Is There An ROI For Enterprise Collaboration Tools?
There's no calculator or formula, but asking a few questions before diving in can put things into perspective.
It's no secret that enterprise social and collaboration tools, whether SharePoint, Jive, Socialtext, or some other variation, aren't cheap. Beyond paying for the software itself, customers must cover capital (for on-premises systems), implementation, education, training, support, maintenance, and the personnel to manage these systems and their usage. As a result, executives are always asking the big question: What's the ROI?
There's no enterprise collaboration calculator or formula. McKinsey recently conducted a study that sought to understand how Web 2.0 technologies impact how organizations collaborate with customers, partners, and employees. Its findings were quite interesting. For organizations deploying Web 2.0 technologies:
-- 77% are seeing faster access to knowledge;
-- 60% are reducing communication costs;
-- 52% are seeing faster access to internal experts;
-- 44% are cutting travel costs;
-- 41% are seeing increased employee satisfaction.
The full survey details other benefits for customers, partners, and suppliers as well. It's also worth noting that many of the above benefits can be broken down to a financial number--for example, examining how much time it usually takes to find information, and then re-measuring once a Web 2.0 tool and strategy have been deployed.
Deloitte produced a report looking at how collaboration technologies impact business performance. Its results for two companies, OSIsoft and Alcoa, show clear improvements.
OSIsoft, which deployed Socialtext software for its 282-employee customer-facing technical support team, reported a 22% average improvement in problem-resolution times within a year. Alcoa, which deployed Traction Software wikis for 305 users within its IT groups, reported a dramatic decrease in the hours those employees spend ensuring policy and regulatory compliance.
Frost & Sullivan also conducted two studies over the past five or six years that show the business value of collaboration. (Frost & Sullivan's studies were about collaboration in general, not specifically enterprise social software.)
In its first study, Frost & Sullivan looked at how collaboration impacts business performance (measured in terms of profitability, profit growth, sales growth, labor productivity, product development, customer satisfaction, innovation, and product quality), and it compared that impact with the impact of strategy orientation and market turbulence. For every single performance area, collaboration was seen to have had a greater impact than strategy orientation and market turbulence.
In Frost & Sullivan's second study, it looked at the ROC (return on collaboration) for basic collaborators, intermediate collaborators, and advanced collaborators in the areas of HR, R&D, sales, marketing, investor relations, and public relations. In each area, the advanced collaborators realized far superior ROC. The greatest areas of ROC were in sales and R&D.
Consider The "Why"
The challenge with enterprise social software starts before anything is purchased or deployed; it starts with the "why," which is something many organizations need to spend more time considering. I've spoken with several large organizations that have invested in these new tools purely from a technology standpoint--they buy the platform and that's it. These investments always fail because there's little driving the decision to purchase and little being done to support the investment.
My firm, Chess Media Group, and Booz Allen Hamilton conducted a series of five in-depth enterprise collaboration case studies with Intuit, Vistaprint, Oce, Penn State University, and the federal government. In each study, not a single organization was able to predict what its ROI would be, but in each case it solved a business problem, and that was considered worth the investment. Those problems ranged from being able to communicate more effectively with employees to being able to find information more quickly to coming up with new ideas for products to decreasing intranet costs. The point is that all of these organizations made these investments with a clear purpose.
Organizations need to ask themselves: Is solving a business problem as good as being able to show a direct, hard ROI?
When I've worked with organizations that considered these investments for customer-facing initiatives, I would always ask them: If you knew your customers, prospects, and competitors were actively using social media, would you invest in that area? Everyone says yes. And then I would follow up with: What if I told you that you would never know if you made a direct dollar as a result of your investment, but that you still knew your customers, prospects, and competitors were still actively engaged in social media. Would you still invest? Again, everyone says yes. This same line of questioning can be applied to investing in employee-facing social and collaboration technologies.
Organizations also must realize that measuring an ROI requires additional time and investment in and of itself.
So where does this leave us in the ROI discussion? It's a tricky discussion, partly because enterprise social software has a bit of a "black box" effect--you never know when a useful piece of information will be shared that can generate revenue or cut costs.
I spoke with someone recently who deployed enterprise collaboration tools at a large university. When I asked her about ROI, she said something along these lines: "Employees are the most valuable resource that an organization has. If you need to explain why it's valuable for these employees to be able to collaborate with one another and justify that with financial numbers, then you have bigger problems."
What do you think? If you'd like to participate in (and share) an enterprise collaboration survey that my firm is conducting, please go here. In return, we will give you free access to four case studies on enterprise collaboration. (No registration needed.)
Jacob Morgan is the principal and co-founder of Chess Media Group, a management consulting and strategic advisory firm focused on social business. Write to him at firstname.lastname@example.org.
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