Many companies look to banks to fund large investment knowing the ROI is a future thing and they need to manage cash flow utnil they see these benefits. At Saratoga we offer rental agreements with one of the main reasons being to allow clients to offset the negative cash flow impact of technology projects. The overall cost increases as we have to cover the additional risk to us and the time value of future revenue. What we have found though is that many people do not look at the proposal in this way. They have a desire to purchase outright rather than spread the costs. We know there are some reasons people may do this and maybe we’re not communicating the benefits fully, but we have always believed the cash flow issues and associated speed of ROI would persuade a reasonable number of clients to opt for rental agreements. Have we misjudged what people want?

What if we package all the products and services you need in to a monthly rental - the Managaed Service apparoach? This would give a business owner/manager a fixed monthly fee based on number of workstations required (directly related to number of staff) for all their IT needs. Thsi immediately allows the employer to either measure the ROI on this investment easily or to set the costs as a cost of employment as it is related to employee numbers. This also ties in with the move to Software As A Service (SAS) - where monthly fees are paid for access to software rather than buying licenses ouright. How attractive is a fully managed service package to an SME - particularly with an eye to ensuring a quick and significant ROI?

There are plenty of places where you can read the about the details of this story:
IT Week
PC Advisor
Silicon.com
PC Magazine UK
MSN UK News
BBC News

There are more. If nothing else this story will go some way to putting Bournemouth on the map for technology and Internet innovation.

What does it mean in practice though?
100Mbps matches the speeds you can achieve in many office networks and therefore starts to make many online services far more attractive and useable. Broadband has already opened up many opportunities to home users and this development will improve that vastly.
There is a move already to provide software as a service - see Google Apps as an example - and these speeds would make it far more practical (and definitely less frustrating!!) to use these freely available products.
Many people are using online back up services to back up their data. Again, moving to high speed connections will greatly improve the performance of such services and they will become almost equal in terms of speed and performance compared to locally installed software.
What about video and audio files. These account for the vast majority of Internet downloads. Is it going to become feasible to watch a movie streamed across the Internet without having to download the entire film first? This would open up a whole new world for pay on demand TV and films.

The advantages for home users are obvious. What about businesses? These may not be as obvious at first, but the benefits are definitely there;
Voice over IP (VoIP). This technology is being used by many businesses and is being trumpeted as the next thing in business telecoms. Basically it allows you to make telephone calls across the Internet and can save significant amounts of money in telephone call charges. So far, there has been a reluctance as some calls suffer in terms of quality due to bandwidth restrictions. These new superfast lines could change all of that, making VoIP far more acceptable to businesses.
Many business Web sites now have video embedded in them in a move to add some personality. These new lines with their increased bandwidth would make it even easier for users to view these Web sites and the videos contained in them. This opens up opportunities for businesses in how they communicate with visitors and the services and products they offer via the Internet.
What about software as a service too? There’s no reason why businesses could not tap into these low cost, reliable services if the bandwidth available to them is large enough.

There are many opportunities made available by having larger bandwidth and I think it is great this trial is happening in Bournemouth. We’ll be watching developments very closely.

A guide to help you use the calculator:
Increased Revenue: This should include all the additional income you expect from using the proposed technology. For example; if you are planning a new e-commerce Web site then you expect a significant increase in revenue directly from this technology investment. Try to factor in any additional income you would expect from having an edge over competitors, improving client satisfaction and therefore increasing referral rates, etc. Be realistic about when these revenues will be coming into your business.
Reduced Costs: If this is going to streamline a process you can easily show the reduced costs here. Do not forget though that many technology investments are designed to improve efficiencies and productivity, so you may well be able to show costs savings per unit. If the technology is going to reduce energy costs or storage costs, etc show those savings here. It may be that you are planning to use an electronic document management and storage system and will be able to reduce printing and storage costs.
Avoided Costs: This is probably the trickiest: how do you know what costs you have avoided? If you are experiencing delays and down-time with old technology try to figure out the cost of the idle time you are going to avoid through your investment. You may also want to factor an element of potential future costs should you not make the technology investment. For example; how much would it cost you if you experienced some significant data loss? Do not include all of this as there is only a probability that it will happen to you, but it would be wise to include a portion if this is part of the reason for considering the technology investment.

The spreadsheet then works out quarterly totals and cumulative totals for these items. These figures represent the fiancial benefits of the proposed technology investment.

One-time investment: This is how much it is going to cost you to purchase the proposed technology - your capital outlay. If you are able to spread the cost through rentals then this could be zero.
Ongoing Investment: This is the ongoing cost incurred directly as a result of having the technology in place. This would include such items as power (only if this is going to be additional - NOT replacing an existing cost), support, updates and upgrades and so on. The one item many people forget is training. If you are going to need to train staff to use the new technology then you must factor in this cost.

This section then calculates quarterly and cumulative totals for the investment required.

