ROI Remains Guesswork At Most Companies

By Toby Ward, Prescient Digital Media, with contributions from Sharon Cheung — Despite all the fuss and talk of measuring the return on investment (ROI) of intranets, a new study confirms a widely-held suspicion: most organizations spend little or no time measuring intranet ROI.
Study finds that while precise measurement is lacking, most organizations are making 'rough' ROI estimates' of the intranet
 
A new study by Prescient Digital Media finds that only 6% of organizations undertake ongoing, specific measurement of the ROI of their intranet.  Occasional measurement is undertaken by only 26% of organizations and 51% either do no measurement, don’t know if they do, or only guess at the ROI. 18% are considering ROI measurements.
 
“Although ROI has not been established in our current intranet we do see the potential and the need to create a more efficient intranet to be able to reduce costs and engage employees in a more direct method.” ROI survey respondent
 
[1] The study drew responses from more than 240 participants – intranet managers, professionals and consultants – representing the intranets of a wide variety of organizations including KPMG, Scotiabank, Volvo, Shell, RBC Financial Group, New York Life, Hewlett Packard and others.
 

Value

 
While few organizations are spending significant time accurately measuring ROI, it is important to 76% of the respondent companies.
 
How important is the ROI of your intranet or portal to your organization?
Unimportant
6
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Somewhat unimportant
6
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Neither important nor unimportant
6
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Somewhat important
36
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Very important
40
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Don’t know
5
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Total
100%
 

[1] The study, conducted in the spring of 2003, was self-select (voluntary) conducted online with readers of various intranet publications including senior management (VP, CEO, COO, CIO, etc.),  middle management (directors, managers, senior managers) and consultants who regularly work with their organization’s intranet or with others.

 
Also, while it may rarely be specifically measured, the intranet’s benefits are inherently appreciated. More than two-thirds of respondents state that the intranet has improved the productivity of the organization.
 
 
How does the intranet or portal impact productivity at your organization?
Greatly hinders productivity
3
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Somewhat hinders productivity
7
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Neither hinders nor improves productivity
13
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Somewhat improves productivity
45
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Greatly improves productivity
23
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Don’t know
9
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Total
100%
 
 
Highly representative of the challenges facing those that manage intranets, only a bare majority (52%) of organizations surveyed said they are satisfied or very satisfied with their intranet or portal while 36% are dissatisfied.
 
 
How satisfied are you with your organization’s intranet or portal?
Very dissatisfied
13
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Somewhat dissatisfied
23
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Neither satisfied nor dissatisfied
8
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Somewhat satisfied
38
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Very satisfied
14
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Don’t know
3
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Total
100%
 
 
The percentage of organizations with intranet users varied with the wide range and size of organizations. 60% of organizations had 1000 users or more while 21% had fewer than 100 users. The largest group had 1,000 to 5,000 intranet users, representing 25% of the survey respondents.
 
How many intranet users in your organization?
Fewer than 100
21
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100 – 1000
19
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1000 – 5000
25
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5000 - 10,000
15
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10,000 +
20
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Total
100%
 
 

Benefits

To gauge exactly what intranet benefits are valued and how they are measured, the survey segmented benefits into 12 categories:
  1. Reduced hard costs: print, paper and distribution costs.
  2. Improved sales: increased revenue and reduced response time.
  3. Enhanced communications: better, faster employee communications.
  4. Enhanced competitiveness: time-to-market, information accessibility.
  5. Enhanced application access: centralized application access.
  6. Enhanced infrastructure utilization: reduced infrastructure and integration costs.
  7. Enhanced collaboration: better, cost-effective training and collaboration.
  8. Reduced product cycle: reduced inventory and faster invoicing.
  9. Improved customer service: improved information retrieval and customer self-service.
  10. Enhanced human resources: reduced administrative costs and improved employee retention.
  11. Enhanced procurement: reduced cost and time of purchasing goods.
  12. Content management: reduced time and cost of publishing content.
Unfortunately, of all the benefits measured, none of the above benefit categories is measured in more than 20% of organizations. Most organizations undertake a ‘rough estimate’ (a guess) and do not undertake precise measurements.
 
Leading the measured benefits parade is content management, measured in 20% of the respondent organizations with 42% of respondents undertaking a rough estimate (a guess) of content management’s ROI value. Other leading areas of measurement included communications, application access, human resources and infrastructure utilization.
 
Percentage of organizations measuring specific ROI benefits:
 
Measured ROI Benefit
Measured Estimate
Rough Estimate
No Measurement
Content  management
20%
46%
42%
Communications
18%
53%
29%
Application access
17%
37%
45%
Human resources
15%
51%
34%
Infrastructure utilization
13%
37%
49%
 
It is interesting to note that while less than 20% of organizations have undertaken measurements of specific benefits, a majority of organizations have at the very least made a ‘rough estimate’ or guess of the value of their ROI.
 

Measured Value

Of those that measure or offer ‘rough estimates’ of their organization’s intranet, answers varied from $0 to $20M. The average annual ROI of respondent intranets fell just shy of $1 million ($979,775.58).
 
Respondents were also asked to provide a measured (or estimated) yearly ROI of each of the 12 benefits.
 
Measured ROI Benefits
Average Yearly ROI
Content management
31%
Applications access
28%
Human resources
27%
Collaboration
27%
Hard costs
25%
 
Not surprisingly, content management is the intranet ROI champion with an average yearly ROI of 31% among the respondent organizations. This correlates well with the perceived value of an ROI benefit.  In part I of the Intranet ROI survey (see Measuring The ROIs of Intranets: Mission Possible? for a full overview of the results), respondents were asked to rate the most important areas for intranet ROI measurement. Content management was cited as important or very important by 87% of the respondents – second only to competitiveness (90%).
 
More surprisingly is the ROI of intranet communications.  According to the survey participants, the average yearly communications ROI of respondent intranets is only 11% -- the least of all ROI benefit categories.  Conversely, communications ranks second in importance – tied with content management.
 

Conclusion

The ROI of an intranet is sought after and valued at most organizations, but few are undertaking specific measurement programs to quantify the value of their intranet investments.  While a majority of organizations make a rough estimate (guess) at the value of specific intranet benefits, still more are planning to measure ROI. To quantify the ROI of an intranet, organizations will have to act decisively to establish baseline measurements for future comparison while enlisting the support and efforts of other people and departments across the organization to determine specific benefits for measurement.
 
As with any critical business system, the intranet must be delivering measurable performance and remain accountable to the investment. If you are not measuring your intranet’s value, then you risk failing the needs and demands of both employees and management. 
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.