You already know about the advantages of using an intranet implementation to drive your strategic-intelligence business processes, right? This is a solution that has been hailed by some as the most important collaborative business tool since the telephone. However, deep in the shadows a mysterious group of men and women are watching you. They are watching every dollar you spend and wondering when they will see a return. Will you have an answer when they come knocking on your door?
To begin answering the question of intranet ROI, you need to build a business case to prove that an intranet is a valuable and cost-effective solution for your company. Management doesn't want to spend money on something it doesn't have to and if they do, they'll expect big returns for their investment. Unfortunately, an intranet, being a proactive solution, may clash with management's well ingrained"if it's not broken, why fix it?" mentality. An intranet fixes problems before they become problems and you have to prove this.
A business case will basically provide your financial sponsors with the details of your intranet project minus all the "techie" jargon. Your business case should include:
and resources permit, a pilot project could also go a long way to
answering a lot of questions from the "people upstairs" with regard
to intranet ROI. Unlike a simple PowerPoint presentation with static
screen shots of a theoretical intranet, a pilot project will allow
you to turn that idea into a practical working model. Once your
key sponsors are given a chance to test drive your intranet on a much
smaller scale, they will get a better sense of what can be accomplished
and how it can effectively be used as tool to aid or replace current
UFO: Unidentified Financial Object?
Intranets are one of the more difficult business solutions to measure for ROI. The reason for this is that many of the benefits associated with intranets are intangible. These cost-savings are in so-called "soft dollars"; improved employee productivity, tighter inter-departmental as well as corporate-wide collaboration and communication, faster and easier information gathering and sharing. How do you measure such things? Some managers don't even bother trying to quantify intranet ROI because it's just not worth it. An in-depth ROI analysis will end up taking more time than actually building the intranet itself.
I mentioned before that intranets are being compared on the same level as the significance of the introduction of the telephone. When you think about it this way, has any company ever been asked to quantify the ROI of its telephone system? No, because everyone understands the latent value and importance of a telephone system in both corporate communication as well as communication with clients.
Does this sound like professional suicide? Asking your company to invest in something on faith that it will end-up paying back? Well, not quite. Let's take a quick look at an intranet's three main expense categories:
Complete Intranet Resource (CIR)
Web site offers downloadable intranet
ROI cost calculation worksheets. These are simple spreadsheets with
sample figures that you can use as templates in trying to determine
your own intranet costs. Fastrack
Consulting Ltd. also provides a cost-benefit
calculator using hypothetical figures and timelines. Obviously,
the size of your intranet and the size of your company will play
a major role in trying to determine intranet cost and ROI.
Evidence of existence
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.