Posts tagged ‘cost’

July 1, 2009

How to Determine the True Cost of Microsoft SharePoint


From CIO Magazine….  great article.     Please follow me on Twitter…

SharePoint has unquestionably garnered a lot of attention from business users and IT. Toby Bell, Gartner Inc.’s research vice president, calls SharePoint 2007 “nothing short of a phenomenon.” He says the growing number of searches for SharePoint on Gartner.com indicates high interest in the product and some confusion about its value.

“For Microsoft and its partner ecosystem, it’s easy to see SharePoint becoming the billion dollar baby in ECM [enterprise content management],” says Bell via e-mail. “[However,] estimating the potential ROI of SharePoint and related products for enterprise buyers is harder.”

Indeed, the true costs of deploying and supporting SharePoint are not well understood. Fundamental misconceptions about SharePoint prevent organizations from deploying it effectively and realizing its value. Many IT executives view SharePoint as a shrink-wrapped product that can be installed and configured in hours or days. In fact, it cannot. SharePoint is truly an enterprise information platform and must be treated as such. That means SharePoint configuration work needs to be well-planned and designed—not conducted in an ad-hoc fashion.

What’s more, because SharePoint has been popular among users, SharePoint sites have popped up all over enterprises, resulting in what is known as “SharePoint sprawl.” The ability for users to easily create and manage a SharePoint site is one of the product’s benefits, but the subsequent sprawl takes up lots of storage space, increases costs and makes it harder for users to find documents due to inconsistent metadata and tagging.

This article explores the true costs of SharePoint—both expected and unexpected. By gaining a firm handle on these costs, IT leaders will be able to identify whether the product is right for their organizations and will be better prepared to take advantage of SharePoints many benefits.

Expected Costs

When determining the true cost of deploying SharePoint, CIOs need to consider the expenses typically associated with rolling out any new software product, such as the cost of licenses, server software, virus protection, hardware and infrastructure, and IT staff. Here’s a breakdown of the costs IT leaders can expect to incur when deploying SharePoint.

1. SharePoint Product Licenses: Microsoft offers different licensing options for SharePoint. Pricing for each of these options can vary considerably based on an organization’s licensing agreement with Microsoft. In this regard, it is important for IT leaders to determine if they are going to be employing the free version of SharePoint, known as WSS (Windows SharePoint Services), or if they’ll use MOSS (Microsoft Office SharePoint Server) Standard, Enterprise or SharePoint for Internet Sites.

WSS is the base level of SharePoint that is freely available with Windows Server 2003 and above. No client license is needed for it. MOSS Standard offers additional functionality including records management capabilities and enhanced searching. MOSS Enterprise offers even more: Web-based electronic forms (InfoPath on the Web), the business data catalog (BDC) for connectivity to databases, and Excel services for rendering Excel spreadsheets via the Web in SharePoint. Both versions of MOSS require the purchase of a client access license.

The version of SharePoint a CIO selects will depend upon the functionality his or her organization needs, and the cost of those licenses will in turn depend on the number of instances of server software that is running at any given time and the number of users.

2. Microsoft SQL Server Licenses: The purchase of SharePoint doesnt include the cost of Microsoft SQL Server, which is used to store the actual SharePoint content and corresponding metadata. In most cases, companies pursuing SharePoint are already running a SQL Server. If so, the SQL Server database servers could be used, or an additional SQL database may need to be installed and configured as part of the SharePoint server farm. The optimal database configuration will be predicated upon requirements for scale, redundancy and performance. Pricing will vary significantly depending on the configuration and the type of software license agreement a company has with Microsoft.

3. Windows Server Software: All SharePoint Servers will be required to run on Windows Server 2003 or Windows Server 2008 regardless of whether they’re physical machines or virtual machines. The SharePoint farm can be fully contained, run on one Windows Server, or the farm can be distributed across multiple Windows servers depending on requirements for scale, redundancy and performance. Pricing will vary for Windows server depending on the configuration and type of license agreement.

