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Socialize for savings

Having the right information when you need it is crucial to increasing productivity. But it is worth the technology investment? We believe the answer is yes, with social knowledge networks.

In today's post on How to Cost Justify Your Social Knowledge Network Needs, I'll back that up with some numbers.

Technology solutions that enable companies to reduce the amount of time it takes to find or "discover" knowledge in their organizational repositories are key investments. They can ultimately lead to a lowering in costs, and an increase in individual and organizational efficiency

When taken in the context of overall Information Lifecycle Management (ILM). however, discovery is just one aspect of organizational information flow. Solutions that assist in enhancing the complete lifecycle, from organizing to collecting, curating, and collaborating, all lead to faster and more efficient information discovery.

In particular, systems that provide community feedback mechanisms have shown to be most effective. By improving these capabilities, organizations can achieve the individual productivity benefits I'll outline here.

In the example from our previous post, the average costs of implementing a solution of this type can vary significantly based on a number of factors. These include total cost of server software, server hardware, annual maintenance, IT admin overhead, content subscription fees, software subscription fees, and so on.

However, a reasonable estimation of average software expenses in the first year of implementing a social knowledge management solution of this size is around $60,000. Ongoing subscription fees are estimated at $30,000. The costs of a fully loaded employee are assumed to be $100,000, and the average time wasted per employee on ineffective information search is 30 percent.

The table below illustrates the return on investment (ROI), timing of the return, and total cost savings based on a number of factors. These include the ramp-up period for realizing increases in productivity, total year one expenses, and ongoing expenses. (Click image to enlarge.)

These numbers are consistent with the ROI values found in a study by leading consulting firm, Accenture. The study, entitled "Measuring the Impact of Knowledge Management (KM)," was presented at the KMWorld conference in September 2008.

It found an average ROI of $25/$1. This was based purely on individual productivity increases due to faster information discovery times, after implementing a knowledge management solution.

In the above analysis, the additional costs associated with hardware, content subscriptions, IT overhead, etc., are not taken into consideration. However, a reasonable assessment of these costs might conservatively produce a net result of a halving the above ROI to $14/$1. This would still represent a very significant return.

Of course, a deeper analysis on a case-by-case basis would have to be conducted to properly assess its ROI.

SKN Value Prop: Productivity gained from implementing a SKN results in savings that outweigh the technology expense.

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