The document discusses measuring the return on investment (ROI) of SharePoint implementations. It explains that ROI is difficult to calculate for SharePoint as benefits are often intangible. However, studies have shown ROI can be proven by clearly defining goals. The document provides examples of ROI methodologies and benefits of SharePoint like improved productivity. It emphasizes starting with a clearly defined business problem and metrics to measure impact. A demo shows calculating indirect benefits and sample ROI worksheets. Best practices include linking value to project milestones and using common business language.

1. Measuring the ROI of SharePoint in your organization SharePoint Saturday Philadelphia February 5th, 2011 Ahmed Hafeez

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10. 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 2/10/2011 4

11. 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 2/10/2011 5

12. 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 sacked 2/10/2011 6 Business case and financial justification lead to better business benefits and higher user adoption

13. 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?) 2/10/2011 7

14. 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) 2/10/2011 8

15. 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!!! 2/10/2011 9

16. 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 2010 McKenzie Quarterly The rise of the networked enterprise: Web 2.0 finds its payday 2010 2/10/2011 10

17. 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 2/10/2011 11

18. 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 2/10/2011 12

19. SharePoint ROI Study (Forrester) 2/10/2011 13 Forrester Total Economic Impact of SharePoint 2010

20. McKenzie Study on the Benefits of Web 2.0 2/10/2011 14 McKenzie Quarterly The rise of the networked enterprise: Web 2.0 finds its payday 2010

21. 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) 2/10/2011 15

22. 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 2/10/2011 16

23. Project Justification Methodologies 2/10/2011 17 Balanced Scorecard High Impact Chain Analysis Total Economic Impact Total Value of Opportunity Classic ROI Complexity Value Statement Low Financial Value Creation Focus

24. Total Economic Impact (Forrester) 2/10/2011 18

25. Balanced Scorecard 2/10/2011 19 ROI Guide: Balanced Scorecard by Gary Anthes

26. 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 2/10/2011 20

27. Sample Value Statement 2/10/2011 21

28. 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. 2/10/2011 22

29. Impact Chain Analysis: Business Process Decomposition (BPD) Diagrams 2/10/2011 23

30. Impact Chain Analysis 2/10/2011 24 Target State Processes Current State Processes Impact Chain Tech 3 Business Impact Tech 2 Current Tech 1 Target Tech 2 Target Tech 1 Current State -> Target State Business Process Decomposition Diagrams (BPDs) Map Technologies to the BPDs Perform impact chain analysis for each level in BPDs for deltas in technology and process change impact. ROI

31. 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 2/10/2011 25

32. 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 2/10/2011 26

33. 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 2/10/2011 27

34. 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 2/10/2011 28

35. Demo: Calculating Indirect Benefits 2/10/2011 29

36. Demo: ROI Worksheet 2/10/2011 30

37. Getting Started 2/10/2011 31

38. Getting Started 2/10/2011 32

39. 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 2/10/2011 33

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