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Assessing intranet cost-benefits
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pixel.gif (807 bytes) Analysing costs

THE NEXT STEP is to analyse the costs that will be incurred in setting up and running your intranet. There are two main categories of cost:
  • Capital costs: hardware and software costs that will be met by the organisation’s capital budget and, normally, written off over a number of years.
  • Revenue costs: other costs that are likely to be borne by the organisation’s normal expense budget.

It is also necessary to make a distinction between the one-off costs associated with start-up and ongoing maintenance costs. Here’s some ideas for what to include in each case:

Start-up capital costs
These costs form a major part of your up-front investment. Because, as fixed assets, they have a useful life of several years and a resale value, they are normally written off over three or four years. Your finance department will be able to tell you what your organisation’s depreciation policy is. You’ll also need to consult your IT department to get estimates for all the hardware and software needed:

  • New PCs – for providing intranet access to employees without their own PCs.
  • Providing network connections to PCs not currently networked.
  • Web servers and server software.

You also need to provide for the cost of software applications, whether they are developed on a bespoke basis (in-house or outside) or purchased off-the-shelf. You can pay considerable prices for ‘industrial strength’ applications, but much cheaper or even free applications can be obtained with a little research. What you will need will depend on what you are using your intranet for:

  • Information publishing: examples of automated applications include directories (phone, employees, products, services, locations, etc.) and applications that automate the production of news pages, classified ads or newsletters.
  • E-mail: intranet e-mail is typically provided with a single off-the-shelf application, plus individual client licenses.
  • Document management: typically one main application.
  • Training: for ease of calculation, assume that an intranet training application represents one hour of self-instructional material.
  • Workflow: applications include on-line forms (holiday, sickness, expenses, timesheets, purchasing, surveys, bookings for rooms, training or travel). If these simply submit messages to be processed manually, they will be relatively inexpensive to develop. If complete administrative processes are to be automated, which use the intranet as a front-end, a more substantial investment will be required, whether in bespoke software development or purchase of/upgrade to intranet-enabled versions of off-the-shelf systems such as HR databases, media libraries, sales support systems, etc.
  • Databases and other bespoke systems: include any application that provides users with an intranet front-end to a major, existing, bespoke corporate system.
  • Discussion: there will typically be one application to allow users to debate topics over the intranet.

Start-up revenue costs
These also form part of your up-front investment, but are more likely to be written off in the first year of implementation:

  • Design consultancy: the cost, whether internal or external, of creating a structural, navigational and graphical design for the part of the intranet being analysed.
  • Promotion: the cost, again internal or external, of launching the intranet to your target population.
  • Training: the total cost, per user, of providing training in both how to use the intranet and how to provide content.

Ongoing capital costs
Some money will have to be reserved each year, from year 2, for upgrades to your server hardware and software and to your off-the-shelf applications. Perhaps the best way of estimating this will be as a percentage of the initial cost – say 25%.

Ongoing revenue costs
A considerable amount of effort is required to maintain and continuously improve your intranet. These costs need to be budgeted from year one:

  • Editorial and design personnel: the people required to administer intranet policies and act as overall content editors for your target population. Remember to include salaries, benefits and expenses.
  • Technical personnel: the people required by the organisation as a whole to keep your intranet up and running from a technical perspective.
  • Internet access: the cost of providing lines out to the Internet. A simple way of estimating this is to make a small annual allowance, say 50, for each employee who will have access.

The following costs apply after the first year of implementation:

  • Ongoing consultancy: continuous modifications and improvements to your intranet design, expressed as a percentage of start-up design consultancy costs.
  • Ongoing promotion: continuing promotion of the intranet to your target population, expressed as a percentage of start-up promotional costs.
  • Ongoing training: a percentage of start-up training costs, largely to account for employee turnover.
  • Maintenance of bespoke applications: assuming this work is not carried out by the technical personnel listed above, make an allowance for continuing development of your bespoke applications, say 25% of the initial cost.

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                                                     Fastrak Consulting Ltd, 1998. All rights reserved.                                 Last revised 2/11/98.