Developing a business case for any IT investment is a complicated exercise. But building a business case for SharePoint poses specific challenges because much of its ROI is intangible: SharePoint deployments can lead to process improvements, but it’s not always easy to quantify the dollar value of those process improvements.
Any business case—whether for SharePoint or any other system—typically requires various financial measurements, such as return on investment (ROI), total cost of ownership (TCO), discounted cash flows (DCF), net present value (NPV) and internal rate of return (IRR), to be estimated. You’ll need to figure out which of these measurements your financial analysts require in a business case for a software implementation.
Fundamentally, a business case for any software implementation should include three core points: the hard savings, the soft savings and risk mitigation. A business case specifically for SharePoint should also address the product’s rich functionality and its broad user support—both of which are distinct selling points for SharePoint.
When these five points are well-defined and properly communicated in your business case, it will unquestionably accelerate acceptance and funding of SharePoint investments.
[ For more on SharePoint, see SharePoint 2007 Demystified: How to Cash in on Collaboration Tools. ]
A business case without a well-framed model of SharePoint’s costs will not pass the proverbial sniff test with most financial analysts, and rightfully so. However, with the costing model established (see How To Determine The True Costs Of SharePoint), the business case can progress.
The first element of any business case for any software application is the cost savings that will result. Organizations that deploy SharePoint for imaging-based solutions, for example, can demonstrate how physical storage and retrieval costs are minimized or eliminated. Another example of imaging-related hard savings is the elimination or reduction of shipping costs: Because SharePoint stores documents in one centralized, online environment, documents no longer have to shipped to various locations. Finally, SharePoint often leads companies to consolidate or eliminate other enterprise content management systems a company may be using, which in turn can result in measurable savings on software licenses, software maintenance and technical expertise.
Russell Stalters, BP’s head of information and record architecture, is planning to accelerate his company’s SharePoint deployments because of the substantial savings the product is introducing. “SharePoint projects are coming in at approximately 50 percent of the overall cost of traditional enterprise content management (ECM) systems,” he says, adding that SharePoint’s benefits go beyond the cost savings associated with reducing software licenses.
The second element of your business case deals with soft savings—the less tangible benefits that result from deploying software and systems. In many cases, the soft savings that stem from SharePoint are efficiency improvements, such as the amount of time a person or group will save as a result of using SharePoint to automate manual business processes or to retrieve stored documents.
You can substantiate your claims of efficiency improvement by performing time and motion studies, which track the amount of time it takes someone to perform an activity before and after SharePoint is implemented. These typically require a fairly in-depth analysis of the workers’ activities, and it is important not to overstate the workers’ newly available time. For example, if a SharePoint process is introduced that allows a worker to complete a one hour job in five minutes, you should not recognize all 55 minutes as savings. It’s safer to estimate a smaller portion of the time savings.
Another SharePoint-related efficiency improvement is the reduction of the time it takes to produce an important deliverable in your organization. For example, by employing SharePoint for case management, you may be able to demonstrate how SharePoint can reduce the closure of a case from 10 days to five. If the speed of case closure is an important factor in your organization, you should include it in the soft savings portion of your business case.
The third section of a SharePoint business case describes the risks a company will mitigate by using the product. Specifically, SharePoint serves as a redundant repository for storing electronic renditions of documents, so companies often use it as part of their disaster recovery strategies. If your company is concerned about disaster recovery and business continuity, you might be able to amortize a portion of the system’s costs over the probability period—the time during which a catastrophe may be likely.
Additionally, because SharePoint is widely used around the world, there’s a readily available pool of resources who can support it. In this regard, SharePoint reduces some IT staffing risk.
SharePoint’s vast functionality—which is enhanced by add-on products from Microsoft partners—has played an important role in many purchasing decisions. Indeed, organizations regularly employ SharePoint as a web content management system, for collaboration, records management, and for its advanced search capabilities. They use one product for multiple purposes, rather than having to purchase multiple products to satisfy their various functional requirements.
That’s the point you want to make in your business case: By leveraging SharePoint and add-ons from Microsoft partners, your enterprise will be able to do more with less. You’ll save money because you’ll be licensing fewer products, and because you’re licensing fewer products, your software maintenance costs will also be lower. Additionally, if your organization is already a Microsoft shop, you may be able to save even more money by aggregating all of your Microsoft product licensing and software maintenance (Software Assurance) purchases under one software license agreement.
Your business case for SharePoint should also explicitly state the key capabilities that the system offers and how those capabilities will reduce application development and on-going maintenance costs.
For example, SharePoint’s extensive functionality allowed global nonprofit Conservation International to substantially reduce the time and cost to deploy a website. “We attempted to build a complex system without SharePoint, and the process took two developers three years,” says Alexandre Dinnouti, Conservation International’s director of web applications. “Ultimately, we realized that we would never finish the project. We redirected the resources to utilize SharePoint 2007, and we had the first version of the system ready in just under six months.”
As SharePoint adoption continues, it has become almost as critical as e-mail to an organization’s daily business functions. Your business case should point out that because users are familiar with the product, business requirements analysis and migrations will take less time than typical software deployments and training costs will also be mitigated. Arguably, you could recognize these cost and time savings in the discussions of hard and soft ROI, but I recommend that you call them out separately because quantifying the specific cost reductions associated with user adoption may be challenging.
At Analog Devices, a global manufacturer of semiconductors, training costs were mitigated because users largely adopted SharePoint on their own. Says CIO Peter Forte: “SharePoint has seen tremendous growth with Analog, and this has come about primarily as a result of grass roots initiatives to leverage the technology that user communities took upon.”
Forte adds that because users took an active interest in leveraging SharePoint, they became more proficient with it and needed less support from IT. Even though they needed less support from IT, they ended up collaborating with IT more effectively. These factors are difficult to quantify into a hard or soft ROI, but they are worth noting in a business case.
Once you’ve drafted your business case, prepare a summary document that touches on the hard ROI, soft ROI, risks mitigated, features and user adoption. Your summary document should also point out the key risks and assumptions you used to prepare the business case.
In the sections on hard and soft ROI, consider introducing three distinct estimates: conservative savings, aggressive savings and a moderated or balanced scenario. Plan conservatively and make sure that you have your supporting details in order.
Your business case should also address change management. Regardless of SharePoint’s ease-of-use and broad user adoption, it still represents a change for users, and if that change isn’t addressed in the business case, the system may not introduce the expected value.
Finally, the business case should emphasize that SharePoint will be deployed in a stepped and controlled fashion. Following these recommendations will enable you to develop a strong business case for SharePoint and a sound foundation for your implementation.
Russ Edelman is president of Corridor Consulting, which specializes in the design, development and deployment mission critical SharePoint solutions for Fortune 5,000 organizations. Corridor is also the co-founder of www.SharePointGovernance.Org, a free site for organizations wishing to share the good, bad and ugly of SharePoint Governance issues.