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Profit Driven Business Analytics by Cristian Bravo, Bart Baesens, Wouter Verbeke

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CHAPTER 7Economic Impact

INTRODUCTION

The investment in big data and analytics entails various economic challenges, which we address in this chapter. First we elaborate on the economic value of both technologies by zooming into the total cost of ownership (TCO) and return on investment (ROI). It will be clear that in the current setting it is difficult to accurately quantify these two key investments. Next, we review key economic considerations such as in-sourcing versus outsourcing, on-premise versus in the cloud, and open-source versus commercial software solutions. Obviously, selecting from among these options should be done with due diligence given the impact thereof on the TCO and ROI. The chapter concludes by giving some recommendations about how to improve the ROI by considering new sources of data, improving data quality, involving senior management, choosing the right organization format, and establishing cross-fertilization between business units.

ECONOMIC VALUE OF BIG DATA AND ANALYTICS

Total Cost of Ownership (TCO)

The total cost of ownership (TCO) of an analytical model refers to the cost of owning and operating the analytical model over its expected lifetime, from inception to retirement. It should consider both quantitative and qualitative costs and is a key input to make strategic decisions about how to optimally invest in analytics. The costs involved can be decomposed into acquisition costs, ownership and operation costs, and post-ownership costs, as illustrated ...

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