Assessing intranet cost-benefits

Why is cost-benefit analysis necessary? A method for calculating cost-benefits Scoping your intranet Establishing some basic facts & figures Analysing costs Forecasting benefits Analysing the results The cost-benefit calculator

Analysing the results

Summarising costs
If your target population is a subset of your organisations total intranet population, then you need only need to take a proportion of the costs that are borne centrally. The following costs are likely to be central:

• server hardware and software
• the purchase, development, maintenance and upgrades to software applications
• provision of technical personnel

Remember that you only need to take account of the cost of applications that are required to support your initial intranet implementation.

Summarising benefits
Total up the benefits for each intranet category under the three benefit headings: direct cost savings, labour savings and productivity increases. Before making your calculations, it is necessary to determine the proportion of the target population that is affected by each of the intranet categories. For example, the whole population may be affected by the use of the intranet for information publishing, but only 30% for document management and 40% for workflow. If you dont make these distinctions, you are likely to over-estimate your benefits.

Comparing costs and benefits
Obviously you will be interested to see whether your benefits do indeed exceed your costs. To do this in a way which reflects the impact on your organisations profit and loss account, you should spread your capital costs over the write-off period. You may also decide to reduce the benefits in year one to take account of the time taken to develop and launch the intranet and to train users. Heres an example of a layout for your analysis:

This example assumes that information publishing, training, workflow and discussion are implemented, that the write-off period is three years and that year one benefits are 50% of those in subsequent years.

Return on investment
Return on investment is a way of expressing as a percentage the return you have made relative to the amount you have invested:

    ROI = benefits investment x 100
                    investment

Your investment is the sum of your up-front capital and revenue costs. For the example above, that gives a total of £586667. Your return is calculated as the annual benefits less the ongoing capital and revenue costs. Heres a completed analysis:

Payback period
The payback period is the time it takes to break even on your investment, in other words when the accumulated return on investment figure first exceeds 100%. In the example above, the payback period is 39 months, or three months into the fourth year.

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