In part one of our series we looked at some of problems that companies have with their data and reporting needs and how moving to cloud based reporting can solve for these. If you missed Part 1 you can check it out here.
Here in Part 2, I want to look at one of the important questions that businesses need to answer. The return on investment, or ROI. For many smaller companies, budgets are tight and keeping control of costs is key. So, spending money on moving reporting to a cloud based solution probably isn't at the top of the list because there isn't a perceived direct return on the investment, whereas spend in other areas is perceived to have a better return.
What I want to do here is demonstrate how moving to cloud based reporting is not only a good investment but can actually save money long term, without even focussing on the fact that businesses say that this type of solution heps them make better decisions or could empower their employees to drive sales. Both of which would be something that you could calculate afterwards, whereas I want to focus on an upfront benefit of moving to the cloud.
Audit your current reporting.
In order to understand the current cost of your spreadsheet based reporting its important to understand what reports your business currently has.
Over time the number of reports increases as new information is requested, or new ways of working are established.
To truly get a handle on what the current reporting in your business looks like you need to complete and audit. This audit is to establish what reports people make and use themselves, where that data comes from and what actions are meant to be taken from it. And whether your looking to change your reporting methods this is a useful task that should be completed anyway.
The areas that you should be asking are:
What reports do you personally create?
What is the purpose of each report?
What is the reporting frequency? (Daily, weekly, monthly, etc)
Where does the data come from?
How long do they take to create, check and send (assuming no errors)?
Do these reports frequently give errors?
How long do the errors take to fix?
This exercise will tell you lots of things about your current reporting and will help us calculate the return on an investment to move the reporting into the cloud.
If you would like a template for this process you can download it below. (Ironically this is creating another spreadsheet in your business).
Eliminating Duplicate Reports
Usually when I ask companies to answer the reporting audit the first thing that comes out is that many reports are actually duplicated. One department runs a report that looks exactly how they want it, whilst another uses the exact same information but lays it out differently.
Eliminating these duplicate reports can save time a report creator time whether you want to move to the cloud or not. This is just a good practice and something that can be easily avoided.
Report Creation Time
By using the Report Audit results it should be possible to have a clear understanding of time for creating each of the reports, something that for the most part would be eliminated by moving to the cloud.
If we assume that a company has 10 reports, covering sales reporting, financial reporting, marketing reporting, and operational reporting with frequencies ranging from daily through to monthly it’s quite possible that the audit would reveal results as below.
These 10 reports have a total of 46 hours per month to update. This is time copying, pasting waiting for spreadsheets to calculate, to open and checking that the calculations have worked correctly, before sending emails to the business.
Moving to the cloud will allow for automation of the update process, connecting directly to data sources and pulling the information in using a series of steps that can happen automatically in the background. This means no copy and paste, no waiting for the spreadsheet to calculate and no more worrying if the vlookups are still looking at the right columns.
Let's be honest though, moving the reporting to the cloud isn't going to eliminate all of this because there are still going to be some checks that are going to want to be done, some e-mails that are still going to want to be sent. But this time can be greatly reduced.
For the purpose of this example, I am going to assume that it is a 75% reduction in report creation time.
I am also going to put a cost to these hours of €30 (which isn't just made up of the salary costs, but additional taxes and benefits that a business would offer employees). I appreciate that for some people updating reports this number will be too high, as they cost a business less. but for others, who could be much more senior, this number could be too low, but I want to pick a realistic value that can provide us with a sensible ROI at the end.
This would mean the following:
Original hours spent updating reports: 46 per month
Time saved on updating reports: 34.5 per month
Total money saved: €1,035 per month
Reducing the time spend updating and distributing reports though automating the report updating process, can save a business €12,420 per year.
Time spent fixing errors
As we explored through the first part error fixing is one of those things happens more and more as reports evolve in and organisation and that time is unaccounted for in the report update process as they don't happen consistently.
Putting a time to the fixing report errors is difficult as there are many factors that can cause errors and varying amounts of time that they will then take to fix. Some errors are simple to fix, others are more difficult.
Moving to cloud-based reporting allows for automation of processes, which means that there is less human interaction and therefore less human error. The automation involved in the report creation process will mean that data can be pulled from systems directly, processed and visualised automatically.
For the purpose of this, let's assume that there is an extra day per month spent fixing reports and getting them back up and running. As above, we cannot assume that there won't be problems in the cloud. There is always the possibility that things need to be fixed, no matter how much automation and programming is done. So, let's assume that this time can also be reduced by 75% per month.
This would mean the following:
Original Error fixing time: 8 hours
Time saved on error fixing: 6 hours
Total money saved: €180 per month
Therefore, reducing the number of errors and the time spent fixing them through process automation would save the business an additional €2,160 per year.
Future report changes
It’s also fair to say that during the year there are changes made to the design of the reports. Changes in your business will determine changes or enhancements that need to be made to a layout or process.
There is obviously time that needs to be allocated to this calculation but as above, can be difficult to put a number to. I am going to assume that across all of the reports there is a total of a day per report in changes that are requested by the business.
This would mean the following:
Time spent updating reports: 80 hours
Total money saved: €2,400 per year
This time saving isn't really a saving, it’s just a transfer of spend from one area to another. Your business will continue to evolve and continue to require additional changes to the reports, which will need to be accounted for in forthcoming years as the reports sit in the cloud.
