Vendor TCO Is High—But Is the Problem the Products or Your People?

Organizations continue to have a generally negative perception about the total cost of ownership (TCO) of BI-related products and solutions. Nearly one-half of organizations believe the TCO of their selected tools is above or well above the average TCO in the industry, while only a small minority consider their TCO below average. Data leaders and their teams need to understand why their TCO is higher than anticipated—and recognize that the underpinning reasons may go beyond the characteristics of their chosen tools and vendors.

Notably, perceptions about TCO are not consistent across most organizations, with some business functions seeing greater TCO challenges than others. Data leaders and their teams, as well as Business Intelligence Competency Centers (BICCs) and the IT function in general, tend to have a more negative view of TCO. This is likely because these teams deal with the problems—such as support issues, version upgrades, users with unrealistic expectations, and misguided project teams stretching tools beyond their capabilities.

As such, data leaders should look more deeply than just a cursory, cross-organization single perspective on TCO. Analyzing TCO perceptions and the drivers behind them in individual business functions, initiatives, and geographies, will provide a much clearer picture of where the opportunities may lie to reduce TCO or realign expectations. Most critically, data leaders should consider factors related to but beyond the specifics of the tools themselves.

Although data leaders need to start by gaining a solid understanding of the factors influencing TCO, doing so with a broad perspective is key. Are TCO issues really the fault of the tools themselves, or might the tools and vendors be taking the blame for other challenges? For example, people in the organization may not use the right tools for the job (such as applying spreadsheets when more sophisticated tools are needed), or they may lack skills and therefore demand greater ease of use than the tools allow. Data leaders can orient their teams through identifying the influencing factors that may inflate TCO perceptions.

With a clear understanding of influencing factors, data leaders can decide specific actions to take to control and reduce the TCO of BI-related tools and solutions. But they must be wary of the obvious knee-jerk reaction—cutting budget for BI in general in the face of high TCO. This is likely to make TCO perception even worse because with less funding, skills, and literacy, optimal tool selection and other concerns are likely to fall further behind where they need to be.

Instead, taking a broader view of TCO reduction will lead to more favorable results. For example, investing in improvements to the capabilities of people and the supporting environment can have a big impact. Increasing user skills via better training, providing guidance to project teams on optimally matching tools to requirements, or expanding data literacy can enable improved TCO perceptions. Expanding supporting capabilities, such as data cataloging to improve ease of navigating to and understanding data and analytic content, also will make the tools more effective and therefore yield improved TCO perceptions.

Data leaders should also consider vendor- and tool-specific factors that may significantly influence TCO. For example, many organizations have an opportunity to shift from traditional perpetual licensing models to subscription models, which provide the opportunity to better optimize costs and improve deployment flexibility, thereby reducing TCO. Organizations already using subscription licensing models may have opportunities to lower costs by reducing use of more advanced BI tools when simpler solutions (such as spreadsheets) can satisfactorily tackle the problem at hand.

In addition, data leaders can leverage actions and controls they have applied to mitigate risk of potential vendor M&A impact (see the Research Insight “Data Leaders Should Own Early Warning and Preparation Regarding Vendor M&A”). Examples of this include building cost limits into vendor contracts or engaging a portfolio of vendors with a range of TCO (rather than a single vendor).

After determining the most impactful actions that can reduce TCO or improve TCO perceptions, data leaders can begin to put these actions in place. Most effective will be a combination of actions focused on specific tools and vendors, as well as improving the ability of people to leverage the tools most effectively. Ongoing monitoring of TCO and TCO perceptions is key—far too many organizations track TCO purely in an ad-hoc and subjective way. Measuring TCO and the impact of the specific actions implemented lays a foundation for ongoing TCO optimization.

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