Is TCO Just Another Acronym?

Not in low margin industries!

TCO

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Total Cost of Ownership (TCO) is a key aspect to any large capital expenditure, and the business intelligence (BI) software industry is no different.  However, many evaluators of BI software seem to lose focus on total cost of ownership during the procurement process choosing to focus on upfront software acquisition cost.  I have always found this to be a curious phenomenon, in particular in low margin businesses (i.e. retailers, wholesalers, and logistics spending roughly 1% of their operational budget on information technology), because it is so important.  The reason this is curious to me, is low margin businesses must be able to do more with less in all aspects of their business to protect thin margins, and that includes BI.

The inevitable fallout of a typical low margin business selecting a BI solution based on upfront software acquisition cost is the following:

  1. Resource Constraints – low margin businesses do not have the luxury of hiring additional full-time equivalents to apply to net new BI projects.  They must make do with the resources they employ today.
  2. Complex Software Configurations – Open source or inexpensive BI solutions typically require expensive external resources with the know-how to work around complex configuration challenges
  3. Endless BI Projects – Nothing chokes a BI solution like a lengthy rollout.  If promises are made to the business and 12 months later they have not been delivered: the project will lose all credibility. 
  4. Shelfware – Limited resources, complex configurations, and lengthy rollouts create shelfware.

So what should a low margin business, like a retailer, do when evaluating a BI solution?

Total cost of ownership must be king in low margin businesses when choosing a BI platform.  Including the following critical capabilities:

  1. A Platform – A visualization tool will only get you so far.  Low margin businesses need a platform that allows the business to tap into multiple data sources, and see the whole story that lives within their data, not just a single source of data. 
  2. Quick Impactful Wins – In order to get more from less, BI rollouts must be quick and impactful.  Release #1 should be less than three months, and testing a theory with your BI platform should be possible in a couple days.
  3. Complex Use Cases Made Simple – If a complex use case, like retail omni-channel analytics, can be accomplished in a straightforward manner without complex configurations that only a few external resources know how to address, then you are on the right track. 
  4. FTE Count – How many Full Time Equivalent employees are required to keep a BI solution up and running?  If the answer is dozens of FTE’s you already know this is not a good solution for a low margin business with fewer resources to deploy.

The good news is quite a bit of analysis has already been done within the analyst community on BI platform ownership costs.  Qlik historically has scored quite well in all areas of total cost of ownership. It's one of the many reasons that Qlik is regularly adopted as the business intelligence platform of choice in low margin business like retailers, wholesalers and logistics organizations throughout the world.

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