Economic Feasibility Tangible Oracle Tips by Burleson Consulting

The Data Warehouse Development Life Cycle

The Feasibility Study

Economic Feasibility

A tangible benefit is a benefit that can be accurately measured. For example, a data warehouse that allows for more direct targeting of promotional mailings could be said to have a tangible benefit of reducing mailing costs by $300,000 per year.

An intangible benefit is recognized as a value that clearly exists but is not quantifiable. For example, goodwill is often listed as an intangible benefit. A company may have achieved a loyal customer base due to goodwill. Customer loyalty translates directly to increased sales, but goodwill remains intangible because goodwill sales can not accurately be separated from total sales. According to generally accepted accounting principles, an intangible benefit becomes tangible only when a dollar amount can be fixed to the benefit. For example, let’s say that a business with an intangible benefit of goodwill is sold for an amount greater than the value of the company’s property, plant, and equipment. If the property, plant and equipment of the company is only valued at, say, $30 million, yet a buyer is willing to pay $40 million, the accountant must assume that the $10 million dollar difference is due to the intangible benefit of goodwill. At this point, goodwill becomes a tangible benefit because a precise dollar amount has been assigned to it. The point is, intangible benefits are very real, and they should not be ignored even though it is difficult to place a dollar amount on the benefit. Other examples of intangible benefits include:

* Worker productivity

* Quantity of information

* Confidence in management

* Fast delivery of information/products

* High quality of information/products

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This is an excerpt from "High Performance Data Warehousing", copyright 1997.

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