Determining ROI on a content management system
As today's economic downturn cuts deeper into IT budgets, CIOs often have to justify investments in more expensive initiatives, like a content management system (CMS). Buying and building the technology for a CMS is the (relatively) easy part. The hard part is justifying the business need and getting upper management to shell out the significant investment needed to get a CMS off the ground.
After you've determined that a CMS will fulfill a true business need, often the next thing that upper management will want to see is an ROI. This article outlines some factors you should consider when determining the cost of a CMS effort, and how to calculate ROI.
Justifying the business expense
Business justification typically involves making a case for a significant capital investment by proving to upper management that the initiative in question--in this case, a CMS--will either help the company save money, or make money, or even both.
"It's critical to do a broad-based business justification for the project as a whole," said Tony Byrne, founder and managing editor of CMSWatch, an independent information and analysis site that focuses on Web content management. "However, that business case may include an ROI--or perhaps not," he added.
The conventional wisdom in IT development is that no project can move forward until a clear ROI has been established. "Doing an ROI on a CMS project can be very difficult and, at times, beside the point," explained Byrne, who provides CMS consulting and training to enterprises and government agencies. For organizations where content is the business, investing in better management is an essential infrastructure cost--the cost of doing business--just as the cost of a phone system or a firewall is for the enterprise.
How much will CMS cost my company?
Byrne advises companies to consider three factors when estimating the costs of a CMS:
Software licensing (including databases, search engines, and other ancillary packages). "This is a pretty straightforward exercise," said Byrne, "but watch out for cost creep as you add additional servers and content contributors. The most important thing to remember is that software licensing may well turn out to be the least of your expenses."
Integration, customization, and extension. Industrial-strength CMS doesn't come out-of-the-box: Hiring a professional services firm to help you put everything together may set you back one to three times the cost of the software licensing alone, depending on the scope of the engagement, warned Byrne. Departmental installations of midmarket packages tend to run toward the lower end; enterprise projects will certainly edge up or above the 3x ratio.
Data cleaning, normalization, organization, migration, and other kinds of prep work. "CMS buyers typically need to do most of this themselves; everyone usually underestimates the level of effort involved," advised Byrne. "Interns can help, but it can still be a big job for regular staff too."
According to a January 2001 report on content management by Forrester Research, the price of enterprise content management solutions easily surpasses the half-million dollar mark, with actual cost depending on the complexity of the site, the level of customization required, and the number of users.
Calculating ROI
Byrne offers a simple formula for calculating ROI. The first step is quantifying costs and then adding up all the hard dollars and cents your company will see in:
- Increased sales.
- Expanded product/service deployment.
- Greater return from other IT investments (e.g., ERP, portal).
- Accelerated time to market.
- Process efficiencies.
- Reduced Web production costs.
- Reduced paper/mailing costs.
- Reduced human errors.
Then, quantify and add up all the "soft" benefits, which include:
- Putting business people in control of online communication.
- Maintaining brand consistency.
- Enhancing customer satisfaction.
- Improving content security and reducing legal liabilities.
- Maximizing internal skills through greater specialization.
"Compare your costs laid out above against the benefits you expect to gain from a CMS," explained Byrne. Although the benefits may be difficult to quantify at times, at some point, your company will simply decide that, ROI or not, it can't live any longer with the (likely growing) pain of not effectively managing your content."
Byrne also added one final piece of advice for CIOs trying to make a business justification for a CMS: "Don't spend so long doing the ROI that your business suffers unduly from content bottlenecks and missed opportunities in the meantime."