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Recoup Initial Outlays for a Portal in Just 6 Months? And What ROI Will Follow?

by Joe Zarb | SAPinsider

July 1, 2002

by Joe Zarb, SAP's Reigning ROI Expert SAPinsider - 2002 (Volume 3), July (Issue 3)
 


Joe Zarb, Vice President, Strategic Consulting for mySAP Enterprise Portals

Q. What are companies trying to achieve with portals?

The short answer is that companies are looking at portals to help them align their business operations more directly with their strategic goals and the “life events” that occur within the organization.

That’s a pretty high-level statement, so let me follow it with a more concrete example. We are seeing the advent of “employee portals,” which follow and guide the various stages and events that an employee experiences during the course of his or her career in the organization. Think of it as a “hire-to-retire” portal.

For instance, consider the typical events from the time an employee is hired: first the interview, then training, education, and appraisals. There are also birthdays, weddings, children, updates to insurance benefits, changes in payroll deductions, and so on. Even though this continuum of life events involves many different applications — HR, finance, an external website for purchasing gifts, things like that — an employee portal treats all those events as a single “composite application.”

Organizations also experience corporate life events. For instance, how do you go from initially kicking around new product ideas to then developing, testing, refining, and taking a new product to market? What milestones, decisions, and activities must you manage to go from “concept of product” to real-world production? This involves hundreds of events — everything from people meeting in a chat room or working off a collaborative whiteboard to replenishing inventory for materials in a later, more mature phase of the market.

Portals are also useful in aligning your business strategies with specific tactics and decisions at the operational level. Imagine that a key corporate strategy is “ease to market.” Using a portal, you could compress the cycle to get a product to market by aligning resources based on the life events of that product line. What’s more, by compressing the time to market, you could fit in more product launches as well. So you have the advantage of being first to market, and you get the added benefit of getting more to market, with more innovation.

Or consider demand and supply. A portal can offer suppliers visibility into your sales forecasts, bringing them into the fold of critical and time-sensitive planning efforts.

These are just some of the collaborative activities companies are looking to run on top of portals, since it is the portal that offers the enabling, underlying framework and infrastructure.

 

Q. Where’s the “low-hanging fruit”? Are there certain portals-based initiatives that help companies capture immediate and significant ROI as they align resources and life-cycle events with corporate goals?

Yes, although this is very industry-specific; you have to work directly with a client — which is exactly what my group does. From an industry perspective, from a trend perspective, and from a strategic perspective, we figure out what’s right for their particular organization. But here are four high-level scenarios:

  1. The “fine machine oil” scenario: In this first scenario, the portal does not create the process; the portal simply makes that process more efficient, so it operates with a much higher degree of quality and accuracy. Just like fine machine oil, the portal makes everything run smoother and faster. Here we might be talking about decreasing the overall business cycle time and then adding the ability to transfer a business process to diverse owners in a secure manner. The ROI we’ve seen in this type of scenario is in the 3-5 to 1 range. Over a 5-year period, for every dollar spent on the portal, you save (or earn) 3-5 pretax dollars.

  2. The “magnifying glass” scenario: By this we mean the ability to eliminate recurring problems by uncovering any built-in shortcomings. For instance, an alert can tell you not only that you are almost out of stock of some item, but that your supplier is also almost out of stock, too. Another example of a magnifying glass is the ability to complete complex and highly interdependent projects on schedule and on budget. For instance, “hire-to-retire” applications aren’t composed of long-term complex projects. Here the portal provides a framework so the numerous short-term steps are synchronized on the path of the larger project. Here, the ROI we’re seeing is 5-7 to 1. For every dollar invested in the portal, you save or earn 5-7 pretax dollars.

  3. “Breakthrough applications” scenarios: These are generally designed to generate revenue through new products or services by re-purposing existing information. For instance, Federal Express used to charge people to look up tracking information on their own. Then they put that environment on the web, which offered users more control, which in turn made them more loyal and more satisfied customers and reduced the headcount required to manage tracking a shipment. With breakthrough applications, you have the ability to enable new collaborative applications that leverage brand, customer, distributor, and partner loyalty. ROI here is greater than 7 to 1!

  4. Locking in customers/Locking out the competition: Last is the ability to lock in customers and lock out competition by providing complex, value-added services over the web. For instance, think of a “handheld” portal. Suppose that at a convention (and this is something we piloted at SAPPHIRE last year), rather than providing attendees with a basket of printed materials, you give them a PalmPilot or Compaq PDA instead. Not only can they find the information they need on that device, but you could potentially sell advertising to local merchants. We’ve seen ROIs of 7 to 1 here.

What may be of even greater interest than a high ROI like the ones I’ve cited here is the speed with which ROI is realized. The payback periods we see for a portal begin within the first 6 months of implementation.

In cooperation with the Delphi Group, SAP has built a free ROI calculator that clients can use on their own.

