ROI, TCO imp for IT in social initiatives

By : |August 20, 2014 0

MUMBAI, INDIA: IT leaders planning to introduce or extend a collaboration and social software initiative may well need a more compelling business case to present to business leaders, according to Gartner Inc.

“As collaboration and social software initiatives are becoming more costly, complex and risky, IT leaders can’t treat them as basic infrastructure rollouts, or simply assume they will benefit the business,” said Nikos Drakos, research vice president at Gartner. “They must make a clear business case, setting out the expected costs and business benefits in an appropriate level of detail.”

While launching a collaboration and social software initiative should improve collaboration in an organization, it does not automatically lead to improved business outcomes.

                                 

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“Despite the compelling reasons for quantifying the business impact of a collaboration and social software initiative, don’t assume that it’s always necessary or appropriate to devise a detailed financial business case,” said Drakos. “In fact, most organizations don’t do this for such initiatives and, in some cases, a less detailed business case is more appropriate.”

For initiatives that do require a detailed financial case, Gartner has developed an eight-step process built on the Gartner Business Value Model (GBVM) which suggests that collaboration with stakeholders from business and finance units will continue throughout the initiative, and each stakeholder will perform different tasks. As social software initiatives don’t always start in the IT organization, the initial driver for the initiative may come from another area of the business. At this stage, the IT leader and other stakeholders should formulate the initiative’s overall strategic vision and objectives, and link these to other strategic business objectives, such as those in the organization’s annual report or in vision statements created by the CEO or other board members.

The challenge in this part of the process, as the firm outlines, is to align the objectives typically associated with a collaboration and social software initiative – such as improving internal communications, enhancing teamwork and improving knowledge capture and reuse – with relevant business areas and business performance metrics from the GBVM. Existing metrics can be used if an organization already measures similar business metrics to those in the GBVM, or new ones can be introduced if none of the metrics in the value model are appropriate.

Gartner recommends that the finance stakeholder must work out what the agreed targeted improvements will mean in financial terms using predefined formulas that link metrics to financial performance.

The total cost of ownership (TCO) can be calculated by adding up all the direct and indirect costs of the collaboration and social software initiative. These include costs relating to software licenses and maintenance, personnel costs, service costs and operational costs over the useful lifetime of the initiative.

The finance stakeholder should calculate the initiative’s ROI based on the previously calculated financial impact of the negotiated improvements and on the TCO calculations.

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