Maximizing return on investment from an enterprise portal

1. Maximizing return on investment from an enterprise portal Ian Campbell Vice President, Research icampbell@nucleusresearch.com

2. About Nucleus Research • Industry research firm providing ROI focused research and advisory services to help companies quantify and maximize the value of their technology investment. • In-depth reports • Modeling Tools • Analyst support • Research centers in Boston and Paris.

3. Agenda • Using a portal • Factors to consider • Evaluating the potential ROI • Case studies • Calculating ROI • SharePoint ROI report and modeling tool

4. Why Use Financial Measurements? Today • Many choices, often replacing current strategies • Decision must be based on sound business criteria. Old Days • Choice was limited and the value was obvious. Interoffice Mail email Siebel Oracle

5. Where to focus efforts? • Can you identify the areas that deliver maximum benefit? • Content management: Benefit

6. Cost vs. benefit • Can you justify the purchase decision? • Will the company get back more than it spends? • Did I get a fair priced based on the benefits? • Can I prove this to the CFO? • Can I prove this to the shareholders?

7. Technology options: building a portal • Application-based portals • Lotus, SAP, PeopleSoft, Microsoft • Portal development frameworks • IBM, Sun-Netscape Alliance • “Out of the box” portals • Verity, Plumtree, Epicentric

8. What kind of portal do you need? (What kind of portal will support your objective?)

9. Type of Portal Employee-facing Potential Returns Reduced administrative overhead Shortened sales cycle Reduced communication costs Reduced training and HR costs What value can it bring?

10. Type of Portal Partner-facing Potential Returns Reduced administrative overhead Reduced communication costs Reduced cost of sales Reduced accounts receivable Reduced product rework expenses What value can it bring?

11. Type of Portal Customer-facing Potential Returns Reduced cost of sales Reduced administrative overhead Reduced communication costs What value can it bring?

12. Functionality factors to consider…

13. Functionality factor 1:Application data integration • How many applications / information resources will need to be accessed through the portal? • Can they be accessed through plug-ins or is development required? • How well/rapidly do potential vendors support integration?

14. Functionality factor 2:Search and indexing • How much does the user know about the data/applications they will access? (key point) • How does the portal categorize/organize information? • Do the search capabilities meet the needs and expertise of the user? Foreign language? Taxonomy? Natural language?

15. Functionality factor 3:Personal productivity support • Is employee productivity support an objective of the portal? • What technologies are employees using to support productivity today? • What agents, devices, and tools are available/appropriate? • What training is needed? (key point)

16. Functionality factor 4: Task management and collaboration • Are accelerated product development or sales cycles, or improved crisis management, an objective of the portal? • What technologies are currently used for tactical collaboration and task management? • What technologies are available in a portal? • What training will be needed? (key point)

17. Functionality factor 5:Content provision • Are reduced research or library costs objectives of the portal? • What external information sources do portal users need?

18. Five factors to consider when measuring the potential return

19. Factor 1 - Breadth • Does it impact a lot of people or only a few? The greater the breadth of the application, the higher the potential return.

20. Factor 2 - Repeatability • Will the application be used frequently or infrequently? The greater the repeatability of the application, the higher the potential return Training and repeatability are linked!

21. Factor 3 - Cost • Is this a costly task or relatively inexpensive? The greater the cost of the task, or the greater the benefit, the higher the potential return. Workflow for ordering new business cards Workflow for new drug submission

22. Factor 4 - Collaboration • Does this task involve collaboration among groups? The greater the collaboration component of the task, the higher the potential return. Group discussion around information creation Individual information retrieval

23. Factor 5 - Knowledge • Will this task involve management of keyinformation? The greater the use of knowledge management the higher the potential return. Daily cafeteria menu Corporate sales customer information base

24. Score some examples...

25. Use a portal to create a document-centric workflow to change your health care provider. Repeatability 2 3 4 5 Breadth 2 3 4 5 Cost/Benefit 2 3 4 5 Collaboration 2 3 4 5 Knowledge Management 1 2 3 4 5 Example 10 5 10 18 25

26. Develop a customer-facing portal to deliver accurate sales pricing and product documents. Repeatability 2 3 4 5 Breadth 2 3 4 5 Cost/Benefit 2 3 4 5 Collaboration 2 3 4 5 Knowledge Management 1 2 3 4 5 Example 20 5 10 18 25

27. Allow partners to access production information to manage supply delivery. Repeatability 2 3 4 5 Breadth 2 3 4 5 Cost/Benefit 2 3 4 5 Collaboration 2 3 4 5 Knowledge Management 1 2 3 4 5 Example 17 5 10 18 25

28. Create a database of marketing documents for internal use by sales, pr, and marketing. Repeatability 2 3 4 5 Breadth 2 3 4 5 Cost/Benefit 2 3 4 5 Collaboration 2 3 4 5 Knowledge Management 1 2 3 4 5 Example 20 5 10 18 25

29. Integrate the portal with the corporate accounting system to deliver information to the board of directors electronically rather than by paper. Repeatability 2 3 4 5 Breadth 2 3 4 5 Cost/Benefit 2 3 4 5 Collaboration 2 3 4 5 Knowledge Management 1 2 3 4 5 Example 5 5 10 18 25

30. Let’s look at ROI…

31. The hard fact of technology • If an application doesn’t generate a positive return, you shouldn’t have deployed it. • Too many bad applications (that can’t be blamed on others) can get you fired.