4. Virus Protection and Backup: SharePoint platforms need to be secure. To that end, Microsoft offers a number of virus protection and back-up products specifically geared toward SharePoint. Additionally, a number of third-party suppliers provide virus protection and backup products for SharePoint. The prices for these products vary. They can be user- or server-based or both.

5. Hardware and Infrastructure: The hardware required to run a SharePoint environment includes the actual computers functioning as servers (for MS SQL database, SharePoint Web front-end servers, SharePoint application servers), the disk storage (local or a storage area network), and the necessary networking hardware and workstations. Most companies already have the networking and workstations in place to support SharePoint; what they need are additional server-based components. If SharePoint is being employed over a WAN, for instance, CIOs may want to explore infrastructure optimization appliances, which can be deployed as software running on industry-standard servers or as pre-packaged hardware solutions. Software-based appliances start at $5,000 and hardware-based appliances start at $18,000.

6. IT Staff: The IT staff needed to support a SharePoint implementation will depend on a number of variables. For example, if users are building their own sites and content with basic SharePoint features, the IT support costs will be lower.

However, if an IT department is using SharePoint as a development platform for business applications, costs will increase because developers and quality assurance testers will be needed. Business analysts, project managers, IT configuration staff and IT help desk staff may also be needed. The amount of time these staff members devote to implementing and supporting SharePoint depends on the pace at which SharePoint is being deployed and on how much advanced configuration and development work is needed.

7. Third-Party Products: Like all software, SharePoint is not perfect in that it does not solve every problem perfectly. Tom Rizzo, Microsofts senior director for SharePoint, says that the product was designed to provide a rich set of functionality, and where gaps exist, third-party vendors have introduced specific products to fill such voids. Examples of third-party products include tools for image capture, metadata replication and workflow supplements. SharePoint, more so than any other enterprise content management (ECM) platform, has set the stage for a global market of third-party products. The cost of these third-party products varies.

8. Configuration Management: SharePoint 2007’s phenomenal growth has occurred despite the fact that it doesnt have overly mature capabilities for configuration, replication, and the promotion of changes to code. As a result, additional time should be allocated toward configuration management. The cost of configuration management will be predicated upon an organization’s process for promoting code from one environment to another. For example, for an organization with finely tuned and documented processes, it may take a week or more to prepare this type of configuration management effort for SharePoint.

9. Consulting costs: IT organizations may need to hire consultants to help configure SharePoint’s many administrative options and to help integrate third-party products with it.

10. Quality Assurance: QA testing should extend beyond out-of-the-box functionality to include testing of custom development, the integration of third-party products, and any formal configuration exercises. As a general rule, CIOs should allocate five to 10 percent of their overall SharePoint project effort to quality assurance.

Unexpected Costs

It’s the unexpected costs—the costs that IT leaders don’t think to include into their business cases for SharePoint—that eat into their ROI. To get the biggest bang for your SharePoint buck, factor these expenses into your SharePoint strategy.

1. Governance: SharePoints greatest advantage—its simplicity and ease of use—is often its biggest curse. Because it’s so easy to use, adoption is high. The drawback of high user adoption is that the product is used inconsistently. As a result, design and governance standards need to be created.

Time and effort needs to be put toward developing and maintaining a SharePoint governance plan that outlines the type of content that should be loaded into the system, records policies, standard processes and metadata constructs, and guidelines for approaching and supporting SharePoint projects. IT leaders don’t need to design an entire governance strategy up front. Instead, they should do some initial planning and let their governance standards evolve to reflect changing user patterns.

2. Change Management: After deploying SharePoint, users will need to change their approaches to creating and managing information. Given people’s reluctance to change, a proactive change management program is recommended. This may be as simple as a formal communication from the executive sponsor stating the importance of SharePoint. It could also be an internal newsletter, e-mail campaign to promote the proper use of SharePoint, and “lunch and learn” demonstrations to give people a sense as to how SharePoint can make their lives easier. The costs of the change management effort will vary depending upon its intensity.

