“Spectacularly inefficient process yields spectacularly large productivity improvement after implementing our product”. You may never have seen that headline verbatim, but in my research of portal ROI, that is the hidden headline to half the case studies I’ve seen published by vendors. You’ve seen it many times: the new productivity tool that says it improved productivity at other companies by 85% or paid for itself in 5 months or delivered 400% ROI. Sure, they all say your mileage may vary, but do you know why? Because the improvement depends on how stupid an organization is to start with.
When I covered portals at Meta Group, I did an annual project where I’d have our library pull every public story of portal ROI they could find and dump them on me in a big file with hundreds of pages. Then I’d categorize them to determine where the savings were coming from. The ROI figures were ridiculous: 75%, 150%, 400%. Multi-million dollar projects paid for themselves in 9 months. If the company’s core business only returns a measly 15% return on investment and portal installations return 400%, please explain to the CEO why they shouldn’t drop everything they do and become portal implementation service providers instead!
Part of the reason for the sky-high figures lay in sloppy accounting or exaggerated benefits. But quite often the math was actually correct. It was just based on a very inefficient process to start with that would have enabled any product able to clean it up to look good. An example I give is that of an organization whose sales force carves purchase orders on stone tablets and has to get them downstairs to accounting in a wheel barrow. Any decent product enabling these cavemen to enter orders into simple web pages would be able to correctly show a very high ROI. Hey, just replace the stairs down to accounting with a ramp and the return on investment will be astronomical. Which points out that, for these highly inefficient processes, improving the parts that don’t involve high tech often yield most of the benefit.
It also demonstrates that in most of these cases, any product would provide similar ROI, not just the one belonging to the vendor writing the case study. Any web forms, web development environment, or portal attacking that problem will return many times its cost. Or any ramp-building company for that matter, not just a “Ramps R Us SuperRamp v3.1(Enterprise Edition)”.
A corollary of this explanation is that these improvements are available one time only. Once organizations are at least moderately efficient, squeezing a few percentage points of productivity becomes increasingly difficult. For some organizations that have done a good job of continual process improvement or been running very lean, even a few percentage points may remain elusive. This explains why in all my years of studying productivity ROI, I’ve never seen two consecutive case studies of the same organization. Getting 250% ROI in one year is interesting – getting 250% ROI the next two years would be amazing.
Well, this blog entry has taken me long enough. Not sure why – I just hand write them in block letters, send them to an editor to spell check, and then OCR them. Hmm – if someone invents a blogging tool where I can just type my entries directly I’ll bet I could get a 1000% productivity improvement at least. I’m going to make a good case study.