Measuring the ROI of SharePoint in your organizationSharePoint Saturday Philadelphia

February 5th, 2011

Ahmed Hafeez

SharePoint Community in Philadelphia

• Sessions for:

• End Users

• Administrators

• Developers

• IT Pros

• Meetings: Second Tuesday of the month, 5:30 to 8:30 PM, Microsoft Malvern office

• Hands-On Labs: Administrators and Power Users, see website for details

WEB: www.TriStateSharePoint.org (under construction)

CONTACT: info@tristatesharepoint.org

TWITTER: @tristateSP

Meeting Format5:30-6:30 Power User Session6:30-7:00 – News/Q&A/Networking/Food/Sponsors 7:00-7:30 – Open Design – “Problem of the Month” 7:30-8:30 - Developer or Administrator Session

Platinum

Gold

SWAG

Event Organizers

Thanks to our Sponsors!

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Agenda

► What is ROI & why it is important► Why measuring SharePoint’s ROI is hard► SharePoint’s Benefits and ROI– Gartner and Forrester studies

► ROI Methodologies► How to Calculate ROI for your organization► ROI Calculation Demo► Best Practices► Summary

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What is ROI Anyway?

► Return on Investment of course ► But what does it REALLY mean in SharePoint’s

context► What someone is really asking is what are the

tangible and provable benefits of SharePoint and how do they compare to the costs involved

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Why worry about ROI?

► 50% of the SharePoint installations go live without a business case & only 23% had financial justification

► Business case requirement resulted in improved collaboration, better knowledge sharing and less content chaos– Improved Collaboration 45% (AIIM Strategies and Experience 2010)

– Improved Knowledge Sharing 35%– Better Mgmt. of Content 25%– Improved Business Process 22%

► Financial and business justification can be the difference between a project getting approved and getting sackedBusin

ess case and financial ju

stification lead to

better business b

enefits and higher user

adoption

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Why ROI is hard to calculate

► Hard to tie improvement directly back to investment► Hard to measure intangibles► Need inter-departmental agreement► Few organizations have formal process► Collaboration tools themselves provide no financial returns– Unlike an investment in bonds, there is no inherent return– The return on a technology investment is

derived from the new or modified business processes that the technology enables

► ROI models are imprecise (does that matter?)

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Why measuring SharePoint’s ROI is extra hard?

► Calculating and communicating the value of a SharePoint project requires financial, sales, and technical skills– Not a forte of IT staff

► SharePoint is utilized in many different ways but Collaboration is the #1 application –How do you measure the financial benefits of

collaboration?► Key reasons sited for use of SharePoint primarily

consist of 2nd level benefits at best (Forrester Study)

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Why measuring SharePoint’s ROI is extra hard?

► SharePoint is also touted as a information worker productivity tool–How do you measure the productivity of an

information worker?► The reasons for deploying SharePoint and the

benefits are seldom framed in-terms of direct benefits to the business

► Unless you define something clearly you can’t measure it!!!

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Can SharePoint’s ROI be Proven?

► ROI of Web 2.0 and Social technologies has long been a heated topic of debate

► Forrester and McKenzie studies state that there is a significant ROI associated with Web 2.0 and Collaborative technologies

► ROI of SharePoint can be proven if goals and objectives are clearly defined

Forrester Total Economic Impact of SharePoint 2010McKenzie Quarterly The rise of the networked enterprise: Web 2.0 finds its payday 2010

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SharePoint ROI Related Benefits

► Improved productivity – Each employee spends less time each day:• Looking for documents

– Teams need less meetings to accomplish collaboration

– Teams with members in different physical locations can improve communications.

– Employees in service roles spend less time fielding requests for documents, forms or information

– Speedup processes using automated workflows

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SharePoint ROI Related Benefits

► Cost savings– Reduce printing costs as more documents and memos

are distributed electronically internally and externally.– Reduce travel expenses as team can meet and

collaborate online– Reduce phone bills– Reduce need for email storage capacity

► Improved visibility into communications and activities in the organization

► Improved security and regulatory control

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SharePoint ROI Study (Forrester)

Forrester Total Economic Impact of SharePoint 2010

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McKenzie Study on the Benefits of Web 2.0

McKenzie Quarterly The rise of the networked enterprise: Web 2.0 finds its payday 2010

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Key ROI Concepts

► Direct and Indirect benefits► Payback Period (Capital Recovery Horizon)► NPV (Net Present Value)► TCO (Total Cost of Ownership – over the lifetime)► IR (Investment Rate, Discount Rate)► Variance Potential► IRR (Internal Rate of Return)

Measuring the ROI for YOUR organization

► Do not be intimidated by intangible benefits ► Start with a clearly stated goal or objective that directly links to a

measurable business objective– Dig into “improve productivity”, “enhance collaboration”, “manage

content better”, etc. etc.► Make sure you start with intention of solving a business problem

not finding business problem that can be attached to a predetermined technology solution

► Define the business problem, how it is measured & baseline it – A Problem well stated is a problem half solved (Charles Kettering holder of 300

patents)

– Average customer service request fulfillment currently takes 3 hours we want to reduce it to 2 hours while maintaining the same staffing levels

