February 8, 1999

Four Areas Vital to an Intranet's Return on Investment

By Steven L. Telleen

Q:What return on investment (ROI) do companies tend to realize when they implement an intranet?

A: There have been a number of studies published on intranet ROIs, with results ranging from over 1,000 percent to a more modest 25 percent. The projects and applications behind these ROIs were vastly different, as were the ways the ROIs were calculated. 

What is perhaps most surprising is that there have been few reports in which companies have not at least recouped their costs within the first year of intranet implementation. So, while very high ROI values may be exceptional, obtaining a quick payback is not. 

An attempt to discern an intranet's ROI begins with examination of four areas. 

Savings in physical media creation and distribution. Many companies have justified the entire intranet infrastructure based on savings in paper, mailing, and storage costs--even without considering waste and updated management costs, or the costs of outdated materials used erroneously. 

Training. Look for a reduction in training time by moving to just-in-time training. The return can be measured in terms of the productivity of employees during a period in which they would have been unproductive using old methods. Also, consider savings on travel and expenses for traditional training. 

Time savings. This occurs in finding, sharing, and collecting information to support decisions. ROI studies frequently ask employees to estimate the time they spent collecting information in the old way vs. the new. The average burdened salary--salary plus cost of benefits, office space, etc.--or billing rate then is multiplied by the time saved. Also, companies often can demonstrate how they've won contracts based on rapid collaboration of geographically distributed participants that easily pull together proposals via intranet usage. 

Applications. Applications that support efficiency and consistency of administrative functions can provide another source for ROI measures. Other benefits can be calculated, too--time and cost to develop and maintain the application, and the time it takes for users to learn the application interface. The latter can be substantial for applications with cryptic interfaces that are important but are infrequently used, so that the user tends to forget the features and processes. 

There are other benefits that figure into an intranet's ROI but are difficult to quantify. For example, the CEO of a company was having difficulty getting staff to understand the company vision, so he decided to detail that vision in an intranet discussion forum. 

The CEO acquired new technology skills, the company agreed on a common vision, and employee morale was higher than ever. An unanticipated benefit: The forum helped the firm recruit the best candidates in the market. Applicants were shown the forum during the recruiting process, and thus viewed the firm as one where employees are listened to and can make a difference. 

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