3. SharePoint Application Training: Even if your users are familiar with SharePoint, using it to solve a specific business problem (such as automating a contract management or accounts payable process) typically requires some training. Training can be performed by your staff or outside consultants. Since SharePoint’s user interface is intuitive, the training effort for end-users is usually measured in hours rather than days or weeks while SharePoint administrators may need a few days of training.

5. SharePoint Community Participation: The SharePoint community is unlike any other ECM community. It is collegial, always on and continually expanding. On SharePoint Saturdays, for example, SharePoint experts volunteer their time to speak at Microsoft offices. There is no charge to attend one of these presentations, at which hundreds of people gather (a testament to the growing role of the SharePoint community.) SharePoint Saturdays are a great source of information, but should you elect to attend these events or the many SharePoint conferences taking place around the world, factor travel expenses into your SharePoint cost equation.

6. SharePoint Code Management: When development takes place in SharePoint, it should be managed in a controlled and traceable manner. To that end, CIOs should invest in code management and plug-ins for Visual Studio or other integrated development environments that allow for the creation and management of SharePoint source code. The costs for such tools can range in the hundreds of dollars to thousands of dollars.

SharePoint: Worth the Costs?

After digesting all of this information, you may wonder if SharePoint is worth all of the expense.

The fact is, managing enterprise information and processes is not a trivial exercise. More than 80 percent of enterprise information is stored as unstructured content. SharePoint gives structure to that content and makes it easy for users to find and access.

If CIOs treat SharePoint as off-the-shelf software, the costs will indeed be onerous. However, if CIOs treat it as an enterprise information platform and content management system, SharePoint will yield tremendous value—and potentially at a fraction of the cost of comparable ECM solutions.

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June 30, 2009

Determining the ROI of Enterprise 2.0


http://blogs.zdnet.com/Hinchcliffe/?p=334

Determining the ROI of Enterprise 2.0 | Enterprise Web 2.0 | ZDNet.com

Despite recent statistics showing that Enterprise 2.0 tools have spread to about a third of businesses globally, there remain ongoing questions being asked in the enterprise software community about the real returns that they provide to businesses that deploy them.Many IT solutions create value only after traveling through an indirect chain of cause and effect. Certainly blogs, wikis, and social networks are popular on public networks, but does that translate to meaningful bottom line value to organizations? In other words, is Enterprise 2.0 truly strategic in the unique way that information technology can so often be?

This is a key question since actual penetration of these tools is almost certainly lower than the one third figure I mention above. Most organizations today, even the ones where the applications are available to employees currently, are not yet exhorting workers to adopt these tools en masse despite a suite of compelling arguments and a growing set of case studies. Even impressive citations such as the recent TransUnion Enterprise 2.0 case study that claims an eye-opening 50x return on investment (using the most basic ROI formula for calculating returns) are not yet initiating widespread inquiry.

The ROI of Enterprise 2.0 and Social Computing

Instead, while we’re seeing widespread interest and acceptance of Enterprise 2.0 in the workplace, there is still mostly a wait-and-see attitude amongst IT managers and business leaders at the moment. The reasons for this seem to fall into three general categories:

One is an broad wariness of a new horizontal information technology approach that purports to solve so many problems and will overlap extensively with existing solutions from e-mail and instant messaging to content/document management and knowledge management systems, to name just a few. Other related concerns are feelings that workers already have a lot of software to use today, that the tools already exist in the organization (see my Enterprise 2.0 and SharePoint discussion a few weeks ago), or that the available tools aren’t fully enterprise-ready yet.

A second set of issues is related to corporate culture and its fundamentally hierarchical nature, which seems anathema to the flattened, highly social nature of Web 2.0 in the enterprise. At this point, it’s becoming increasingly clear that in some tightly controlled, top-down organizations, culture is indeed an impediment to the use of emergent, social computing. Fortunately, there is now enough evidence visible in current case studies that many industries can indeed benefit from Enterprise 2.0.

