July 26, 2002

Point of Return

Justifying BI projects is much easier when you can clearly link expense with return

by Sudhi Sinha

Imagine that you're a CIO of a global conglomerate facing a tough choice: Spend money to upgrade your Web infrastructure to host a new e-hub, or invest in a business intelligence (BI) solution that recommends optimal inventory for your stores. Both projects are critical for business growth. What are the parameters upon which you should base your decision?

Managing expenses and justifying returns is now one of the greatest challenges facing any IT manager. At the same time, with increasing globalization and competition and decreasing turnaround times, BI projects are gaining popularity. Because the traditional management view is that such projects are only an extension to existing IT infrastructure, IT managers are often under greater pressure to justify their BI project budgets in concise and quantifiable terms.

Many statistical techniques that address return on investment calculations for systems projects can be extended to BI projects. Similarly, project management tools can help you control cost and capital expenditure. But for all these tools and techniques to work, you must determine two magical figures before the formulas can be applied: development and implementation estimates and ultimate financial benefit.

In the course of most BI projects, expense and benefit aren't audited simultaneously; a mapping between the two rarely occurs. However, with increased pressure on the dollar, a clear link between expense and return must be established. Thus, a modeling technique that can help you link them is of great value.

The Zachman Paradigm

In a 1987 paper for IBM Systems Journal (Vol. 6 No. 3), John Zachman proposed his now famous Framework for Information Systems Architecture. The Zachman framework is a very useful tool for data modeling. Since its introduction, the framework has been adapted for many areas of IT application, including the design of data warehouses and BI solutions.

The framework recognizes the different representation layers of an iterative design process influenced by the needs of those participating in the project. It addresses different points of design such as data, function, network, people, time, and motivation with respect to the different layers — contextual, conceptual, logical, structural, physical, and functional — that stratify the life-cycle process of a project.

This framework is also an excellent tool for managing a BI project. Because expense and return are by-products of thoughts and actions, it should be possible to model them on the lines of thought and action. This philosophy is the guiding principle behind the return expense modeling (REM) framework. In combination, the Zachman and REM frameworks give you the capability to influence design and development based on financial considerations.

In the Zachman framework, design elements are represented in vertical columns, and the layers of the architecture are depicted in rows. (See Table 1.) Every project begins with a simple thought to improve some existing process or create new opportunities. As the idea is expanded, details are added to the initial thought so that a plan of action and supporting infrastructure can be built to realize the idea or thought. The Zachman framework captures this growth of thought and details. The REM framework, in contrast, is geared toward maintaining the integrity of this growth process.

The layers in the REM framework reflect phases of return or expense. At the core of any project initiative is an expectation of return; thus, the three upper layers in the Zachman framework map to the return expectations of the REM framework. The Zachman framework also identifies these three layers as defining the concept before any actual physical build takes place. The next three layers of the framework are used to outline the components of expense, which it uses to define the actions leading to the physical build of a solution. (See Table 2.)

The columns of the REM framework characterize the tools with which you can manipulate expense and return factors. The columns are categorized into three groups: elements, control, and reflection.

• The elements column contains the items that are actively involved in the return-expense equation and have a direct impact on the equation's output. The effectiveness and efficiency of a solution is determined by the functions performed by it (how), the network it's built upon (where), and the people using it (who). The corresponding columns Function, Network, and People of the Zachman framework map to the Element columns of the REM framework.
• The Control column contains items that determine the motivations and modalities of return and expense. This column manifests why something is being done differently in the form of a new solution. It maps to the Motivation (why) column of the Zachman framework.
• The Reflection column holds the items that provide feedback on modalities and motivations. Such feedback is usually qualified by some data with respect to a time frame. (For example, a credit card company's decision to lower prices to boost sales will be reflected in terms of revenue over a certain expected time frame.) These columns serve the purpose of proving the hypothesis made by the Control or Motivation column and stating what exactly is being done and when to serve the requirements of the solution, and, therefore, the expense and return associated with the solution. The Data (what) and Time (when) columns of the Zachman framework map to Reflection columns of REM framework.

The Contextual layer is a transcription of the perceptual requirements in which a necessity is stated and defined, and an idea for a solution is initiated to serve the stated necessities. At this stage, the scope for any return expectations from the proposed endeavor is delineated. The Motivation column in the Contextual layer contains the list of business goals, business drivers, and business questions that the proposed solution needs to address and the information needs required to answer those business questions. All these factors define the scope.

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