This presentation was given on the Panoptic Event in Belgium (Mechelen) arround Enterprise 2.0. Early Stage presented it's vision on calculating ROI for Enterprise 2.0 projects.

1. Calculating the ROI of
collaboration tools
Bart Van Den Kieboom
June 17 2009

2. What will we talk about in the coming 45
minutes?
1. Setting the scene…
2. Why calculating ROI?
3. Challenges in calculating ROI for Enterprise 2.0
projects.
4. Components of ROI-calculation
5. The typical ROI-curve
6. A practical example
7. Bonus : what is the value of one contact in your
network (948 $)

3. 1 Setting the scene

4. 1. Setting the scene
Enabling interactivity
Increased collaboration
Change Management
Social Computing
Social Media

5. 1. Setting the scene
And many, many more...

6. 2 Why Calculating
ROI?

7. 2. Why Calculating ROI?
Pré-project
• It’s a necessary part of each business case
• To get approval and support from management
• It will help you to identify the real benefits and business
drivers
• A quantitative approach tends to be more acceptable than
evangelistation
• It will provide a set of KPI’s for future evaluation
• It helps to see the big picture

8. 2. Why Calculating ROI?
Post-project
• Just because for once you will have the real numbers
• It will help to detect problems
• To adjust the business case
• To be prepared for the first evaluation

9. 3 The Challenges?

10. 3. The challenges
• The benefits are often difficult to measure
• Enterprise 2.0 tools are rarely used as originaly intended
• The uptake and use of collaboration software is very
difficult to forecast
• Direct costs are often low, so more time is needed to “The benefit of Web
calculate the the real time spend. 2.0 tools within the
• The cost of doing a ROI-study should be aligned with the enterprise is very
squishy, very soft. It
cost of the project.
is all about
• The evolution of the collaboration software during the productivity, comm
analysed period will impact the ROI calculations. unication and
• You will need data from the HR-department to get the worker
right number on personel cost efficiency, which
are notoriously
difficult to
measure.”
Oliver
Young, Forrester
Research

11. 4 Components of
ROI calculation?

12. 4. Components of ROI calculation
Costs
Technology related
• Software licence fees
• Deployment
• Maintenance
• Integration costs
• Additional hardware required
• Bandwith
Adoption
• Training
• Time to learn

13. 4. Components of ROI calculation
Tangible assets
Revenue
• New revenue from existing clients
• Revenue from new clients
Increased productivity
• Time saved searching for info
• Increased effectiveness of access to better
information
Company internal communication
• Less email
• Fewer phone calls
• Fewer meetings
• Less travel
Technology related
• Replacement of existing software licences
• Reallocation of IT staff

14. 4. Components of ROI calculation
Tangible assets (cont„d)
Product development
• Reduced time to market
• Cost of market research
Supply-side (partners)
• Reduced communication costs
• More efficient supply

15. 4. Components of ROI calculation
Intangible assets
Brand capital
• Increased sales
• Ability to hire better staff “Improvements in
• Increased customer loyalty intangible assets
Social capital affect financial
outcomes through
• Greater collaboration
chains of cause-
• Cost of market research and-effect
• Lower staff turnover relationships”
Innovation
• Create new markets
• Take market share Robert Kaplan
Recruitment/retention and David
Norton, Harvard
• Lower recruiting and training costs
Bus. School

16. 4. Components of ROI calculation
“a key aspect of the
ROI issue is that the
strategic
capabilities
represented by
Enterprise 2.0 are
primarily emergent
in nature, instead of
carefully aimed at
and unleashed at
specific problems”
Dion Hinchcliffe,
ZDNet

17. 5 The typical
ROI-curve

18. 5. The typical ROI curve
“The main reason
We started the
enterprise 2.0
project was
because there was
so much buzz about
it in the public
space. We just
couldn‟t stay
behind”
John
Parkinson,
CTO TransUnion

19. 6 Practical
Example

21. 6. Practical Example : the case
Company Industrial Telco X (Europe section)
2000 employees
Specialised in network security
10 offices accross Europe
More than 5000 customers over Europe (many of them
Fortune 500 companies)
The business problems
Email fatigue
Searchability of information is becomming a bigger problem
every month.
European branches have difficulties to
communicate/cooperate with each other.
New employees can’t share their skill set with people outside
their office and this could lead to less quality and
innovation.

22. 6. Practical Example : the case
The solution
Decision : implementation of a typical enterprise 2.0 software
focussed on collaboration and social search.
Functionalities include
• working in online groups (internal and external)
• Discussion capabilities through structured threads
• Document/link/contact sharing
• Social metrics are used to improve results
• Clear indexing of documents
• Blogging capabilities for each employee
• Setup of an internal “Linked-in” like social network

23. 6. Practical Example : the case
The success factors (hard benefits/examples)
Reduction of email
More and better communication internally:
so less meetings
shorter meetings
Improved production time
Shorter sales cycle
Less calls to tech support
Reduce rotation time for personel
Reduced time to search for information

24. 6. Practical Example : the case
The success factors (soft benefits)
Increased client satisfaction
Less frustration for employees to communicate
amongst each other
Better evaluation of employees
Better cross-departemental communication
Improved brand image
Better recruitment
Shorter adaption time for new employees

