Measuring the ROIs of Intranets: Mission Possible?

by Toby Ward — There is a lot of hype surrounding ROI (return on investment). Everyone and their ASP are trumpeting the benefits of intranet applications and portals. Truth be told, measuring the ROI of an intranet appears to be more art than science. Few organizations are actually measuring an intranet’s benefit in terms of dollars and cents (or pounds and pence).

As I wrote in my first article on the subject earlier last year ( Measuring the Dollar Value of Intranets), there is no ‘magic bullet’ to appraise the dollar value of an intranet. Measuring ROI of a corporate intranet or portal is, at best, an imperfect science. In fact, it is impossible to measure an intranet’s exact dollar value. Although  measuring the precise return on investment may not be possible, more organizations are, nevertheless, attempting to quantify both potential and existing ROI.

While technology stalwarts such as Cisco and Oracle have made big strides in appraising (largely for marketing purposes and bragging rights) the dollar value and performance of their existing intranets, few others have done any extensive measurement.

To better understand how organizations value and measure the ROI of their intranets, Prescient Digital Media partnered with the Katz School of Business at the University of Pittsburgh to conduct an extensive, but voluntary, study of willing organizations. The first part of a two-part survey was conducted in the spring and summer of this year (2002) through an online survey tool. While the study is not a scientific sample of a specific audience, the respondents were a mixture of intranet managers, consultants and readers of Intranet Journal. This diverse group of people offered unique intelligence into the minds of organizations and professionals operating corporate intranets.

Two-hundred and seventy-five (275) survey participants were asked to rank in order of importance almost 70 different intranet investment benefits organized according to 12 broad categories including:
  1.      Hard Costs
  2.      Sales
  3.      Communications
  4.      Competitiveness
  5.      Application Access
  6.      Infrastructure utilization
  7.      Collaboration
  8.      Time To Market (Cycle Time)
  9.      Customer Service
  10.      Human Resources
  11.      Procurement
  12.      Content management

The findings were somewhat surprising: softer, harder to measure benefits such as competitiveness, communications and content management  (the big ‘C’s’) were rated the most important. Traditional areas of focus for ROI benefits, including procurement, sales and time to market were rated among the lowest benefit categories.

Most important benefit categories

 1.  Enhanced competitiveness
 2.  Content management
 3.  Enhanced communications
 4.  Hard cost reduction
 5.  Enhanced customer service

Least important benefit categories

 1.  Enhanced procurement (eProcurement)
 2.  Reduced cycle time  (time to market)
 3.  Enhanced infrastructure utilization
 4.  Enhanced human resources
 5.  Sales process enhancement

“I’m not that surprised,” says David Yockelson, an executive vice-president and director with  META Group, a technology research and analysis firm. “The value of the intranet to me is going to be more around productivity and soft costs. My expectations are more about communicating more freely, time savings, and information availability rather than sales and hard cost savings.”

When survey participants were asked to rank specific line item benefits (almost 70 in all), access to and increased sharing and accuracy of information led the benefit parade. The lowest ranking benefits related to procurement and time to market.

Most important ROI benefits

 1.  Improved information sharing (customer service)
 2.  Enhanced communications and information sharing (communications)
 3.  Increased consistency of info (customer service)
 4.  Increased accuracy of info (customer service)
 5.  Reduced or eliminated processing
 6.  Easier organizational publishing

Least important ROI benefits

 1.  Reduced capital costs by using ASP
 2.  Reduced reliance on proprietary standards (vs. open standards)
 3.  Reduced inventory
 4.  Increased collaboration with vendors reducing time
 5.  Wider marketing reach (Internet vs. EDI & Catalogues)
 6.  Increased control over purchasing process

Again, specific benefits relate to customer service, communication and content management – access to and accuracy of information. While the results may be somewhat unexpected given the emphasis on softer benefits, the results were appreciated by some of the pundits.

Yet, as many readers and intranet managers can attest, executives want to see hard savings. While soft benefits can produce some ‘wow’ numbers, including millions of dollars attributed to time saved (improved productivity), corporate bean counters want to see cold, hard numbers.

“What is more convincing? Clearly the hard cost savings,” Yockelson says. “Nobody wants to hand out money for anything – times are tight. If you can’t justify it, it won’t happen. They’re (executives) bristling at any costs.”

Part II of the intranet investment study examines where organizations are measuring value and what ROI they’re finding. Participation was requested in developing the most accurate picture on intranet investment value. Readers were encouraged to partake by completing an online survey. All participants received full copies of the complete research and were eligible to win cash, a PDA or University of Pittsburgh prize package.

Toby Ward, a former journalist and a regular e-business columnist and speaker, is the President and Founder of Prescient Digital Media. For more information on Prescient’s CMS Blueprint service, or for a free copy of the white paper “Finding ROI”, please contact us.