Creating a Winning ROI
The Rockley Group, Inc.
No business case is complete without a section on return on investment. You need to determine how your costs for implementing content management can be offset with savings or increased revenue. And you need to ensure that your ROI is accurate and believable. This article provides guidelines for creating a winning ROI.
Identifying current costs
As indicated in
Identifying the Components of your ROI, April 2004, Volume 1, Issue 1, The Rockley Report you need to begin the process of identifying ROI by analyzing your issues. Each of the issues you identify are potential savings areas to use in the calculation of your ROI.
Reuse: A Substantial Factor in Determining ROI for Content Management (http://www.dclab.com/ann_rockley_roi.asp) provides guidelines for how and where to look for costs in your organization. Chapter three of our book
Managing Enterprise Content: A Unified Content Strategy provides a detailed description of how to calculate ROI.
Key savings in calculating ROI
The two most important savings to consider in your ROI are reuse and translation. We have found that these can be your greatest area of savings, and in the case of translation can be your largest area of direct dollar savings.
Your percentage of reuse can be used to calculate productivity savings and translation savings. Ensure that you have a solid number for your percentage of reuse, don't underestimate it, but don't over inflate it either. If you want to be accurate in your percentage of reuse do a programmatic analysis of a representative example of your content to determine identical and similar reuse. Using a number that can be supported by actual analysis rather than a "guesstimate" is more effective.
Once you have your percentage of reuse use it to calculate the percentage of:
- translation savings (less content to translate)
- productivity savings (less time to create and review content)
As indicated earlier, this could be your biggest area of savings. Depending upon how many languages you translate your content into, we have found that you can see an ROI in a year to 18 months. The cost savings can be found in the following areas:
The average cost of translation is 24 cents/word. Therefore if you reduce the number of words to be translated through reuse your translation costs go down dramatically.
- Post translation publishing
30-50% of your total cost of translation is related to post translation publishing (e.g., reformatting the content in the medium you plan to deliver it in). When you move to XML or another structured format that separates format from content you can virtually eliminate these costs.
- Element based translation
Typically an organization sends out large sections of their content and sometimes whole documents for translation. Not all content needs to be translated in a large sections. You will be charged for the costs of comparing the current content to the previously translated content to determine where translation is required. The less content you send or the more specifically marked that content is the less costs you will incur. With content management you need only send the elements that have changed and you can automatically indicate where that change has occurred. Note: Translators translate content in context so you will need to send a larger grouping of information for context but you can indicate only those elements to be translated.
- Project management
Project management costs for translation are typically very high with project managers having to manually track content going out to and returning from translation. With the use of an effective content management system that provides a strong translation workflow you can reduce these costs significantly. Estimate a minimum of 25% reduction in project management costs, potentially higher depending upon the number of languages you translate and the complexity of your process.
Revenue generation vs. productivity gains
Typically productivity gains are used to show savings in the time to create, maintain, and deliver content. These productivity gains are calculated using reuse. However, in these days of downsizing and outsourcing, showing productivity gains can produce an undesirable result from your perspective. It is much more effective to show the productivity gains as revenue generation and new resources.
- Revenue generation
Most of the resources used to review materials are subject matter experts whose "real" job is not to review content. Reuse can be used to show how you can reduce the time they spend reviewing content and use that time to produce more revenue for the company instead. For example:
- Make more sales
- Support more customers
- Develop more software/hardware
- Service more product
The same holds true for authors who are subject matter experts rather than full-time authors.
Determine the figure your organization uses for revenue generation and calculate how much additional revenue could be generated if the time taken to review/create content were reduced.
- New resources
Rather than showing that reuse reduces the amount of work an author must perform and consequently increase their productivity, use those productivity gains to show how this could result in "X" number of new resources. There are never enough resources to do all the work that is required. Reuse frees up resources so it is like getting new resources at no additional cost to the organization.
Other savings areas
Reuse and translation are large areas of savings for your organization, but they may not be the biggest or most important areas for you to focus on with your ROI. What are the "hot buttons" in your organization and how can content management address those issues (e.g., compliance and risk)? Including savings from these areas may be the deciding factor in your ROI.
Don't calculate your ROI based on one year. It is unrealistic to expect that you will achieve your full ROI in the first year for the following reasons:
- Re-engineering of content/migration
You will need to re-engineer or migrate your content to the new structure. This activity takes time.
You have a lot of content and consequently a lot of existing translation. It will take time before reuse affects all of your content.
- Change management
You will find that it takes time to get all of your areas working with the new methodologies and tools.
You will realize savings in your first year, you just won't realize all the anticipated savings in the first year. Determine what percentage of content will be affected in the first year and what in the subsequent years. We typically use three years for our ROI. The first year, costs will exceed savings, but that will start to change in the second year and by the third year you should have realized all your savings.
While you may have calculated your costs very carefully you will probably find that you still didn't estimate enough. Nobody likes cost over-runs but they are a reality because you can never anticipate everything, particularly in the area of customization. We recommend that you increase your project costs by a minimum of 15% to ensure that you are adequately covered.
Armed with a clear idea of your cost savings, a positive reflection of anticipated resource savings and realistic costs will position you with a winning return on investment. Take the time to really scrutinize your numbers to portray a realistic solid return on investment.