The bottom section goes onto combine the two previous sections. The example in the spreadsheet shows a negative ROI in the first quarter, but by the end of the first year this becomes a positive ROI. you may need to extend the chart to cover an extended period if you believe the life of the technology is longer than 1 year. You will then see clearly when you can expect to ‘breakeven’ and what ROI you can expect in future months/years.

Armed with this information you can then make the right decision about the propsoed technology investment.

If your supplier makes certain promises about savings and/or returns then I would suggest you build these into any agreement you sign. If you make a decision based on information they provide and this information turns out to be wrong who should bear the cost of that? I would suggest that asking a supplier to make a financial commitment to back up their claims will ensure they are more realistic about what their products and services can actually do.

If your supplier is unwilling to make such a commitment, give us a call to see what we can do for you!

Maybe you allow yourself to be persuaded by the sales pitch. If this is a good one, they will listen to you and then explain how the product will benefit your organisation. How often does a sales pitch focus on ROI? Does anything else matter? If you’re a charity, a school or another organisation where you do not have to make money then you may well have a focus other than ROI. But if you run a business how can you spend money on anything that isn’t going to do one of the following;
1. Improve your bottom line (make money)?
2. Improve your top line (reduce costs)?
3. Improve efficiencies (increase how hard your money works for you)?
4. Avoid potential future costs (protect against potentially damaging incidents - eg data loss)
5. Improve cashflow?
These are reasonably tangible, but there are other factors that could affect the ROI;
6. Will the technology give you an edge over your competitors and allow you to potentially increase market share?
7. Will the technology improve the quality of what you do and/or the quality of the customer service you provide?
8. Will the technology allow you to market your products more effectively?
These are not always measurable factors, but they can be very real and should form part of any ROI calculation. The problem is; what value do you assign to the factors?
There may also be factors that are specific to your industry or even to your organisation.

You will also need to decide the lifespan of the equipment. Is it 3 years? If so, you should look at the impact of all the factors over this period against your initial cost and ongoing costs.

As this question is unwrapped, you can start to see how complex finding an answer actualy is.

How important is it to you that your IT supplier helps you understand the ROI you can expect from the investment they are aksing you to make?
In what format would you want to see this?
Should it be part of the proposal stage so you can see the investment required compared to the expected ROI before you make a financial commitment. Or should it be even earlier than this and be part of the initial discussion? Do you need a proposal if you are not convinced there is a real potential of getting a significant ROI?

Is ROI actually as important as we think it is or are we barking up the wrong tree?

Here are some of the things I found within a few minutes;
1. Yes, applications can access a lot of data about you. I did find applications that had been authorised that I had never installed. Facebook can hide behind various comments, but the bottom line is that their platform allows uncontrolled 3rd party developers to add applications that can harvest data from unsuspecting Facebook members.
2. I can browse my friends list and click on ’see friends’ and see a limited profile of ALL their contacts. I can then repeat this with their contacts (view friends) - even if I am not ‘friends’ with that person. If you manage to find a real celebrity profile through the search facility you can view their friends - a very interesting exercise, but is there not a breach of trust taking place?
3. It is possible for external Web sites to post stories to my news feed.
4. If a friend of mine comments on someone’s photo and this appears in my news feed, I can view the photo even if I am not conencted to the owner of the photo. I can then use the forward and back buttons to browse the entire album.
5. By default, Facebook submits a public search listing of your profile to be indexed by search engines. Not only do they not fully protect your data they share it with the likes of Google, Yahoo, etc.

Given the sharp increase in identity theft and increasing concern about data privacy, it seems incredible that;
A) Facebook allow such easy access to private data - even data of individuals that just happen to be friends of someone that has installed the ‘wrong’ application.
B) Facebook memebrs are so careless with their data. I know of people that put a lot of private data in their profile and more than enough for someone criminally minded to fake their identity.

My message: be careful with your data. I have put together a very quick guide to protecting your privacy against Facebook applications and gives a few pointers about other steps you can take to improve privacy.
Restrict data accessible to Facebook applications

To tie this back with this week’s discussion, how does this affect businesses trying to use Facebook to reach new clients? How far should you go in trying to reach them and to gather information about them? When does market research become an invasion of privacy? When does making contact become spam? If Facebook tightens its controls to protect privacy will this impact the business use of the site?

The recent Web 2.0 Expo
Media Week
New Media Knowledge
Emarketer
Search Engine Land

These were just some sites. There are lots more plus blogs and other companies that do what we do.
There are the usual ‘make a $million on Facebook - GUARANTEED’ merchants, but most sensible people seem, at best, not totally sure of how best to use the online social networking movement to generate new customers for their business.

In this situation I find the best way to resolve the issue is to carry out an experiment. I already have some keen ‘guinea pigs’, but a few more would help. If you’re interested in testing the concept of using Social Networking sites to promote your business please let me know. It will probably take the form of a workshop with follow up meetings to measure results.

