What is the Value of a Database?
Businesses often look at databases as an expense and fail to fully realize the value they bring. Databases can do things for a business better, cheaper and faster than people. Often, they can do things that a single person just can’t do in a reasonable amount of time. For example, if you are looking for quick access to Dashboard level data across your business, a single person could not do this. At best they would compile reports periodically and while this can be a highly effective way for a business to operate, it is also time consuming and inflexible as well as vulnerable to an employee’s departure. So how can you begin to calculate the value of a database to an organization?
Compare the Database to Headcount
The starting point it is to compare the cost of the Employee Headcount needed to do the work to the cost of the system automating it. It will become quickly evident that the database is far cheaper than a person. Let’s say for example that you are a company with 100 employees and that the average annual cost $50,000 per year. If the database is doing the work of 2 people and it only costs you $20,000 to own, that’s a huge savings. Now think of it against your most valued employees. Those who have precious little time that should be spent client facing or doing more strategic work. How much is there time worth? You don’t need to be exact. A quick back of the envelope estimate will show you how valuable the time savings will be to your company.
See the Database as Insurance
Something people often overlook is that a database is essentially protection against employee turnover. When a knowledgeable employee leaves a company, that institutional knowledge walks out the door with them. The informal processes and client knowledge they had are lost. If the experts are correct, and turnover costs 1.5 to 2 times an employee’s annual salary, imagine how much of that you save by hardening those business processes in a system and storing valuable client knowledge. Turnover happens naturally in a business and is costly, but a good database can lessen the impact.
Measure the Database as a Cost of Doing Business
This varies depending on the type of business you are in. If the database is essential and you must have it to do business, this raises the value immensely. It can be difficult to quantify but ask yourself, how much you would be willing to pay to be in the business in the first place. This doesn’t have to be what you would end up paying for the system but it will help you when evaluating how much you can spend to achieve your profit margins.
The Formula to Value a Database
You can estimate the value of the database to your business with this formula.
Database Value = Headcount + Insurance + Cost of Doing Business
Headcount: The equivalent number of employees
Insurance: Employee Turnover Protection
Cost of Doing Business: How much you will spend on this necessary function.
The Database is your Best Employee
If you do the math, the database if your best employee. Databases don’t quit or call in sick and they don’t get disgruntled. They work all hours and are always there for you. Yes, they need maintenance and development, but by far, they contribute much more to the business than they cost.
If you need some assistance with one your systems, maybe we can help. Reach out for a free consultation.