State of the Portal 2004: Budgeting, Funding, and Frameworks

A survey of more than 380 organizations by META Group has revealed that portals are best thought of as modular software frameworks rather than standalone applications. Also, portal planners tend to underbudget for services.

META Trend: In 2004/05, enterprise portal governance will be a critical issue for Global 2000 organizations reconciling multiple portal frameworks (from ERP systems, content management tools, e-commerce packages, etc.) and declaring the principles under which federation will take place. By 2005, large vendors will finalize the ties and positioning of portals to the rest of their product portfolios, while small, independent vendors capitalize on market opportunities around new technologies, verticals, and Sarbanes-Oxley. By 2006, portal frameworks will become a key delivery point for process automation involving human-oriented workflow. By 2007, portal and composite application frameworks will have merged and become indistinguishable; in addition, we expect the overall portal project failure rate to decrease to 10% (from 30% in 2003) due to product maturity and institutionalization of best practices.

Portal frameworks have become commonplace in organizations, whether selected by a central group as an enterprise product or acquired with another product. Portals are also settling into place as infrastructure frameworks rather than standalone applications. Both these conclusions are based on an enterprise portal survey of nearly 400 organizations performed in mid-2003. The respondents were mostly North American companies ranging from small (less than $500 million in annual revenues) to large (more than $1 billion in annual revenues) enterprises (see Figure 1). Although this study had several key findings relating to portal adoption, budgeting, segmentation (internal and external), and metrics, there were three in particular that stood out as most significant:

Portal Budgeting
Portals have been a growth area within most organizations. META Group’s Worldwide IT Benchmark Report 2004 confirmed this trend, showing that 46% of respondents spent more on portals in 2003 than they did in 2002 (36% spent the same, 18% spent less). However, the planning of these expenses is often inaccurate. A comparison of budgeted versus actual portal cost elements demonstrates that many companies are unprepared for the financial road ahead of them. META Group case studies have shown that most actual costs (50%-80%) go to personnel and services, and only 15% is spent on software. However, the survey showed that most firms budget for the reverse, with a majority (56%) of the money allocated to hardware and software. This is not unusual, because organizations typically focus more on elements they can negotiate. Personnel costs are often seen as a fixed cost (for employees) or a “necessary evil” (for contractors and consultants). Larger companies (more than $1 billion in revenue) budgeted for proportionately less on software than did midsize firms, indicating that these larger firms have the best sense of where project costs lie. Organizations budgeting portal projects should focus at least as much attention on estimating personnel costs as on hardware and software.

Funding
We found that in most cases, a central IT function is still primarily responsible for the portal budget. In 39% of the organizations polled, the portal is centrally funded, and in another 34% it is jointly funded by central and line-of-business IT departments (see Figure 2). This indicates that portals are generally funded as infrastructure even if they are implemented as line-of-business solutions.

When it comes to making the portal decision, we found that a two-stepped approach to portal decision making existed in most companies. In an overwhelming majority of the cases, a line IT manager, IT VP or director, or IT staff member drives the establishment of the portal strategy in respondents’ organizations. It is these people who are most likely conducting the due diligence and will need to determine implementation details, cost issues, features/functionality, maintenance, and support factors. However, it was clear from the research that these mid-to-high-level IT people do not make the final decisions and are presumably writing recommendations and handing those recommendations over to an executive (e.g., CEO, CIO, president) who, in most cases, is making the final strategy and implementation decisions. This highlights the importance of keeping executives in the loop during portal decision making and emphasizing enterprisewide business value and metrics rather than just technical justification.

Portals as Frameworks
Enterprise portals have evolved from monolithic, personalized intranet products into frameworks that act as factories for developing complex systems. These frameworks must integrate a portal’s contextual capabilities with a bewildering array of existing technology. Frameworks are a software model that has become a best-practice solution to complex, combinatorial problems by providing a pre-arranged set of integration and partnerships needed to solve a particular problem. More than a blueprint, frameworks provide actual, physical deliverables. They act as a Swiss army knife by unifying several disparate components into a single frame. Frameworks are a crucial concept of META Group’s Enterprise Technology Model.

Our survey confirmed that portals are best treated as frameworks by demonstrating the degree to which they require complex variable features and integration. Customers seem to want every possible combination of portal services. The services most desired in-the-box were search (68%) and content management (61%). However, for most portal services, there was an even split between organizations that wanted the portal framework to provide the service and ones that wanted the portal to help them integrate with an external service. This indicates that organizations need to determine which services they already have in their environment that they want the portal to integrate with and which services they expect the portal to provide out-of-the-box. Each organization has a different mix of portal-provided and externally integrated services that will in turn affect the portal product selection decision.

Bottom Line: Portal budgets need to focus on personnel costs to better estimate real spending patterns. Executives need to be kept in the loop during portal evaluations. Organizations must individually assess infrastructure service needs because these differ radically among implementations.

Business Impact: Products that enable unification of user activities for customers, partners, and employees will become more prevalent, less risky, and less expensive during the next 18 months, reducing the cost and implementation time for customer relationship management, supply chain management, and employee knowledge management strategies.

META Group originally published this article on 21 May 2004.