Q. How do you account for these ROIs? These are not the kind of numbers we typically see.

That’s correct. You won’t see these high ROI numbers being generated from a portal that merely web-enables an application, which is basically what a first-generation portal does. Ours is a second-generation portal. There is a wide divide between the two.

A first-generation portal merely places a web veneer on top of various applications. It’s limited in its ability to deal with the large volume of information and numerous different formats users must work with nowadays. It can’t serve as a platform for assimilating documents with operational transactions, with business intelligence analysis, or with marketplace information found over the web, so it can’t deliver a holistic view of the information and transactions a user needs.

With the second-generation Enterprise Portal, we are the only portal supplier that provides a complete framework for collaborative and composite applications. This framework includes four key functions:

  • First is knowledge management — the ability to manage documents with author, publish, subscribe, search, and organize capabilities.

  • Second is the comprehensive business intelligence environmentextract, transfer, load, test, analyze, query, and report. Reporting, as SAP customers know, is a paramount user concern. The mySAP Enterprise Portal is integrated with best-of-breed reporting solutions — Crystal Reports, for example, for reporting, and TeaLeaf for web-based data mining. Since we’ve done the integration, these components are easily accessible to every user.

  • The third area is portal infrastructure — which enables people to web-enable their applications as well as unify them into a single composite application. It allows you to be notified when a threshold occurs, and it allows you to resolve this notification; you can do something about it. You can add, change, delete. Other portals don’t support that.

  • Finally, we also have the ability to call, index, and categorize external web sites. In fact, this really creates the next collaborative platform that’s going to enable and deliver on applications such as market to customer, concept of product, customer to cash, and purchase to pay.

Existing SAP customers have certain ROI accelerators additionally working for them.

I’d be remiss if I didn’t point out here that ROI should not be the only criterion used to assess the merits of a portal solution. ROI can attest only to the merits of the technology, not the merits of the vendor that stands behind that technology. You want a vendor with deep resources, real staying power, unwavering dedication to innovation, and the ability to actually implement. With the Enterprise Portal, you are assured of the viability of the company and stability of our technology. In terms of innovation, we are regarded by all the leading analysts as a “thought leader.” As for our ability to execute, Gartner gives us the highest grade. More important, so do our customers.

Q. What are the most important first steps in successfully deploying a portal?

First understand, in detail, how the portal is going to benefit the business. Align it with a high-yield strategy that has so far eluded you. If you have a time-to-market strategy, or a track-and-retain-and-develop customer strategy, and your strategy has proven to be difficult to pull off, a portal might be an ideal framework to really launch that initiative.

Second, make sure that the portal impact and deployment is well understood and appreciated at the highest levels of the organization.

A free “Portal Index” has been developed by SAP in cooperation with Cap Gemini Ernst & Young to help companies assess their readiness for portal adoption based upon the organization’s operational effectiveness and the degree of connectivity of their enterprise.

Q. Are there organizational obstacles to talk about?

I think there are. If I were going to caution readers, the first thing I’d say is, “Don’t underestimate the training and internal evangelizing that must be instituted to get a portal up to its full potential and fully rolled out.” Often companies overlook that.

Keep in mind that a portal lends itself not only to internal users but also external users. Lots of companies don’t allocate money for training their suppliers, their key distributors, or their trade partners. You’ve got to do that. Even though a portal is simpler and easier to work with, you want to help people through that learning curve — no matter how subtle.

Lastly, make sure the portal impact and deployment considerations are well understood at the highest levels of the organization. This is not a simple IT project; it has broad implications.

SAP offers a free collection of tools to help you quantify the value of unification. It is designed to help you assess the total cost of ownership of an SAP portal versus building a portal on your own or integrating third-party portals.

Q. Why should companies embrace this technology sooner rather than later?

This technology really is an essential framework and foundation. Without having that in place, the benefits of those collaborative applications that reside on top of the framework and foundation can’t be realized. Let me give you an analogy: The very first person who purchased a fax machine probably didn’t have a decent ROI for a short while. But it didn’t take long until not having a fax machine meant you didn’t have a business.

There are lots and lots of companies out there now that have the Enterprise Portal; it ships with mySAP.com. So start there. Boost it up on the priority list of your mySAP.com rollout schedule. There’s no charge for that!

SAP’s Strategic Consulting Group aids clients in establishing a business case for their portal implementations which align their technical, business, and strategic

imperatives, minimize costs, and maximize benefits while assessing risk. With a proven methodology developed over the past five years, they help clients establish achievable results.

The Strategic Consulting Group works with clients in one of three ways: coming onsite and building a business case for them; sharing tools, techniques, and benchmarks; and working through a network of business partners with whom they share best practices, including Cap Gemini Ernst & Young, PwC, Accenture, Logical Design Solutions, Delphi Group, and many others.

For more information on SAP’s Strategic Consulting Group, contact Joe Zarb at joe.zarb@sap.com or call him at +1 203 544 8095.

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