25. 6. Practical Example : the case
The costs (first year)
Software licences 120.000 €
Hardware + bandwith 55.000 €
Consultancy to help for succesfull implementation 50.000 €
IT staff needed for implementation (2 FTE during 28.000 €
2 months) (2 * 7000 * 2)
Internal trainers and change management (2 FTE 42.000 €
during 3 months) (2* 7000 * 3)
Assimilation time for the employees (2000 empl. 497.737 €
55.000 € of value per employee) * (1 day/221)
Maintenance and support (0,4 FTE per year) 33.600 €
Total : 826.337 €

26. 6. Practical Example : the case
The costs (recurring)
Software Maintenance (20%) 24.000 €
Hardware maintenance + bandwith 14.000 €
Maintenance and support (0,4 FTE per year) 33.600 €
New developments (and change requests) 100.000 €
Total : 171.600 €

27. 6. Practical Example : the case
The benefits (first year)
Email reduction
The cost
The average manager spends 30 minutes a day answering mails to
his team-members
The average sallary is 70.000 € per year
This means a cost for the company of :
300 managers * 70.000 € / 221 working days / 16 half hours per day
= 5939 € per day.
The reduction
Thanks to the new software the managers need 10 minutes less to
answer mails. So the new cost is : (5939 / 3) * 2 = 3959 € per day
or a benefit of 1980 € per day
Total benefit per year : 437,500 € per year

28. 6. Practical Example : the case
The benefits (first year)
Improved search time
The cost
The average employee spends 20 minutes a day looking for info
The average sallary is 55.000 € per year
This means a cost for the company of :
2000 employees * 55.000 € / 221 working days / (480/20) per day =
20.739,00 € per day.
The reduction
Thanks to the new software the employees need 8 minutes less to
find information. So the new cost is : (2000 employees * 55.000 € /
221 working days / (480/12) per day : 12.443,00 €
Cost reduction : 8296 € per day!
Total benefit per year : 1.833.333,00 € per year

29. 6. Practical Example : the case
The benefits (second year)
Improved Employee collaboration
It’s not so easy to measure this.
Assume that with the improved collaboration you get new R&D-
teams.
10 % of the R&D projects generate a real value of approx. 500.000 €
Thanks to collaboration software 10% of the new teams will
generate new value.
In this example we assume that 20 new projects are created that
wouldn’t have existed otherwise. 2 of them will create added value.
here we assume that an added value of 2 times 500.000 € is created
(but only from the second year on). We will not include it into the
ROI however because of the too abstract assumptions.

30. 6. Practical Example : the case
The benefits
Better communications with customers
By allowing the clients access to the platform and by using it’s
benefits with the client a better relationship will be build.
It also creates more confidence
The global result will be a bigger client retention with more recurring
deals.
This is a typical KPI that can be measured post-implementation but :
• it is difficult to attribute the correct part of increased sales to the
software.
• And what if there is decreased sales?

31. 6. Practical Example : the case
Final assumption
• Benefits for the first year are limited due to the implementation
time.
• It would be incorrect to attribute all benefits directly to year 1.
• We only attribute 35% of the calculated benefits to year one

32. 6. Practical Example : the case
The result
Year 1 Year 2 Year 3 Total after 3 years
Costs € 826.338 € 171.600 € 175.102 € 1.173.040
Benefits € 794.792 € 2.316.250 € 2.362.575 € 5.473.617
Total -€ 31.546 € 2.144.650 € 2.187.473 € 4.300.577
€ 3,000,000
€ 2,500,000
€ 2,000,000
€ 1,500,000
Costs
€ 1,000,000 Benefits
Total
€ 500,000
€0
Year 1 Year 2 Year 3
-€ 500,000
-€ 1,000,000

33. 7 The bonus :
948 $

34. 7. The worth of a contact?
The IBM-MIT study
• A network of over 400.000 connected people
• Financial data AND communication data of over
1000 consultants
• Interviews with key-consultants
• Project information of over 10000 projects
• Based on IBM’s internal social networking site
Beehive.
• A lot of math...

35. 7. The worth of a contact?
The key findings
1. The structural diversity and the centrality of your network
have a positive impact on your work performance.
2. Having a few strong ties with the management is better
than having many weak ties with the management
3. Having strong ties with management is good (as said
above) but having to many managers working on your
project is bad for productivity.
4. Equipping your project team with people who have
desirable network characteristics will have a positive
impact on the projects performance.

36. 7. The worth of a contact?
And finaly
1. The average e-mail contact is worth $948 in revenue
2. Consultants with weak ties to management produce 98 $ “Our software was
per month less than the average. able to detect
3. The money formula : “interesting
matches” for
Network Topology Network Content Controls people ... but
1. Size 1. Links to managers 1. Demographics nobody cared..”
$= 2. Betweeness
3. Reach
4. Cohesion
+ 2. Strong links to
managers
3. Communications to
+ 2. Function of the
employee
3. Regions
Research team at
IBM while working
5. Tie Strength managers 4. Job type on new
5. Month matchmaking
software.

37. Thank you