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Project Justification MethodologiesCo

mpl

exity

Financial Value CreationFocus

Low

Hig

h

Total Value of

Opportunity

Balanced Scorecard

Total Economic

Impact

Impact Chain

Analysis

Value Statement

Classic ROI

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Total Economic Impact (Forrester)

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Balanced Scorecard

ROI Guide: Balanced Scorecard by Gary Anthes

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Total Value of Opportunity (TVO)

► Helps compare the value of alternatives► Takes alternative solutions into account by

calculating the opportunity cost of not doing something else

► The TVO of an alternative is the NPV of the option minus the NPV of the best among remaining alternatives

Putting a Price Tag on IT Projects - Bruno Collet

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Sample Value Statement

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Value Statement: Hand-in-hand with ROI

► Objective of a Value Statement is to clearly establish links between benefits and objectives – A value statement focuses more on the qualitative aspects

rather than the quantitative ones, it is simply narrates the benefits without tying it to the bottom-line

– They help overcome resistance, bind together stakeholders, and focus the project around delivering real business value

– They help you see the forest from the trees whereas ROI calculations help you count the trees

– A useful tool to summarize and contextualize benefits of a project in almost all circumstances.

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Impact Chain Analysis: Business Process Decomposition (BPD) Diagrams

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Impact Chain Analysis

ROI

Function

Process 2

Sub 1

Sub

1.1

Sub 2

Sub

2.1

Process 1

Sub 1

Sub 2

Sub 3

Current State Processes

Target State ProcessesFunction

Process 1

Sub 1

Sub 2

Process 2

Sub 1

Sub 2

Current Tech 1

Tech 2Tech 3

Target Tech 1 Target Tech 2

Business Impact

1. Current State -> Target State Business Process Decomposition Diagrams (BPDs)

2. Map Technologies to the BPDs3. Perform impact chain analysis for each level in BPDs

for deltas in technology and process change impact.

Impa

ct C

hain

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ROI Rules of Thumb

► ROI of less than twice the cost of capital should be considered high-risk

► A ROI of 4 times or more of the cost of capital is considered ideal.

► For fast moving verticals recovery time of 1 to 2 years is ideal► High percentage of indirect benefits increase the variance

potential for the project► Indirect benefits that are less than 50% of the overall benefits

are ideal whereas a number of 90% or more indicates high risk to the project

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Employee Efficiency ROI Example► Goals:

– Need to improve the efficiency of the customer support department by 10%– Reduce number of calls by 10%– Improve customer satisfaction by 10%

► Pre-Requisites:– Define what efficiency means for customer support– Baseline current state– Define measures for the desired state

► Measures:– Average number of support calls handled per day– Average resolution time– Customer satisfaction with the resolution

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Measuring Efficiency

► Removed activity a user performs (automation)► Reduced the time it takes to complete an activity► Reduced the time to proficiency for an activity► Restructured the nature of the activity to

eliminate all or portion of the activity► Reduced or removed user errors► Gains can vary significantly by user type► Define target groups clearly and define metrics for

each group separately

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Customer Support Process

Current State

► Phone based support► Tracking system in place► No central Knowledge Base

Baseline► Current 5 calls per employee► Average resolution time 20

hours► Customer satisfaction 7

Desired State

► Knowledge base– Document library, FAQs, Search,

Tagging ► Forums

– Answer on forums– Leverage external experts– Allow users to search

► External Customer Support Portal– Allow creation of cases– Searchable knowledge base/self-

help

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Demo: Calculating Indirect Benefits

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Demo: ROI Worksheet

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Getting Started

Focus

• Start with departmental focus & manageable scope

• Do not be afraid of asking for external help, consulting companies can help

• Identify 3 departments/areas that will benefit the most from SharePoint

Benefits• Identify & document 3 key benefits

(direct or indirect) for each department

• Identify measures for each benefit• Establish a clear link between

benefits and operational change• Baseline existing system

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Getting Started

Costs• Outline a solution and calculate the

licensing, support costs, ongoing admin costs (tricky)

• Calculate the costs of customizations and deployment• Hardware, management software,

3rd party web parts, etc.

Justify• Create a value statement and clarify

business objectives• Select an appropriate ROI method

and develop business justification• Communicate in-terms of direct

business benefits

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ROI Best Practices► Define a clear sponsor organization responsible for ROI helps

improves success of the project and user adoption► Linking business value and milestones into the project life cycle

within IT is critical for IT to realize the full value it is delivering► Identifying the key business metrics for a project and focusing on

them is critical to quantifying business value► Employee productivity measurements require extra analysis, data

collection and partnerships with finance and business units to verify the business value

► Using a common language of business value based on the needs of customers helps build a stronger partnership with business users and customers

Edgewater Overview Technology Management Consulting Firm

Provide a unique blend of specialty IT services Leverage proven industry expertise in strategy, technology

and enterprise performance management Focus on middle and Global 2000 market

Founded in 1992 Headquartered in Wakefield, MA Large North American footprint + 330 Employees +700 clients +2400 projects completed to date Publicly Traded (NASDAQ: EDGW)

Contact Us

To learn more about Edgewater Technology and our Business and SharePoint expertise, contact:

Ahmed Hafeez781-224-9015

ahafeez@edgewater.com

http://edgewatertech.wordpress.com