Economical Aspects when Deploying Enterprise Portals

INTRODUCTION

Enterprise portals have become the backbone for the integration of a large number of different applications, content, and services (Smith, 2004). Nowadays, electronic business can hardly be imagined without the use of these portals as central entry points. At the same time, companies become more and more aware that portal projects are complex, time- and cost-consuming, with a high risk of failing. Costs and benefits to build up and operate an enterprise portal have to be weighed up in a systematic manner, including make-or-buy decisions with regard to packaged portal platforms vs. open source developments, individually developed vs. purchased standard portal components (Hazra, 2002).

However, often clear figures describing the economic impact of portal solutions are missing. Furthermore, there is still uncertainty which methods are suitable, at which stage of the implementation process they have to be used, how they have to be adapted and customized, and which preconditions have to be set in order to assess the economic impact of enterprise portals. In addition, enterprise portals can be deployed across a broad range of industries and application areas, thus enabling the implementation of such different portals like knowledge portals, employee portals, ERP portals, collaborative portals, process portals, and partner portals. All these types of portals need a specific and individual approach to evaluate the economic impact.

The goal of this article is to contribute to the decision of how to analyse and evaluate the economic impact when deploying large enterprise portals. For that purpose, we present a framework that can be applied by carrying out the following steps: At first, important preconditions and assumptions concerning the portal solution have to be collected. Then, key factors, derived from the results of the previous step, can be identified. Finally, these factors have to be evaluated and, if possible, quantified and measured. Consequently, these steps have to be embedded in the development process of the portal solution. We describe a procedure model, based on the stages of the PDCA-approach (plan, do, check, act), which can be used to carry out a structured analysis taking into account the whole life cycle of the deployed portal solution.

As foundation of the framework, we provide a classification, where measurable key factors of portal costs, benefits, and risks are collected and structured (according to the main portal types B2E, B2B, and B2C). In particular, qualitative factors play an important role in portal projects. Even though these factors are hard to measure, they are urgently needed to draw a complete picture of the profitability of a portal project. Based on this classification, existing methods to measure the economic impact are reviewed and assigned to the corresponding items of the classification.

PDCA: AN APPROACH TO MANAGE THE ECONOMICAL IMPACT OF PORTAL PROJECTS

Originally, the PDCA is used to systematically implement changes as well as improvements and therefore, especially suitable for the deployment of portals, as portal projects tend to influence and often change many internal and external processes. The PDCA is based on the common practice of identifying and testing hypotheses, resulting in measures to correct the initial assumptions. The procedure can be carried out in multiple cycles, ensuring a continuous improvement of the economical analysis (Bushell, 1992). Hierholzer (2000) is using the PDCA-process to manage and implement process improvements with regard to benchmarking.

Plan Phase

The first step in the PDCA approach contains the business case, the identification of categories with regard to benefits, costs, and risk, as well as the identification of performance indicators and target values. In addition, methods to evaluate the identified benefits, costs, and risks, as well as options for flexibility are determined, which can be relevant for project management later on.

In portal projects, the business case intends to set requirements and details the upcoming investment, taking into account a rough analysis of effects on the value adding and the technical description of the planned investment. In order to make a final decision on the project start, costs, benefits, and risks have to be identified and transferred into measurable performance indicators. Similar to the analysis of costs of IT investments using the well-known method of total cost of ownership (TCO) (Elsener, 2005; Wild & Herges, 2000), cost, benefit, and risk categories have to be split up into more detailed categories; finally defining atomic items, where concrete values can be assigned. The resulting framework can be used as a checklist to support the identification of appropriate categories and to assign specific analysis methods.

Figure 1. PDCA-approach

There are many possible performance indicators, for example, ROI, NPV, payback period, and so forth. However, during the implementation of portals, often benefits are realized that are difficult to measure in quantitative values. This is the main reason why it is suggested to additionally consider qualitative performance indicators used in for example, balanced score card (BSC), employee life-time value (ELTV), and customer life-time value (CLTV).

