individual-entry-BA-Blog

« Enterprise Decision Management and Alerts | Main | How do you write a set of requirements that don't encode any business rules? »

Calculating the potential ROI of business rules

David Linthicum wrote a great article in ebizQ earlier this year - The ROI of Your SOA. In it he gives a mechanism for assessing the value of agility:

Agility is a strategic advantage that is difficult to measure in hard dollars, but not impossible. We first need to determine a few things about the business, including:

    • The degree of change over time.
    • The ability to adapt to change.
    • Relative value of change.

The degree of change over time is really the number of times over a particular period that the business reinvents itself to adapt to a market. Thus, why a paper production company may only have a degree of change of 5 percent over a 5 year period, a high technology company may have an 80 percent change over the same period.

The ability to adapt to change is a number that states the company’s ability to react to the need for change over time. The notion being that the use of an SOA provides a better ability to change IT to adjust to needed changes in the business.

Finally, the relative value of change is the amount of money made as a direct result of changing the business. For instance, a retail organization’s ability to establish a frequent buyer program to react to changing market expectations, and the resulting increases in revenue from making that change.

Determining an SOA’s ROI is not an exact science, but with some analysis and some realistic data points, you can figure out how much value your SOA implementation has brought you, or will bring you. Again, we need to cost justify the use of this approach and technologies, and the information presented here should help you along the road to creating your own business case.

Now this struck me as great way, also, to measure the potential ROI of a business rules approach. David's "formula" works almost exactly the same for business rules as it does for SOA with a few minor changes:

The degree of change over time is really the number of times over a particular period that the business reinvents itself to adapt to a market or that the regulations with which it must comply are changed.

Regulatory compliance is a big deal for business rules and it is the changes in regulation that often drive the need to change the rules.

The ability to adapt to change is a number that states the company’s ability to react to the need for change over time.

Don't think this needs any change - a truism for any business rules user is that the company must be able to change at a pace faster than the non-rules enabled systems can sustain, otherwise there is little value to using business rules to enabled faster system change.

Finally, the relative value of change is the amount of money made as a direct result of changing the business or lost as a result of failing to change.

This extension is probably implicit in David's assessment but is worth calling out for business rules. As noted compliance is important and one of the reasons it is important is the potential for being fined. A life insurance company that uses business rules to ensure compliance with state regulations regarding funds switching, for instance, is avoid fines by staying up to date. Likewise statutes like the BASEL II accords impose costs on those that fail to comply even when they don't impose fines. Ensuring your systems can stay up with changes helps avoid those costs.

So David's formula is useful not just for an SOA, but also for a business rules approach (with a few modifications) when assessing the ROI of agility.

First time on the EDM blog?
Subscribe to the EDM blog feed or check out some other recent posts:

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451629b69e200d8355538aa69e2

Listed below are links to weblogs that reference Calculating the potential ROI of business rules:

Comments

The comments to this entry are closed.

Search Site


  • dmblog.fico.com

Subscribe

  • enter your email

Upcoming Events

  • FICO Tools & Analytics User Forum 2012
    BERLIN: September 11-12, 2012 LONDON: September 18-19, 2012 Gain new insights for improving business performance through advanced analytics and decision management tools.