So, when all's said and done, how do you measure "hard dollar" investments with "soft dollar" returns? It's difficult to directly connect money spent with money returned, in this case. Some analysts say that, at the very least, you will break even within one year. Others, such as Forrester Research, place average intranet application ROI at 1238%. The difficulty with respect to measuring intranet ROI stems from the fact that much of the payback comes in the form of intangible returns with indirect cost savings:
Replacing Hard Medium - These are the savings accumulated by replacing paper documents as well as the administrative costs associated with maintaining and storing this hard medium. This includes reductions in both distribution and production costs.
Time Saving - In the world of document management, it's a widely accepted statistic that over 20% of an employee's time is spent searching for information... that's eight hours a week. In strategic intelligence, there's no gain in looking for information. The gain comes only with what you do with this information after it has been found.
Knowledge Stays When People Leave - People decide to tackle other projects or leave the company. When they do this, they take with them all of their experience and knowledge. However, an intranet gives you the opportunity to gather and store the knowledge of your employees, past and present, into an accessible pool of shareable information.
Reducing Duplication of Effort - Every company must deal with a certain amount of "the left-hand doesn't know what the right-hand is doing" syndrome. By using an intranet as a collaborative tool for information sharing there is less likelihood for duplication of effort.
Employee Self-Sufficiency - By placing relevant industry and corporate information in a centralized location, it makes it easier for employees to find what they are looking for. This eliminates the need for intermediaries. When you empower your employees with the appropriate tools, you also provide them with the opportunity for more efficient decision-making.
An intranet is a solution that provides long-term gains with short-term costs. Sure, it may seem like a lot of money to invest upfront when compared with something like the production of paper-based medium but what you need to realize is that the initial costs will pay for themselves in the long run. The rolling costs of printing, maintaining, and distributing hardcopies will accumulate and these are dollars you won't be getting back either. It will cost you money, no matter how big or small, every time you need to make an update.
The good news with an intranet is that much of the initial costs come in the form of a one-time investment. A properly built and maintained intranet will eventually reach a point where it becomes self-sustaining. Every dime you put in will bring with it the opportunity for gain, either directly of indirectly.
Despite my efforts at convincing you about the difficulties associated with trying to quantify intranet ROI into a feasible number that you can put on paper, your sponsors will want one anyway. That's just the way the world works; you put water in the fridge and it will freeze, you go outside when it's raining and you'll get wet, you ask your company to invest in a solution and they'll want a concrete return... isn't it strange that ROI means "king" in French? Hmmm, coincidence? I'll open up a new X-File.
This story was first published on IntranetJournal, an internet.com site.
Paul Chin is an IT technologist and intranet specialist for Competia, a consultancy and training organization for senior executives and analysts in strategic planning and competitive intelligence.