I’m also still interested in your opinions, experiences, etc. So keep commenting…

In many cases this is focussed on creating your own community and using social networking tools; blogs, forums, wikis, etc. (Web 2.0) We have already embraced this approach and have built, or are building, many Web sites based around this concept. There are many others talking about ‘monetising’ social networking sites such as Facebook. This is the topic of these posts and something we are currently wresting with. Brian’s experience (see comment on yesterday’s post) is interesting. We built and support the bomocreatives Web site in partnership with Brian to match his vision and purpose for the group as a whole. It has been built as a social networking site; events are listed, there is a forum and so on. This site performs the function for which it was intended. Brian has also turned to Facebook as another way to find new contacts and build relationships with existing contacts. He states this has not generated any income for his business, BUT it has improved attendance for Bomocreatives. So there has been a benefit. Although it has not generated any additional income yet. Maybe it will do in time. As Brian meets more people and they get to know him better and trust him he will get more work and make more money.

I certainly don’t believe online networking is a shortcut to building relationships with people to the point where they trust you enough to do business with you. I do believe there is an opportunity to make that initial contact with another group of people you may not otherwise reach. You would then need to do the usual things you do to convince someone of the value of doing business with you.

‘Monetising’ social networking is itself big business. in fact today there is a large conference taking place in Los Angeles: The Economics of Social Media Conference. This presentation in particular caught my eye;

3:30 - 4:20pm
Pushing Social Media Boundaries With Marketing And Advertising
Sponsored by Bunchball

Is social media advertising a beacon of light or a train wreck? Social media has been blasting through the boundaries of online advertising as consumers engage and carry messages more easily than ever. From ad networks to immersive social brand marketing campaigns that are driving consumer engagement - marketers have more tools at their disposal than ever. How is the marketing landscape changing, where is the creative bar being set and how is engagement being measured?

Maybe if I’d have know about this conference earlier I could have booked a ticket and found out all the answers to my questions. As it is i am hoping there will be access to notes/slides/MP3 recordings and I will be able to find enlightenment only slightly later than the attendees and without the need for long air flights.

Is the use of social networking to promote businesses another attempt by technologists to make promises they cannot necessarily keep?
I’m not sure. that’s why we’re asking the questions, trying things out and MEASURING the results we get compared to the amount of work needed. Only then will we be able to say with any confidence ‘using social networking to promote your business can have a positive impact on your bottom line!’

Anyone else with something to share?

Everything we do as a business is executed in a manner which allows us to measure, and therefore assess, performance. We work in partnership with our clients to make ‘a measurable difference to their business’. This implies we have some way of measuring what we do for them. If we assist a client with a Social Networking campaign, what is going to be our ‘yardstick’? What results do we want and what are we going to measure?
How many Facebook friends/fans the business has?
How many people say ‘I saw your company on MySpace’ when we remember to ask them how they found us?
How many ‘conversations’ or ‘relationships’ your business has online?
How much profit changes over the period the campaign runs for?

Ultimately for a commercial organisation it comes down to profit - hard cash! You get profit from satisfied customers. Social networking sites might be one place to find new customers you can satisfy. But this is just a tad crude and we’re not sure yet what the time lag will be. How can we effectively monitor performance as we go along and be confident we’re heading towards having more satisfied customers giving us more profit?

Is it about ‘audience’ numbers or should there be a focus on the level of participation?
Do we need a range of measurements to match our clients goals?
Is it really that different to measuring other marketing activities?

These ,and others, are questions that many people are struglling with;
Facebook Group - Social Media Measurement
MeasurementCamp
Chinwag - Measuring Social Media

I actually found lots of places where this question is raised - has anyone got ideas about the answers???

You may well be asking ‘how on earth can a business use such sites to promote themselves?’ This is a question many people are asking and some people are even dipping their toes and trying things out. Facebook has introduced Pay Per Click advertising for example: replicating the Google model within their own site. The aim is to make the ads relevant to the user based on their demographic information. This seems like a sound business model, but there are many users that are vehemently opposed to such moves and believe social networking should be about making, building and maintaining friendships only. If the audience is against advertising within the site, how effective can the ads be? Are there alternatives that are less obviously commercial, but still as effective? Web 2.0 is another term used for the move to user generated content on the Internet; blogs, wikis, forums, etc. The focus has shifted to web users finding information (content) that is valuable to them or is of interest to them. This is the approach we are considering to see if businesses can really utilise social networking sites. Our philosophy being that users will only take any notice if you have something to say that is of interest or of value: blatant commercial advertising is being ignored more and more.

How then can a business promote itself via this media? I don’t think it will be effective for all businesses. You need to be able to provide something to the members that will interest them - almost all of them want to know ‘What’s In It For Me?’ (WIIFM). You may even need to give something away as a ‘hook’ in to your business.

We’re about to work with some clients to trial various methods and see which ones work. We’ll post news and updates here about how we get on.

Have you used social networking sites to promote your buisiness? What did you do? How successful was it? If you haven’t used these sites to promote your business, what is your view of this approach? Is it something you would consider using?

Accoring to The BBC, big businesses are taking this very seriously - http://news.bbc.co.uk/1/hi/technology/7359927.stm - if they’re prepared to spend so much money in this area isn’t it something you should at least consider?