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Assessing intranet cost-benefits
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pixel.gif (807 bytes) Forecasting benefits
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NOT MANY PEOPLE have trouble calculating costs. It takes a little more ingenuity to pin down the benefits. There are three main categories of benefit:
  • Direct cost savings: savings in expenditure other than labour - print, paper, telephone, travel costs, etc. - that can be directly attributed to the introduction of the intranet. These can usually be calculated in three steps: (1) the number of incidences of expenditure in the time period, (2) the cost of each incidence and (3) the proportion of these that could be eliminated using the intranet. For example, if the number of pages of formal printed material received per person per year was 500, the cost in pence per page, including printing and delivery, was 6p and the percentage of these pages that could be delivered on-line was 70%, the saving in pounds would be 500 x (6 / 100) x 70% x the size of the population.
  • Labour savings: savings in the amount of time required to carry out tasks as a result of introducing the intranet. These can be expressed in minutes per person per day. To calculate the saving, divide the number of minutes saved by the number of minutes in the day (60 x the number of working hours) and multiply by the size of the population and the average salary.
  • Productivity increases: increases in output per person attributable to the introduction of the intranet, expressed as a percentage. Because personal productivity has such a wide range of implications from job to job and organisation to organisation, it is probably easier to convert these to simple labour savings. For example, if the total productivity gains were 3%, calculate the savings as (3 / 103) x the size of the population x the average salary. The actual effect of higher productivity, such as increases in sales, could well be much larger and, if you can estimate these, then you should.

Each category of intranet usage has its own associated benefits:

Information publishing
Direct cost savings: the print, paper and delivery costs that can be saved by making documents available on-line and discontinuing their paper equivalents. Clearly this saving can not be realised if paper and on-line versions operate in parallel.

Labour savings: faster access to information; more rapid and easy exchange of information; less duplication of effort (because there need be only one owner for each piece of information) and less interruptions (because you can control when you access information).

Productivity increases: through the availability of more accurate and up-to-date information and making available information that was not previously available.

Intranet e-mail
Direct cost savings: Costs of phone calls, faxes, memos, letters, diskettes and other digital media, saved through the use of e-mail both within and outside the organisation.

Labour savings: less time trying to get through on the ‘phone; less time spent preparing and checking items to be sent out and less interruptions (because you can control when you access information).

Productivity increases: faster access to information.

Document management
Direct cost savings: the print, paper, digital media and delivery costs that can be saved by making documents available on-line for review, editing and approval rather than distributing as hard copy or on diskette.

Labour savings: less time spent sending out documents for review, editing and revision; less time spent locating/obtaining documents for review, editing and revision; less duplication of effort (data can be shared between documents by linking or copying and pasting); less time wasted correcting errors caused by work being undertaken on incorrect versions.

Productivity increases: faster access to accurate and up-to-date business documents.

Training
Direct cost savings: savings in travel and accommodation, trainers, rooms and equipment for courses delivered via the intranet rather than in a classroom.

Labour savings: less time spent travelling to courses; less time required to reach learning objectives (through the use of more efficient self-instructional methods).

Productivity increases: immediate access to required knowledge and skills.

Workflow
Direct cost savings: the print, paper and delivery costs that can be saved by making forms available on-line.

Labour savings: less time spent per person per form in obtaining up-to-date copies of the form to complete; for each fully-integrated workflow application, the number of days saved in admin time per year.

Productivity increases: faster and more reliable admin processes.

Databases/bespoke systems
Labour savings: less time required to learn and use applications.

Productivity increases: through information being available that was not previously available.

Discussion
Direct cost savings: travel and accommodation costs for meetings that could instead be conducted on-line.

Labour savings: less time spent travelling to meetings; less time spent in meetings.

Productivity increases: faster resolution of issues and concerns; the resolution of issues and concerns that would not have been possible without the intranet.

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