Leaping to high returns

Measuring intangible returns is not easy but Nortel's portal has achieved so great a return on investment it is the benchmark for...

Measuring intangible returns is not easy but Nortel's portal has achieved so great a return on investment it is the benchmark for all future projects.

Now that corporate belts are tightening, IT directors are having to present business cases for new projects that offer high levels of return on investment (ROI) and can stand up to the closest scrutiny. It is relatively easy to put figures on tangible savings in headcounts or the cost of ownership of particular items of technology. It is much more difficult to build a convincing business case for more nebulous concepts such as improved staff productivity. Yet that was the task facing Nortel Networks when it decided at the end of the 1990s to create the world's largest unified employee portal.

Linking 80,000 staff at 150 separate sites, Nortel's portal gives staff access to standardised corporate documentation and workflow-enabled processes. From the outset, Nortel knew that only a relatively small proportion of the ROI for the portal, which is based on OpenText's Livelink intranet-based knowledge management solution, would come from savings in hardware, software and networking costs.

Most of the benefits would accrue from increased staff productivity and greater employee satisfaction across the company. Nortel needed to find a way to cost out the impact of the portal in these areas.

Knowledge management specialist Tony Roberts says one way that Nortel made the challenge of building the business case easier for itself was by having clear goals for the project from the start. The key business objectives were to consolidate human resources (HR) processes, such as the induction of new recruits and to rationalise the infrastructure - technical, intellectual and human - supporting those processes.

"We had about 40 file servers in multiple sites supporting variants of the same processes and documents for various communities," Roberts says. "As far as possible - given the local legal environment - we wanted to leverage common processes across different countries and store all the relevant resources in a one-stop shop, with employees having a role-based view into that repository."

Some of the payback for the project comes from reduced hardware, software and networking costs and was relatively easy to calculate. For instance, moving to a single architecture cuts the cost of ownership: instead of needing 30 administrators to run 30 different servers, the system can be managed by just three staff running one large box.

On top of that, the browser-based interface allows Nortel to deploy the system without the expense and management headaches of installing software on each desktop. It also means the same solution can be rolled out to both Unix and NT networks. Behind the scenes, integration with applications such as SAP only needs to be performed once.

However, these hard benefits account for just one-third of the ROI in the project. Most of the rest came from cutting jobs in HR or by releasing staff for other activities. For instance, instead of employing several people in different parts of the business to maintain similar documentation for each of their local communities, Nortel has created a single document "prime" that can service all those communities at once.

The portal should also allow all employees to become more productive, by cutting the time they spend on HR-related activities, with line managers benefiting the most. To put an ROI figure on this benefit, Nortel carried out a detailed investigation of the time staff spend sourcing particular information. "We did an e-mail survey asking people what the critical documents were and then did tests with representative users to see how quickly they could find them with our existing processes," Roberts says.

These figures were then compared with benchmark figures provided by knowledge management solution suppliers and multiplied by a weighted labour cost to give an ROI resulting from productivity savings across the company. This element of the business case was then contractually enforced during the implementation by writing the benchmark data into Nortel's contract with OpenText as one of the success measures for the portal.

Employee satisfaction is another area that has contributed to the success of the project, but Roberts admits it is almost impossible to measure this in a way that can be incorporated into the ROI bottom line. What Nortel has done is to develop a feedback process, in the form of a link on each page, which allows staff to make their views known to content owners.

The number of responses will give Nortel an idea of how happy users are with the system, while providing a practical way to gradually improve the quality of resources available to employees and giving staff a sense of greater control over their environment.

With so much of the ROI coming from cultural change and soft benefits, Nortel knew that the way the project was governed would be critical to its success. The company tackled this challenge by splitting the project into several stages, beginning with an opportunity assessment in which a small, high-level team looked at the issues and risks involved in reorganising the HR function so that it could support and take advantage of the portal concept.

The output of this stage was a business impact analysis and high-level business case that was put before a governance board for approval. The team then worked up more detailed costings that were used to persuade the board to release money for each phase of the implementation.

Finally, once the system had been rolled out, the team looked at the ROI that had been achieved and put in place further training and organisational development programmes to ensure it got the most from its investment.

Getting the maximum ROI from the project was also key because it acted as a pathfinder for the introduction of knowledge management and portals into other areas of Nortel.

Roberts says the company not only needed to test whether the technology was sufficiently mature but also whether Nortel, as a company, was also mature enough to create and deploy common processes and a single role-based user authentication infrastructure.

OpenText has become Nortel's preferred product for document management and has been used to support other knowledge management initiatives, such as new product introduction processes and the company's ISO9001 accreditation. Nortel is exploring how Livelink can be used for virtual teamworking and online collaboration.

The HR portal project has been so successful that Nortel shareholders will no longer consider any project with an ROI of less than 1,000%.

Roberts says, "We're not looking for small developments but for big impact projects we can deliver quickly, projects that are so aligned with the business strategy that it's a no-brainer to take them forward."

The other critical success factor, he says, is to get the right people involved in projects from the outset, with high-level representation from all the functions that will be affected by a project.

Key to Nortel's success
  • Look for high-impact projects that can be delivered quickly and are closely aligned with the business strategy in order to get board support and management commitment to seeing them succeed

  • Structure projects so as to clearly establish the issues, risks and expected benefits at each stage

  • Get high-level support from all business areas that will be affected by the project

  • Use surveys and test scenarios to put hard figures on less tangible benefits, such as improved staff productivity

  • Make suppliers accountable for their sales pitches in these areas by incorporating their promises into supply contracts as success measures.

What the BuyIT experts say...

Alistair Fulton,
BuyIT chairman and president, the Computing Services & Software Association

Adopting common processes across a global company is recognised as essential if you want to capitalise on its wealth of skills rather than being weighed down by its size and inertia.

Achieving this and making such organisations work efficiently is an enormous challenge - many have not succeeded.

Similarly, finding ways to measure the intangible benefits that emerge from
e-enabling processes is something all major companies are grappling with. So to find a case study of a company that has achieved both seems too good to be true.

Nobody questions the need for all companies to adopt new working practices to take advantage of the updated technologies and to ensure survival in the face of increased competition. The true measure of whether a company has been successful in changing its culture is when the HR systems are e-enabled and using the technology becomes an integrated part of the way everyone in the company works. Nortel appears to have achieved this and there is no doubt that the measurable financial benefits will have been an important factor in getting the full support of management.

It will be interesting to see whether Nortel's success is emulated in other companies and becomes accepted practice.

Graham Colclough , principal, Cap Gemini Ernst & Young
It is about time we heard of strong and well-researched success stories in the area of e-enabling internal business processes.

Nortel's experience of its "business-to-enterprise" activities has the sort of maturity and rounded approach to projects that is rare even in the best implementations.

There must be thousands of potential organisations that could benefit from the actions Nortel has taken, but doubt their resolve to make a move to do so. Let this story be a means to provoke action.

Nortel has taken a staged approach that ensures buy-in and measurement at all points, recognises both hard and soft measures, provides a basis for the next phase of development and keeps the (internal) customer in mind all the way.

What is it that stops more organisations doing the same?

Is it perhaps concern about their ability to implement properly? Is it a doubt that people will embrace the change?

Somewhere along the line industry and organisation leaders have to take the plunge and experiment with such initiatives, otherwise they will lose the opportunity of getting onto the ladder before the bottom rungs get too worn to take the load.

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