $15,000.

Running Costs

1. Maintenance & Updates: Included in Power BI Premium Per Capacity.
2. Additional Support and Storage Costs: $10,000/year (estimated).

Total Cost of Ownership (TCO) for Year 1

• Software Cost + Training + Integration & Setup + Additional Support and Storage.
• $5,000/month * 12 months + $10,000 + $15,000 + $10,000 = $90,000.

ROI Analysis for Business Intelligence Tools

DataVision Inc., a large-scale retail enterprise, is evaluating three leading Business Intelligence (BI) tools - Power BI Premium Per Capacity, Qlik, and Tableau. The company aims to enhance its data analysis capabilities, improve inventory management, and drive data-driven decision-making. With an annual revenue of $20 million and annual inventory costs of $2 million, DataVision Inc. is anticipating the following benefits from implementing a BI tool:

• Increased Sales: Expected to rise by 12% due to improved data-driven decision-making, resulting in an additional $2.4 million.
• Cost Savings: Anticipating a 20% reduction in inventory costs, amounting to $400,000.
• Total Benefits: An estimated increase of $2.8 million.

ROI Formula

ROI is calculated using the formula:

This formula gives the ROI as a percentage, which represents the return on every dollar invested.

Assumed Benefits for ROI Calculation

• Increased Sales: We assumed a 12% increase in sales due to improved data-driven decision-making, which for a company with an annual revenue of $20 million results in additional revenue of $2.4 million (12% of $20 million).
• Cost Savings: We anticipated a 20% reduction in inventory costs, which for annual inventory costs of $2 million translates to savings of $400,000 (20% of $2 million).
• Total Benefits: The sum of the increased sales and cost savings, equating to $2.4 million + $400,000 = $2.8 million.

Calculation of ROI for Each Tool

For each BI tool, we calculated the ROI using its specific Total Cost of Ownership (TCO) for the first year and the total benefits derived from implementing the tool.

ROI Calculation for Each Tool

Power BI Premium Per Capacity

• Total Cost of Ownership (TCO) for Year 1: $90,000.
• ROI Calculation: ROI = ($2.8 million - $90,000) / $90,000 x 100
• ROI: Approximately 3011%.

Qlik

• Total Cost of Ownership (TCO) for Year 1: $62,400.
• ROI Calculation: ROI = ($2.8 million - $62,400) / $62,400 x 100
• ROI: Approximately 4387%.

Tableau

• Total Cost of Ownership (TCO) for Year 1: $110,400.
• ROI Calculation: ROI = ($2.8 million - $110,400) / $110,400 x 100
• ROI: Approximately 2436%.

Analysis

• Power BI Premium Per Capacity emerges as a highly cost-effective option for large-scale deployments, showing a significant ROI of about 3011%. This plan is especially beneficial for scenarios where a large number of users need access to BI capabilities.
• Qlik leads with the highest ROI of approximately 4387%, reflecting the efficiency of its capacity model for catering to both power users and recipients.
• Tableau, known for its advanced data visualization features, shows a robust ROI of about 2436%. It stands as a strong contender for businesses that prioritize detailed and comprehensive data analysis.

Conclusion

Each tool offers considerable returns, and the choice should be based on specific business requirements, scale of users, and budget constraints.

The capacity pricing seems to be the future of the industry and both Qlik and Power BI are investing heavily in this type of licensing.

I know crunching fictional numbers is risky, but how do you like it? Is it helpful? Or maybe you have different methods on deciding which technology choose?

Please like, comment and share the article if you liked it - or let me know in the comment what you don't agree with, I'll be happy to chat! ??