Blog 6 - ROI and IBM's Social Collaboration Suite

This weeks topic of discussion was the Return on Investment (ROI) of social technology implementations. I'll admit, it was hard to find a case which strictly followed social technology implementations, versus social media implementations which were far more popular, but after lots of searching, I was finally able to find one! Sort of.

My case study is based on the Total Economic Impact Of IBM Social Collaboration Tools report published by Forrester Consulting in 2010. Forrester Consulting was commissioned by IBM to evaluate the potential benefits that can be accrued through the use of IBM Social Collaboration Tools. In doing so, Forrester analysed a large, unidentified multi-national manufacturing corporation which had recently implemented IBM's Social Collaboration Tools as the focus for this study. It should be noted at this point that IBM and Forrester were in communication during this study, but Forrester claims that it retained editorial control and that the findings were fair and unbiased

IBM's Social Collaboration Tools suite is made up of three enterprise-grade software applications which focus on certain parts of improving communication, connections and collaboration. The three applications are:

• Lotus Connections - focused on developing, nurturing and upholding contacts for staff
• Lotus Sametime - an application which provides unified communications across many platforms - voice, data, video and telephony.
• Lotus Quikr - team collaboration software.

While social media implementations can provide benefits from a marketing and sales standpoint, social technology has the benefit of being able to improve just about all areas of a business - as they can re-organise and optimise workflows, access to information and the "chain of command" for both customers and workers.

When interviewed by Forrester, the unidentified company noted many intangible benefits from implementing the Social Collaboration Tools:

• The unified collaboration tools suite was far easier to navigate and communicate using as there were no incompatibilities
• Easier integration environment, good search features, tagging, and a decentralised administration
• A global roll out meant that the entire company was brought up to speed.
• The product had a real impact on the company's emerging markets - allowing employees in developing markets access to the knowledge and advice from other employees across the globe.
• Virtually no training was required due to the familiar nature of the interfaces. The help desk had so few inquiries that the company did not need to track them.
• The company noted a snowballing ROI as the tools shall provide use in ways that cannot be imagined currently.
• It was noted that within six months of the roll out, natural interactions were occurring on the platform - without the cue from higher management.

These benefits are, to some degree, to be expected when investing in an enterprise level solution. With a single - or very few - compatible platforms which all work is conducted on, or at least on a social level means that work can be completed faster. These familiar social tools granted access for quick, open channels to be setup, and meant that the company was able to better respond to the micro-level problems faster, preventing any issues from growing.

The company had two specific areas it felt that there intangible benefits from - Research and Development and Sales. 

The collaboration tools allowed more ideas to be generated, and more employees to chime in with their suggestions, whilst still maintaining intellectual property rights. Better internal communication meant that research staff could find out end user information from the sale staff which meant better requirements, specific technologies and innovations could be established. 

While sales benefited a little less than R&D, the company found that it was better able to support it's clients as it was able to transfer issues to the right department faster, and in the case that support staff could not solve a problem, knowledge could be sourced from other areas. Because the sales people were spending less time communicating and doing paperwork, they were able to spend more time selling and making sales pitches.

The third part of the report details the hard (tangible) benefits through a Total Economic Impact Matrix featuring four different sectors.

• Revenue Of Incremental New Products. It's likely 0.5% (the likely estimate) of new products would be implemented sourced from an idea or use of the collaboration tool. This, in combination with the estimated profit and stock numbers totals an incremental revenue of $2.1m for the company
• Increased Revenue from Faster Time-to-market. The use of the collaboration tool removes unnecessary steps in the production process, and can streamline things. This results in $336,000 of regained value for the company.
• Revenue of Incremental Sales. The use of the collaboration tool to utilise marketing opportunities and knowledge would lead to a $150,000 benefit.
• Staff Productivity Savings. As stated earlier, more efficent staff mean more savings as they can work on things that will bring more revenue to the company. With just a 10 minute time saving thanks to the efficencies of the system, can bring in a saving of roughly $455,000.

In total, these equate to a $3,041,000 saving for the company.

There are, however, some costs involved too. These are detailed after the projected benefits, and are broken down into initial, once off expenses totaling $1,579,600, and reoccurring expenses totaling $313,300 per annum.

Therefore:

ROI = ((Gain from investment - cost of investment) / Cost of investment) x 100

ROI = ((3,041,000 - 1,892,900) / 1,892900) x 100

ROI = 60.6%

A 60.6% return on investment indicates a slight return. The reason this number is not in excess of 100% is mainly because of the installation fees, so let's analyse the following year which in theory should have a higher return as the only expenses are the upkeep:

ROI (Year 2) = ((3,041,000 - 313,300) / 313,300) x 100

ROI (Year 2) = 144%

This means that while the company may not post a return in the short term, once the initial costs have been extinguished, the projected benefits would outweigh the upkeep. This, coupled with the intangible benefits show that the use of IBM's Social Collaboration tools would be a greatly beneficial business move in a large, multi-national company.