32. ROI Case Studies Nucleus looked at the costs and benefits of SharePoint for a number of companies and calculated the ROI (TCO/Payback) they’ve experienced. • Aanza • Children’s Hospital • Anderson Power Products • ARC Advisory Group • Rare Medium Cases available through the Nucleus web site.

33. Aanza • Software developer creating product lifecycle management software • Benefits: • Reduced their development effort • Shortened time to market • Increased reliability • Reduced marketing expense • Key point: • As an embedded application SharePoint can provide a positive return. ROI: 436%Payback: 3 months

34. Children’sHospital • Needed an easier and more scaleable way to post documents. • Benefits: • Self serve model to allows the creator to post • Reduced IT costs • Increased accessibility • Increased document control • Key point: • Classic document management solution but leveraging the ease-of-use and integration of SharePoint with Microsoft Office. ROI: 409%Payback: 3 months

35. ARC Advisory Group • Research firm needed to streamline workflows and automate delivery to the web. • Benefits: • Provides document management capabilities • Complete and flexible workflow for review process • Shortens review process • Streamlines publishing to the web • Key point: • For this Exchange shop SharePoint was the logical step to bring a formal process to document management. ROI: 179%Payback: 7 months

36. Anderson Power Products • This “old’ company needed a more efficient way for product teams to develop and share information. • Benefits: • Single place to share documents • Ensures the current document are always available • Provides broad searching capabilities. • Limited training requirement • Key point: • SharePoint’s integration with other Microsoft applications allowed APP to bring new technology into a company traditionally reluctant to accept change. ROI: 267%Payback: 5 months

37. Rare Medium • The company needed to standardize on one system and location to share and collaborate on documents. • Benefits: • Single place to share documents • Ensures the current document are always available • Provides broad searching capabilities • Key point: • SharePoint’s common platform enabled Rare Medium to centralize documents and eliminate “islands of information.” ROI: 187%Payback: .54 years

38. Common Themes • Functionality • Document indexing and categorization • Portal search and browsing • Tactical collaboration workspaces • Document-based discussion • Document management • Benefit areas • Improved information organization and access • Improved document collaboration • Increased tactical collaboration and productivity • Reduced user training and IT support costs

39. Measuring Technology

40. Using Financial Measurements • Compare financial measurements to other internal decisions and success factors - NOT to other companies! Positive ROI! Document Management?

41. Short Finance Class • Toolbox used to measure the value of technology: • Net Present Value • Payback Period • Return on Investment

42. @ 15% Interest Rate $152.09 $100 Year 3 Net Present Value NPV The value today of cash received at a future date given an interest rate. Use a spreadsheet or a financial calculator

43. Savings Payback Period Time Costs Payback Period Payback The time period needed before net savings equal initial cost. Excellent measure of risk Should be the key measurement!

44. Traditional Payback and Risk Value Payback indicates when ROI = 0 Short payback periods drive an aggressive deployment strategy: Deploy today and – if necessary – discard tomorrow. Time

45. Return on Investment ROI The average total savings over 3 years divided by the cost. Nucleus recommends a three year horizon but use a time period consistent with your organization’s standards. (Year 1, Year 2, Year 3) / 3 ROI = Initial Cost

46. What about TCO? Total Cost of Ownership looks at costs and ignores benefits. • Good for comparing two similar applications • Good for budgeting • Bad for choosing applications • Bad for prioritizing projects

47. Measuring Costs Basic Rules • Count everything that is directly associated with the project. (I purchased a web server for this project) • Don’t count infrastructure items not associated with the project. (I used the existing web server) • Do count infrastructure items that were driven by the project. (The company purchased a web server because of this project and two others like it - include 1/3 of the cost)

48. Six Categories of Cost • Software • Hardware • Personnel • Consulting • Training • Other One Time and Recurring

49. Benefit Examples - Directly Quantifiable • Reduced the number of personnel • Reduced costs to print and distribute the maintenance manual. • Avoided regulatory fines. • Reduced accounts receivable. • Reduced the cost to publish to the web. • Reduced travel costs

50. Benefit Examples - Productivity Based • Reduced the time needed to develop new software by 25%. • Reduced time to find new documents. • Maintenance on an aircraft takes 10% less time. • Increased software quality