Cost Analysis

Cost Analysis

IBM Watson Analytics has three options when purchasing for use.  These options are “free”, “personal”, and “professional” (IBM, 2015).  Given our business use of IBM Watson Analytics, we will be using Watson for the professional pricing option at a monthly cost of $80.00.  This option permits multiple users to utilize the service monthly and provides 10,000,000 rows per data set, 500 columns per data set, and 100 GB of storage. (IBM, 2015) We suggest having multiple departments utilize IBM Watson Analytics to increase performance and review.  To initially implement IBM Watson Analytics Professional at IVK, it is recommended to purchase the allotment of five initial authorized users at the default storage amount of 100GB.  This permits managers of five IVK departments to test out Watson Analytics prior to introducing to all employees, allowing for potential issues to be identified early on.  Having five authorized users increases the price to $880.00 (IBM, 2015). After the original team implements the analytics into daily processes, the remaining 5 departments can come on board to implement analytics into their department.  Having 10 authorized users, one for each department, increases the price to $1760.00(IBM, 2015).

Variable Costs

The estimated pricing for Watson Analytics may fluctuate per the amount of storage needed. The base amount of 100 GB will be initially used; however if additional storage is required, it will increase the price by $50 for every 50GB increase (IBM, 2015).  Variable costs should include utilities, and materials used.  Given IVT is an established companies, these figures will remain unchanged, other than the salary bonus.

 To initially implement and support the system, it will cost $400.00 monthly for the software at the rate of five employees being able to access the software.  This expense will increase as more departments and individuals start to utilize IBM Watson Analytics.  The financial bonus for the employee point-person will depend on the individual's job position, however given the median bonus by job within the IT industry, the bonus is anticipated to be approximately $4,000, as shown below in the PayScale chart.  (Payscale.com, 2015).

Fixed Costs

Given IVK is already established, rent and machinery costs will be unchanged; however these expenses should be listed under fixed costs for any company.  Because Watson Analytics is SaaS, there is no shipping or installation fees.  Support is provided for free through an online Watson Analytics Community that includes 24/7 live discussions and the Client Success Portal offer live chat 24/7 as well as a ticket service (IBM, 2015, "Support").  Premium support subscriptions are available (IBM, 2015, "Support"), but pricing is not provided on the Watson Analytics Support webpage.

The costs associated with implementing Watson Analytics into IVK are shown above in the cost chart.  This chart displays the monthly cost, which is broken down into initial monthly cost, 4 months, 8 months, 1 year, and 2 years.  This chart also shows the initial fixed salary bonus.

Another way to view this information is through the chart above.  When looking at the same information in this chart, you can easily see that the cost is a very cost-effective investment for IVK. 

ROI

Companies who implement IBM Watson Analytics have reported high success.  Among the advantages are an increased in client retention by 26% after introducing IBM Watson Analytics (IBM, 2014).  Watson Analytics assisted companies in understanding reasons behind clients' departure.  After their discovery, companies noticed an increase in client retention which translated to an annual net gain of 3.8 million dollars due to returning clients (IBM, 2014).   IBM Watson Analytics is an affordable option for companies.  Companies reported an ROI of 383% in only four months (IBM, 2014).  Incorporating a bonus for the employee leading this implementation will decrease likelihood of that employee's departure from the company, thus reducing costs associated with training a new employee (Collett, 2015).  Based on this information, we anticipate IVK's ROI to be 410% in four months, 438% in eight months, 447% in one year, and 458% in two years.  

Overall Synthesis

Implementing IBM Watson Analytics to a company is a cost-friendly solution.  This is especially true when implementing IBM Watson Analytics into a pre-existing company (IBM, 2015).  Rent, utilities, equipment, and salaries are already in use within IVK and makes the transition to implement Watson Analytics easier, as these are factors that are of concern.  Instead, the initial variable cost of implementing IBM Watson Analytics and the salary bonus are the only major costs associated with this addition.  Both costs are well within the budget of IVK and would be an excellent addition to increase, productivity, business awareness, and relevancy.  Additional information on IBM Watson Analytics can be found at IBM's website.

References

 

Austin, Robert D., Nolan, Richard, L., & O'Donnell, Shannon (2009).  Adventures of an IT Leader.
        Kindle Version.  Retrieved from Amazon.com

Collett, Stacy. 2015, April 27. Companies that desperately need hot IT skills are ratcheting up
        salaries and bonus to lure talented tech workers.  Here's how to grab your fair share.  Retrieved
        from http://computerworld.com/article/2909514/salarysurvey2015/it-salaries-2015-cash-
        is-back.html

IBM. 2015. IBM Watson Analytics. Retrieved from http://www.ibm.com/marketplace/cloud/watson-
        analytics/us/en-us#htMainContainer

IBM. 2015. Watson Analytics: IBM Watson Analytics. “Support.” Retrieved from 
         https://community.watsonanalytics.com/support/

IBM. 2014, January 21.  Better business outcomes with IBM Big Data & Analytics.  Retrieved from
        www.ibmbigdatahub.com/sites/default/files/whitepapers_reports_file     
        /59898_Better%20Business%20Outcomes_White%20Paper_Final_NIW03048-
        USEN-00_Final_Jan21_14.pdf

Payscale.com. 2015, September 25. Bonus for industry: Information Technology (IT Services).
        Retrieved from http://payscale.com/research
        /US/Industry=Information_Technology_%28IT%29_Services/Bonus