Posted by: Adam Steinberg
CIO, Enterprise 2.0, Web 2.0
One of the first talking points associated with Web/Enterprise 2.0 always seems to be ROI. “What’s the value from Web 2.0, and how do I measure it?” This is an all-too common question, but utilizing a few basic finance/tools can take us a long way in measuring ROI when your organization is beginning to use blogs, wikis, social networking or tagging.
Opportunity cost – The Granddaddy of all measuring sticks
Most finance types consider opportunity cost to be the greated-valued foregone opportunity of a choice. For a quick overview on opportunity cost – see the Wikipedia entry.
Value of time is also an important tool when measuring ROI. For instance, if I make $10 an hour, the cost of my taking a 10 minute break is $1.66. See the Wikipedia article as well.
One of the major benefits of Web 2.0 tools such as blogs, wikis and search tools is that they make it much easier to communicate, collaborate and find information.
As Jeremy Thomas of Social Glass puts it:
“I suppose Search is the easiest to quantify. The average knowledge worker spends 25% of his day looking for content. So let’s say that company X has 1,000 knowledge workers who make an average of $80,000/year. This means the company ‘wastes’ 20 million/year in funding with the time workers use to find content.”
When measuring ROI, one of the best places to start is to determine how much time employees save by using blogs and wikis instead of email, or how tagging makes it much easier and faster to find the latest document needed.
Another place to measure ROI is to examine if employees can make more money with Web 2.0. Can sales people make more calls because they have more time? Are customers that participate in your company’s social network 50 percent more likely to renew contracts? Another avenue is to examine how Web 2.0 makes your marketing team more efficient. Are 40 percent more leads coming in because of buzz from your company’s blog or social network? Is there more brand awareness from word-of-mouth generated by bloggers?
There are also significant cost that must be measured as well. What is the value of the time it takes IT to setup and maintain a system of blogs, wikis and social networks? How long will it takes employees to learn the new software, and what’s the value of their time? Is there a cost for new software or hardware?
This is just the tip of the iceberg in measuring ROI, but any effective organization must be able to have at least some idea of the ROI when using new software. Just because Web 2.0 can be collaborative and dispersed doesn’t mean that costs and benefits cannot be identified.
Are you measuring ROI from Web 2.0 in your organization? Do you have any other ideas on how to measure ROI? Leave a comment!