What is the Cost of Implementing Watson?
Watson Analytics only offers a subscription model which is about $80.00 per person per month. IVK is a mid-sized company (for these circumstances we can assume around 500 employees). The company’s variable cost would be the cost to cover the total number of employees that need a subscription to Watson Analytics. This cost would be around $40,000 a month of all employees to have user access to IBM Watson. Annually, this total would amount to $480,000. Technical support will be provided by IBM as part of the monthly user subscription. IVK’s IT department will take care of internal support as necessary and will be able to develop training as all employees grow accustomed to the software.
Fixed Costs
As described above, part of the fixed cost is the subscription fee
of $80.00 per person per month. As part of this fixed cost, IBM Watson
offers technical support, training, and updates/upgrades as part of their
subscription price. IVK can use the training provided to further the
value generation by allowing our managers and employees to recognize new
opportunities and uses for this technology (Bender, Henke, & Lamarre,
2018). Another key integration that IBM Watson focuses on is the ability to
connect and work with different types of databases. Many companies need to
resort to multiple software packages for them to accomplish exactly what they
are looking for, often relying on software compatibility and integration to
help get the job done. IBM Watson eliminates some of this fear by using
systems that integrate all types of software ranging from Access to
Salesforce. For companies such as IVK
who are looking to gain an advantage over their competitors, these aspects
offer a big competitive advantage over those who choose to spend separate
budgeted money on these operations. Exploiting the information found through
this program will promote a quicker revenue increase than the competitors
(Harvard Business Review, 2016).
Other fixed costs include the extra overhead and equipment regarding
the additional hardware and power requirements for the Watson system.
Additionally, IVK would need to factor in the implementation cost for
using IBM’s Watson. Upon research into
the pricing of Watson, aside from the subscription cost, no additional fees for
implementation could be found. Currently, the company has $7,983,460
proposed for new initiatives that could be used for both the initial
expenditure and ongoing subscription for the year (Austin, Nolan, &
O’Donnell, 2016). As the company grows,
the fixed cost may increase based on the number of employees that are hired and
need to allocate technological assets to the new employees.
The upfront costs for implementing this system are the initial
expenditure of the $40,000 for this month, the additional expenditure for the
hardware and overhead, and the technical training needed for the employees who
are being affected. The overall costs can partially be taken out of the
proposed initiatives budget for IT, as well as the other applications
development budget if needed. In depth pricing is confidential and can
only be accessed by companies with serious inquiries.
To request more information on pricing please visit https://www.ibm.com/us-en/marketplace/watson-analytics/purchase.
Return on Investment
Taking into consideration the circumstances at IVK, the following
assumptions can be made to evaluate the ROI:
·
Two
IVK employees’ fully burdened salaries are set at $150 per hour
·
Since
IVK seems to be a relatively small company, they only release around three
applications per year, one annual large project and two semi-annual smaller
projects
It takes roughly four hours to deploy the test environment while
the major project can be released in four hours and the two minor projects in an
hour and a half.
IVK suffers from a problem of trying to fail as quickly as
possible in order to “fix” their problems faster. Due to this raw method
of execution, IVK encounters 10% of errors in their deployments which is a much
higher rate than their competition. IVK’s ideal scenario would be to
reduce effort by 80%, reduce script writing by 80% and reduce the number of
errors by 75%. Using these figures, IVK
is set to have an ROI of almost 400%. When analyzing the breakdown of
this investment, it is realized that the script costs result in the largest
savings which can be attributed to the high salary cost of each employee and
the time required for each project.
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References
Austin, R. D., Nolan, R. L., &
O’Donnell, S. (2016). The Adventures of An IT leader. Boston, MA:
Harvard Business Review Press.
Bender, M.,
Henke, N., & Lamarre, E. (2018, October). The cornerstones of large-scale
technology transformation. Retrieved from https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-cornerstones-of-large-scale-technology-transformation?cid=other-eml-alt-mkq-mck-oth-1810&hlkid=379d8fbfe6364c46abf62102d3863b21&hctky=10583833&hdpid=e1670b14-4631-4873-8407-1e7b9b6747d2
Faster Data Preparation for IBM
Watson Analytics and Cognos Analytics. (n.d.).
Retrieved from https://www.datawatch.com/resource-center/literature/faster-data-preparation-ibm-watson-analytics-cognos-analytics/
Harvard
Business Review. (2016, June 16). Competing in the Connected Economy. Retrieved
from https://hbr.org/webinar/2016/05/competing-in-the-connected-economy
Smart data
analysis and visualization. (n.d.). Retrieved October 14, 2018, from https://www.ibm.com/watson-analytics/pricing
Two-factor
authentication. (n.d.). Retrieved October 13, 2018, from https://console.bluemix.net/pricing/platform/finance
Watson
Analytics - Compare Reviews, Features, Pricing in 2018. (2018, October 04).
Retrieved October 10, 2018, from
https://www.predictiveanalyticstoday.com/watson-analytics/
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