Calculating the ROI of K-Logs Versus Enterprise Portals

This is a fantastic article that calculates the ROI of “K-logs” — Weblogs used for collaborative knowledge sharing in an enterprise — versus traditional enterprise portals.

I recently read the ROI document produced by Plumtree Software for estimating the value portal software (you have to sign-in to get it, lower right). Let me sum it up quickly for you.

The document assumes a 5,000 person organization.

Portal costs:

Portal license: $2,000,0000 ($400 per desktop for the core package)
Hardware: $110,000
Collaboration and portlet development tools: $675,000
Operational costs: $1,250,000 (very expensive admin)
TCO over one year: $4,035,000 for 5,000 desktops or $807 a desktop

Portal benefits:

Lower cost of delivering web front ends to business apps: $1,200,000
Lower cost of adding a web front end to business apps: $1,050,000
Large document publishing via portal lowers costs of publishing via e-mail: $56,000
Lower extranet, directory, and Intranet management costs: $1,038,000
Lower training costs due to portal integration: $1,800,000
Efficient information delivery lowers compliance costs: $432,000
Collaboration improves project effectiveness: $300,000
Elimination of paper-based distribution of corporate media: $800,000
Employee self service: $182,000
Customer and partner self service: $80,000
Increased productivity via a single Web interface: $2,500,000
Net benefit: $9,342,000 or $1,886 per desktop.

Total ROI of a traditional Portal system: 240%

What is amazing to me is how many of these functions are available via a K-Log network at a small fraction of the price. Here is how I would construct the ROI document for a K-Log portal.

K-Log Costs (high end estimates):

K-Log portal software license: <$250,000 ($50 a desktop at the high end -- using a variety of vendors as models).
Hardware: <$60,000
Custom K-Log portal development: <$100,000
Operational costs: <$300,000
TCO of a K-Log system over one year: $710,000 for 5,000 desktops or $142 a desktop (a well run project could probably cut this to under $75 a desktop).

K-Log benefits:

Lower cost of delivering web front ends to business apps: $1,200,000 (100%, this can be done by personal K-Log systems by template control and self editing of navigation links).
Lower cost of adding a web front end to business apps: unknown (a portion of this could be accomplished by using the low cost CMS that the K-Log system is built on, but I will count this as a zero for sake of argument).

Large document publishing via portal lowers costs of publishing via e-mail: $56,000 (100%, self published files with human understandable version history is easy via a K-Log system)

Lower extranet, directory, and Intranet management costs: $1,038,000 (100%)

Lower training costs due to portal integration: $1,800,000 (100%, I would argue that a K-Log system is even easier to train an employee on than a portal package since this is a system that is in wide use on the Web).

Efficient information delivery lowers compliance costs: $432,000 (100%, through both RSS and K-Log publishing)

Collaboration improves project effectiveness: $300,000 (K-Log networks include discussions, comments, e-mail bulletins, trackback, RSS, and more for collaboration)

Elimination of paper-based distribution of corporate media: $800,000 (100%, RSS — including enclosures — and K-Log publishing)

Employee self service: $182,000 (100%, information and application access is even more under the control of the individual employee in a K-Log network, and therefore more able to radically enhance power users — which typically are some of the most productive employees)

Customer and partner self service: $80,000 (100%)

Increased productivity via a single Web interface: $2,500,000 (100%, easily done through template control and integration of web front ends with employee weblog interfaces).

Net benefit of a K-Log system: $8,292,000 or $1,658 per desktop.

Total ROI of a K-Log system: 1,170%

Other benefits of K-Logs over Portals involve traditional KM goals that Portal software can’t hope to match. In many ways with a K-Log network running on your Intranet you get the all the benefits of Portal software and the best KM system that has yet been envisioned.

Questions and comments: jrobb@oddpost.com

Sincerely,

John Robb