The next step is to define target values as basis for analysing progress and deviations. As soon as all indicators are determined appropriate, evaluation methods have to be selected. Often, this procedure is already contained in many popular methods, such as TCO, real cost of ownership (RCO), total value of ownership (TVO), total economic impact (TEI), and rapid economic justification (REJ) (Amberg & Okujava, 2005 provide a short overview of these methods). The choice of the valuation methods and the scope of the valuation are dependent on the stage of the portal’s development life cycle. Furthermore, the analysis of flexibility options can outline possible options for action. Possibilities to manage the IT project can be identified and corresponding effects assessed. With these, guidance companies get the opportunity to react upon internal and external influences and adapt the project procedure accordingly.

Do Phase

The do phase is the core phase of the economic evaluation. All results are collected in a report, which is an important part of the business case and serves as basis for the investment decision.

The report is seen as a reference to evaluate upcoming IT investments, building the starting point for the evaluation and the systematic management of IT investments. It contains the business case and categories of benefits, costs, and risks, together with their corresponding evaluation methods. Furthermore, the report supports a project controlling, by collecting performance indicators together with their target values in a transparent way. In addition, it contains possible scenarios and flexibility options. The report is accomplished by an executive summary containing a description for the best solution, its economic impact together with the main pros and cons for this solution.

Check Phase

The goal of the check phase is to control the progress of the project, the achievement and control of goals and, if necessary, modifications of the business case.

In order to identify differences already in early stages, many authors demand a continuous monitoring of performance indicators (Deming, 2000; Kutz, 2003). There are different comparison methods: As typical,, savings need a certain amount of time until they become effective, the comparison over time providing a suitable basis for monitoring the project process. The comparison of objects is focussing on projects neglecting other organizational-wide influencing factors (e.g., market changes), whereas a comparison using target figures is useful to control the level of goal achievement of the IT project. In addition, benchmarking using external data from other organisations might be useful to assess the impact and finally manage the investment.

Table 1. Typical cost categories in portal projects  

Corrections with regard to the basic options defined in the business case align both the economical analysis and the project management to real-life expectations. In case these corrections are not sufficient, business goals have to be aligned (Collins, 2001, 2003).

Act Phase

The act phase is responsible for actively managing the project, taking into account identified deviations from the check phase. These deviations can particularly result from modifications in the environment of an organisation. Corresponding corrections are normally carried out by project management. In case these measurements seem not to be sufficient, the business case has to be corrected. Possible deviations may result from planning, execution, or controlling errors. In order to solve typical planning problems, budget and resources can be reallocated or, even the project can be stopped.

ECONOMIC CATEGORIES OF ENTERPRISE PORTALS

In this article we present the cost, benefit, and risk categories typically associated with portal deployment, based on reviewed literature (Collins, 2001, 2003; Firestone, 2003; Kastel, 2003; Kutz, 2003; Mangold, 2004; Pietsch, 2003; Pisello, 2001; Ramos, 2002; Sullivan, 2003) and case studies (CapGeminiErnst&Young, 2003; Gurzki & Ozcan, 2003; MetaGroup, 2003; Techconsult, 2004).

Portal Costs

The identification of portal costs is relatively easy. According to the reviewed literature and case studies, we distinguish between the following types of costs that all categories of portals have in common (Table 1).

Portal Benefits

Much harder than the identification of costs is the identification of portal benefits. As all portal benefits are finally dependent on the content, the structure, and the specific use of the enterprise portal, often, only the most important drivers of benefits are considered (Kutz, 2003). The following tables outline the different potential benefits of B2E and B2C portals found in the scientific literature and case studies. We distinguish between directly quantifiable benefits and benefits that are hard or not at all measurable.

Table 2. Directly quantifiable benefits of B2E and B2Cportals

Table 3. Benefits of B2Eportals that are hard to quantify

When looking at benefits of B2C portals that are hard to quantify, we found out that these benefits are similar to those of B2E portals. Also, in the case of B2C portals, employee-related effects can be identified, but surely not to the same extent as in the case of B2E portals (Table 3).