The last issue is one that has bedeviled software and its strategic application to business since the very beginning, namely the accurate predicting of the return on investment of an IT solution. Andrew McAfee, who originally coined Enterprise 2.0, summarized the challenges succinctly a while back in The Case Against the Business Case. The central problem? Assets that are intangible, such as knowledge, social capital, and situated technology — which Enterprise 2.0 is primarily focused on — rarely have direct impact to financial outcomes such as revenues and profits. Its their downstream effects that generate the most value to the business.

There have been a number of good discussions on this topic lately including a detailed exploration of the issue by Hutch Carpenter, where he concludes that “software ROI is only as predictable as the activity for which it is used” and Martin Koser’s discussion on the challenges of coming up with the concepts and measures for “collaborative performance”. Susan Scrupski has also been exploring the ROI of Enterprise 2.0 and in her call for case studies recently highlighted that while we have a good number of them, there is still not enough ROI coverage in a wide set of industries.

However, a key aspect of the ROI issue is that the strategic capabilities represented by Enterprise 2.0 are primarily emergent in nature, instead of carefully aimed at and unleashed at specific problems. Classical technology investments such as assembly lines and industrial automation could be quantified because their most significant effect was direct and measurable. Many IT solutions (think e-mail or service-oriented architecture) are general purpose and tend to be indirect and create value only after traveling through an indirect chain of cause and effect to enable a positive business outcome. The problem with this is that it’s very hard to either measure or predict accurately, especially since IT solutions tend to have longer chains of cause and effect than other technologies. While this often builds up accumulated value by its ability to cascade across a business, it’s very unsatisfying from the traditional perspective of investment in X by spending Y to achieve a predicted return Z.

Cause and Effect Chains with Enterprise 2.0 Tools

The net result of this lack of clarity is a hold up on the explicit use of Enterprise 2.0 for strategic benefit by businesses, even as the tools are proliferating, often virally, in many organizations. For now, the tools are often used in a localized or ad hoc fashion, or at very least, without a concerted business-wide effort to systematically capture the perceived business value. This question is important since an accumulating body of knowledge is pointing to potentially dramatic business returns with Enterprise 2.0. If these continue to be borne out, it will affect the competitive and financial positions of the companies that are proactive and therefore their long-term marketplace success. As I outlined recently in my Economics 2.0 session at Web 2.0 Expo last week, Enterprise 2.0 and other new modes of business seem to herald new, much more efficient — and just as significantly, fundamentally different — ways of running our businesses.

What will change the current status quo? A preponderance of case studies in the affirmative? Sustained, first-hand experience of the early benefits convincing senior management? Lack of reports of negative outcomes like data theft and excessive socializing? Yes, it will be all of these, but like the well-known examples of successful emergent systems such as termite colonies, bird flocks, animal herds, business organizations, and now online communities, there are real limits on the ability to direct emergent systems towards focused outcomes. In the end, all one can actually do predictably is enable the possibilities and not prevent them.

Innovation often comes from where you least expect it and harnessing collective intelligence, the core principle of Web 2.0 as well as Enterprise 2.0, is the very art of eliciting value from emergent systems such as the Web and our intranets. That this value is forming the bulk of the networked economy (open source software, social networks, social media sharing, etc.) is one of the signature lessons of the era of open business models and 2.0.

Update: Based on some feedback to this post over the last day, I would like to make it clear that there is little doubt that Enterprise 2.0 delivers ROI today, at least on the collaborative side (the jury still seems to be out on the social networking side). Recently, researchers have even been able to put a real numerical value on social connections. My point is just that it’s difficult to determine where the returns (often the most important ones) will appear when the tools have so many downstream effects. That’s not to say either that Enterprise 2.0 ecosystems can’t be directed to some degree to achieve business objectives. In fact, I believe the the next generation of workers will be experts at achieving their goals by eliciting and then harvesting the knowledge and capabilities they need over the network.