The Data Warehouse Development Life Cycle
Economic Feasibility
COMPUTING RETURN ON INVESTMENT (ROI)
To illustrate how costs and benefits are quantified and discounted
for a data warehouse project, let’s consider
the data warehouse project estimates for Project alpha. Table 2.1
shows Project alpha’s costs, and Table 2.2 shows Project alpha’s
tangible and intangible benefits.
Cost
Amount Time Frame
Ongoing Costs
Cost of analysis and design team
$40,000/month
Immediate
Costs of programming team
$60,000/month 6 Months
One-Time Costs
Cost of CPU and DASD
$15,000,000 10 months
Costs for data extraction and loading
$10,000,000 12 months
Costs for client hardware/software
$10,000,000 15 months
Table 2.1 Project alpha’s costs.
Benefits
Amount Time Frame
Tangible
Reduced direct mail costs
$3,000,000/year 24 months
Reduced inventory costs
$2,000,000/year 24 months
Intangible
Improved quality of information
unknown 24 months
Improved response time to market changes
unknown 24 months
Table 2.2 Project
alpha’s benefits.
The first thing to note is that Project alpha’s costs
and benefits do not occur within the same spans of time. In order to
compare apples with apples, both the costs and the benefits in the
project need to be expressed in net present value dollars. This
involves discounting the cashflows according to the opportunity cost
that the company possesses. Not all opportunity costs are the same.
A securities investment firm that commonly realizes a 24 percent
return on investments will have a much higher opportunity costs than
a conservative organization that realizes an average 12 percent
return on investment.
This is an excerpt from "High Performance
Data Warehousing", copyright 1997.
 |
If you like Oracle tuning, you may enjoy the book
Oracle Tuning: The Definitive Reference , with over 900 pages of BC's favorite tuning
tips & scripts.
You can buy it directly from the publisher and save 30%, and get
instant access to the code depot of Oracle tuning scripts. |
and include the URL for the page.
