ROI of SharePoint – An Example


In a recent post, I talked about ROI of SharePoint and how there are many hidden “soft costs” within business activities — which are probably not measured in most organizations today.    A good use case for measuring ROI of SharePoint is a set of business activities around managing IT contractors.

Many IT organizations both large and small utilize contractors and consultants. In many global enterprises, you might have several thousand contractors in and out of your organization over a calendar year. The process of hiring contractors and consultants is often times a painful one. It takes weeks if not months, lots of back and forth emails, paper forms and approvals, resumes, interviews, rate discussions, on-boarding, and more… Project timelines are impacted and the demand for IT project requests starts to backlog because it takes too long to get the right IT resource into your organization and onboard. In the absence of an expensive “vendor management” system, the end to end process can seem like a chaotic dance of emails, paper, and documents.

Just as there is a cost in hiring a full time employee, there’s a cost of on-boarding a contractor. Additionally, if you’re not tracking vendors, candidates, or rates, how do you know you know you’re getting the best candidate for the lowest rate? Do you know the average bill rate of your contractors or for a particular vendor? Are you measuring the cycle time for an IT manager to initiate a resource request through the on-boarding? Do you know the dollar impact resource delays have on project schedules and costs? Do you know what metrics you should be measuring at all? These types of questions beg for a solution built on SharePoint to help you manage the information and documentation, communicate status, and report on key performance indicators (KPIs) you indentify to be important to your organization.

Before you even begin to start building your solution on SharePoint, you’ll want to begin by mapping the end to end business activities, approvals, and flow of information and documents. The next step involves developing an “information architecture” with the appropriate content types and metadata you are looking to capture. Part of this exercise involves understanding what KPIs you are looking to measure as that will drive some of your taxonomy. Where possible, you also want to attempt to estimate time and dollar costs of the existing process so you can compare those estimates after you implement the solution built on SharePoint. There are obvious hard costs like the hourly rate of a resource. Soft costs might be the time required for approvals, time waiting for hiring decisions, or interview feedback. There are also less obvious soft costs such as cost of turnover, lost productivity, low morale, lost sales, or missed opportunities.

So let’s look at an example to see how much lost productivity we might find in this example of IT contracting staffing requests:

  1. Let’s assume you receive about 2000 IT staffing requests a year.
  2. The average processing time for fulfilling IT staffing requests is on average 6 weeks (or 240 working hours).
  3. The lost calendar hours waiting for staffing requests to process would equate to 480,000 lost hours per year waiting (2000 requests * 240 hours waiting per request).
  4. Those 480,000 total calendar hours divided by 24 = 16,667 days total waiting.
  5. Multiply 16,667 days waiting times 8 hours in a day = 133,336 Lost Productive Work Hours Waiting for IT Staffing Requests in this example.
  6. The average hourly rate of your employees (those submitting and fulfilling the requests) is estimated at about $55/hour.
  7. $55 * 133,336 lost productive hours = $7,333,480 as the Total Cost of Loss in Productivity

Once you understand the end of end process and estimate the current loss in productivity involved in the current set of business activities, you can then begin to set a target such as reducing the request fulfillment time by 50%.  Then you can begin to leverage the capabilities of SharePoint.  The assumption is you probably already have it inside your organization and all you need is your own Site Collection.  The costs are minimal and you can now provide IT managers a place to request resources via a centralized SharePoint web form and self-track the progress of their requests and candidates throughout the interview process.   You can empower the individuals who work with outside staffing agencies to manage the candidates and resumes, present them in SharePoint to the hiring manager and include the in-flow of information and documents all within SharePoint lists and libraries with appropriate metadata.   Managers can enter feedback and executives can approve billing rates.  Lastly, you can begin to report to executives and measure cycle times, average billing rates, and more — all from the data and information captured in the solution built on SharePoint.

Just imagine this SharePoint solution allows you to reduce the time it takes to fulfill IT Staffing requests by 20% or 50%?   In our example, that’s a cost savings of millions that are measurable and easily communicated to executives and business leaders to justify the cost of SharePoint and showcase the value and ROI of the technology platform.

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2 Responses to “ROI of SharePoint – An Example”

  1. Jeez I’m suprised I never saw this blog before. The best bit of advice I can give to people who want to try and go up against a CFO on the ROI side of things is to learn about discount cash flow (DCF).

    You need to account for risk by discounting the expected rate of return by the risk free rate. So for example, if I could take all that cash that I would spend on SharePoint and put it in the bank risk free and still get say, a 6% return, then my return for SharePoint needs to beat the risk free rate of return.

    Anyone who knows finance knows that when you discount returns to account for risk can make a signficiant difference in the numbers.

    I write about it here and include a downloadable spreadsheet

    http://www.cleverworkarounds.com/2007/11/17/learn-to-talk-to-your-cfo-in-their-language-part-1/

    Come to think of it, I never got to write about the risks of DCF and how to do it even better using monte carlo

    regards

    paul

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