Companies are spending in order to save

In these tight economic times corporations are forever looking for ways to reduce costs and increase efficiency. But in the world of information technology it is often necessary to spend money in order to save money. Creating comprehensive corporate portals is a good example of this.

Though designing, building and maintaining a portal can easily run into the millions of dollars, the potential for savings also can be enormous. Many large companies have phased out entire internal travel offices in favour of a portal employees can visit and make their own travel arrangements. Others have dramatically reduced the cost of printing and distributing reports while at the same time increasing accessibility to information.

Yet calculating an ROI for a portal is still not done by the majority of companies which install them. In fact 41 per cent of companies surveyed this year by Forrester Research Inc. (for a series of portal reports) are not even measuring the benefits while another 20 per cent don’t know if their company is doing a formal ROI.

Considering the investment, these numbers might be a little surprising. But measuring a true ROI on a corporate portal is a little like gauging public opinion. The numbers are pretty much what you want to make of them.

“Some of these vendors, like Plumtree and SAP for instance, are paying so much attention to pushing ROI propaganda here that they actually have task forces now that they will send to your organization and draw up an ROI report for you,” said Nate Root, the author of one of the Forrester research papers.

“In my estimation they are vastly overestimating the real ROI,” the Cambridge, Mass.-based analyst said.

But in their defence, Root was quick to point out that measuring a portal ROI is no easy task. “It is a tough technology to peg an ROI on.”

He said there are some finite areas to measure ROI, like when a portal replaces software on client PCs which in turn reduces IT costs or instances where a portal lets you eliminate an HR call centres with online processes and thus reduce staff.

“But most of the benefit is intangible,” he said.

On the other hand, intangibles can add up to large potential savings.

“Basically anything that you can think of in a company that employees accomplish by calling someone else in the company and getting them to do something for them, that is a perfect target to be replaced with online services,” Root said.

Ricoh Canada Inc. has used its portal to reduce paper waste and increase accessibility to information. Since the company’s portal solution is part of a beta test with TopTier Software (acquired this year by SAP AG), there is no cost associated with the implementation other than maintenance.

Regardless there are savings for Ricoh.

“Prior to the portal we used print, on a bi-weekly basis, almost 500 reports…and then distribute (them) by hand,” said Paul Johnson senior vice-president of operations Ricoh in Mississauga, Ont.

While Johnson was involved in getting a Baan ERP implementation up and running, they decided to stop producing the reports. “There was not a lot of screaming about not having them…which told you a lot of the reports were hitting the garbage pail without being utilized,” he said.

Now there is a large demand for specific reports such as the type of information the ERP system can provide, he said.

Root is also not set on the idea that a company really has to measure portal ROI in the same manner as other capital expenses.

He likes to compare portal technology to a telephone system. Companies will eventually treat it as part of their infrastructure. “No one asks you to justify the ROI of the phone on your desk,” he said.

saving cash

Telus Corp.’s savings with its wireless portal solution will, in part, be due to reduced hardware costs, according to Nadine Filice, manager of research with Telus in Edmonton.

Its portal, which is both wired and wireless is primarily designed to ease the process for employees to get information and applications. Telus’s wired portal has about 26,000 users while its wireless solution, to be implemented next year, will start with about 400 to 1,000 users. Here the savings will be dramatic, she said.

One of the large areas of savings will be the cost savings associated with using PDAs instead of laptops to access the corporate portal. She said there is a savings of about $6,000 per users and with 3,000 eventual users the savings will be in the millions.

“If we concentrate on those (wireless) guys using the portal then we don’t have to give them the massive hardware,” she explained.

As for the savings associated with the wired portal users, she said the numbers will not be as dramatic as with the wireless users, but substantial nonetheless.

For Telus, the issue is not if there will be an ROI but when.

“It will be hard to show [an ROI] especially in the first say three to six months,” she said.

“[But] we will definitely see something by the end of next year but I don’t think it will be as much as we will see with having our workforce mobile,” she added.

For Root, the key to a successful corporate portal is getting employees to use it. A simple method is to give them no choice.

“When you flip the proverbial switch and turn this thing on, you have to simultaneously take away the safety net,” he said.

This tactic, not surprisingly can not be used outside the corporate domain.

“For your external customers and partners you can follow what retail companies are doing, not shutting the doors to stores just because they have an online store,” Root said.

“When you are dealing with your customers you want to err on the side of getting their business no matter what, so you can’t really take away your safety net.”