Better visualisation and interactivity
Humans are visual, with more than 80% of the information we take in being visual. Therefore, how we display data on reports is important. The use of chart types, styles and colours all play a role in how people consume data and how they are able to interpret what is being displayed.
Whilst Excel can provide some good charting options, getting a good-looking dashboard in Excel can be challenging and therefore something that isn't focussed on. Whereas cloud-based business intelligence tools are all geared towards good visualisation that can be interacted with easily.
We cannot underestimate the importance of interactivity in this process. In a world where we are used to tapping on screens and pressing buttons to interact with the world around us there is an expectation that reports should be able to do the same.
There is a tangible benefit to this, although difficult to quantify. It’s possible that a set of users, who spend ten minutes per day looking at reports, could reduce this to five minutes per day if they could understand the reports faster and get to the information they need quicker. Its also possible that they will spend the same 10 mins looking through the reports but be able to extract more knowledge then they had previously.
As a senior manager, salesperson, marketing executive or supply chain manager, accessing data as and when you need it is important. If you’re in a customer meeting, or in the warehouse, you don’t want to have to get your laptop out, boot it up and access the large excel file that will tell you the information that you need at your fingertips.
Being able to access the right data in the right place at the right time can be a real enabler for all levels of the business. It also makes it more likely that they will actually use the reports. I know from experience that people won’t want to open their laptop to take a look at a report to check a number, but they will get out their phone to do the same.
Putting an actual value to this is difficult, but this level of access to reports will help your organisation be more data driven and aid decision making.
The implementation costs
So far, we have put a monetary benefit to some of the benefits that moving to a cloud based reporting solution will bring to your organisation. But this is only one side of the coin, and we need to consider how much moving to a cloud-based solution will cost your business.
Here, I have broken this down into two parts, the build, i.e. the cost of outsourcing the creation of the reports in a cloud BI solution, and the ongoing licencing of this.
Build the reports
At Sontai we build cloud-based reporting using Power BI and we put as much of the control as possible into the hands of our customers. So, if the customer is asking for functionality that is complicated and time consuming, we will advise as to alternatives to achieve the same result that will ultimately be cheaper for the customer. Additionally, as every project is unique it’s hard to put a price onto a project from the outset.
That said, there are some considerations that we can apply to get a better understanding of a project cost. For example, the more data inputs there are, the longer they will take to connect, process, and align. The more metrics that are required the longer they will take to create. The more report layouts there are the longer they will take to make. All the time taken to create will have an impact on the overall cost.
For the purpose of this I am going to assume a build cost of €15,000, which would deliver final reports to a business. Whilst this number is obviously fictional, but it is based on real world scenarios for this type of work.
The other part of the overheads that we need to include is the licencing. As mentioned above, at Sontai we use Power BI to create reporting solutions for our clients. The model for Power BI is simple, where organisations with more than one person (who would be able to use Power BI for free) would need a ‘Pro’ licence, which at the time of writing is €8.50 per user per month. Costs for other tools will vary, but will explore this later in the series.
For our example here let’s assume that we need 20 licences which would equate as follows:
Monthly Licence Costs: 20 x €8.50 = €180
Annual Licence Costs: 20 x €8.50 = €2,040 per year
As I mentioned above, businesses evolve over time and their reports will need to be updated in line with these changes. This is going to be the same whether the reports are cloud based or not. They should still be updated sporadically to ensure they are relevant to the business.
In the first year of the report transition its unlikely that there are going to need to be changes as the reports will be built and aligned to the company’s current strategy and requirements. However, in subsequent years it should be assumed that there are changes applied to the reports and there would be a cost associated with that.
Above, we assumed that over the course of a year there would be around 80 hours spent tweaking reports, which was estimated at a cost of €2,400.
To keep the example simple, I am going to assume that this value would be the same in years two and three, as the same amount of time could be being spent tweaking the reports.
If we bring all of this together, we can really start to understand what the actual return on this investment looks like.
From this example the Year 1 savings are around the costs of the new implementation. But the true savings are realised in years two and three, where the time spent updating and fixing the reports really comes into its own. Meaning that over the course of the first three years there can be a potential saving of €25K. Moreover, this doesn't include some of the other benefits that haven't been monetised.
With a saving of €25k over three years this is a large amount of money for any small business to save. Even if you don’t agree with some of my assumptions in the calculation there is still a saving over the three years if the build cost of the cloud-based solution doubled in price. This demonstrates the value that can be achieved by moving your reporting to a cloud-based solution.
From experience, I have seen report audits return 30 reports with some reports taking hours per day to update. For these people there are real savings in terms of time, and I have seen companies pull back from recruitment as they thought their staff were at capacity and unable to get to other value adding tasks.
If your business doesn't ahve as many reports, with a limited numer of inputs then bear in mind that the potential savings would be smaller but so too would the cost to build the reports in the cloud.
If you are thinking that the reports in your business need to be looked at and moved to a cloud based alternative, then talk to Sontai about how we can help support you on that journey.
In part 3 of our 'Cutting the Cord' sereis we are going to look more detail at keeping your data secure in the cloud.