In our last gripping installment we began to consider the business case for SharePoint and I introduced the ideas of the Left Brained and Right Brained business case. In this episode we’re taking the excitement to unprecedented heights as we analyze the costs of SharePoint.
This is article number 11 in the series exploring my four point framework for ensuring long term, measurable success with SharePoint. There are four element to the framework:
The Costs of SharePoint
Whether you’re taking a Left-brained or a Right-brained approach to your business case, you’re going to need to estimate the costs of your proposed project. The cost side of the SharePoint business case is the easy bit. Table 1 summarizes the key areas of costs of an on-premise SharePoint project and splits them between capital expenditure, or the one off set up costs, and operating expenditure, or the ongoing running costs.
Table 1: The Costs of SharePoint
In my experience people tend to underestimate the operating expenditure. For example, in the post-project review for a collaboration project at a European central bank, the bank’s project manager told me that one of the key lessons learned was that the project estimates should have been more honest with regard to the operating expenditure. In that case it was the costs of the full time employees to drive adoption and business engagements that had been underestimated. If you remember our three-layer governance model, these were the costs associated with the business impact team.
One problem in developing the business case for your first SharePoint project is that the first project often carries the costs of implementing the platform, but the benefits are realized across multiple projects.
A UK based retailer I worked with struggled to get approval for their intranet project because the project costs came to £450,000 (US$ 711,630) but they had only managed to identify £75,000 (US$ 118,605) of annual savings from reduced printing and content management costs. The project costs included the setup of the SharePoint platform and the purchase of the licenses for thousands of employees.
Table 2 shows a simplified summary of their business case for the intranet project with the platform costs included. I’ve not made any provision for operating expenditure in this example. As you can see, over a three year period the financial analysis is negative. NPV is less than zero, in three years the returns would only amount to half of the overall investment.
Table 2: Example business case for SharePoint platform and Intranet solution
One approach to solving this type of problem is to split the costs of the platform and licensing out into a separate business case and financial analysis. By taking this approach, and by using SharePoint Foundation as a starting point, the retail client I worked with was able to show a positive business case by reducing the capital expenditure in year one to from £450,000 (US$ 711,630) to £100,000 (US$ 158,140). The project went ahead and was a great success.
It’s worth noting that you can purchase SharePoint Online licenses on a per-user per-month basis and the licenses cover the use of on-premise deployments as well. So even if you’re not ready to move your data to the cloud you can still use the licensing model to move your license costs from capital to operating expenditure, and that can make a business case much easier to put together as it reduces the payback period.
Coming Up Next Time….
In our next episode we will whip the excitement up to a near frenzy as we conclude the business case for SharePoint, and the strategy element of the framework by looking at the benefits of SharePoint, and a set of metrics that you can use to measure success.
If the business case for SharePoint is something that keeps you awake at night you may be interested to know that I’ll be presenting “How We Do It: Building Bullet Proof SharePoint Business Cases For World Class Organisations” at the International SharePoint Conference in London in April. Everyone who’s anyone will be there. Will you?
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