Portal Risks

Identifying risks and acting accordingly are important prerequisites for a successful portal project, as the occurrence of a risk may cause costs, endanger the achievement of objectives, or even lead to the project break down (Collins, 2003; Pisello, 2001). As the amount of risk is increasing with project scope and complexity, the professional management of risk factors is often crucial for the success of the portal. By considering the consequences and the probability of each risk, it should be possible to determine the importance of key risks. Here, it is important to involve risk management during the project planning phase and throughout the whole project life cycle (Collins, 2003; Ramos, 2002). Table 5 shows typical risk factors when planning a B2E or B2C portal.

Table 4. Risk factors of B2E and B2Cportals

Table 5. Methods for analysing benefits

SELECTION OF METHODS

Based on the identified categories of costs, benefits, and risks, methods to measure these factors have to be selected and applied.

Methods for Analysing Costs

The total cost of ownership (TCO), developed by the Gartner Group, is commonly used for analysing costs. TCO offers help when identifying and measuring the cost effects related to the IT system (Wild & Herges, 2000), by providing a monetary performance indicator that is able to make a statement about the costs of an IT system during a predefined period of time.

Methods for Analysing Benefits

Because of the problems of quantifying qualitative benefits, companies often focus on quantitative benefits, which can be assessed more easily. In order to analyse the quantitative benefit in terms of cost savings, common methods like ROI, EVA, CBA, or TBO are used. Here the strong focus on costs becomes apparent. Benefits are only considered as long as these benefits are quantified in terms of cost savings, assessed by comparing with target values. However, the majority of benefits are those qualitative aspects, which are hard to measure. These are expressed in monetary figures, restricting the assessment of qualitative benefits by corresponding performance indicators (Pietsch, 2003).

Table 6. Methods for analysing risks

There are methods, such as the value benefit analysis and the balanced scorecard, that try to extend the scope of the economic evaluation by considering benefits that are hard to quantify (Table 5). The value benefit analysis assesses the qualitative benefits by collecting subjective judgements. This method is often used in practice, and provides a good extension to the already mentioned methods and performance indicators, even though, due to its inherent subjective assessment, it might be subject to manipulation.

In order to support an integrated evaluation of quantitative as well as qualitative benefits, a balanced scorecard can be developed, particularly collecting those portal benefits that are hard to measure. Active base costing adapted to process-oriented value benefit analysis is a good method to cover process improvements along processes. Real options are used to assess the dynamic of portal projects. However, due to its high complexity, their popularity is low.

Methods for Analysing Risks

It might be difficult to estimate risks for portal projects that pursue long-term strategic goals (Collins, 2001). In addition, changes in the organisation’s environment are complicating the identification of distributed and time-lagged cost and performance effects (Pietsch, 2003). Table 6 summarizes possible risk categories, together with its problems to measure and its methods. Typical methods are the quantitative risk analysis, that is, the Monte-Carlo-Simulation, and Scenario and Sensitivity Analysis.

The scenario technique can only be used in relation to other evaluation methods. Next to a detailed examination of corresponding risks, different possibilities to define and analyse scenarios can show additional views on the economics of the investment. The scenario technique is easy to apply, is highly accepted, and has some advantages concerning the assessment of the qualitative risks of portal projects. Sensitivity analyses are used similar to scenarios to consider different possible results under alternative presumptions (Collins, 2001). They provide a basis to identify critical success factors and to develop risk profiles.

CONCLUSION AND FUTURE TRENDS

Even though many benefits may lay at hand when implementing large enterprise portals, such as personalisation, streamlined processes, and improved information quality, a systematic evaluation of all economic influencing factors considering both quantitative as well as qualitative benefits, costs and risks is important, not only in advance, but dynamically throughout the whole portal project life cycle.

Common methods and procedures to analyze the economic impact of investments cannot be easily adapted for enterprise portals. The need to consider different types of back-end systems, that is, intranet, ERP systems, or legacy systems, inter- and intraorganizational processes, as well as the identification and measurement of the soft, but nevertheless important subjective qualitative factors, are complicating the detailed evaluation of benefits and costs for enterprise portal projects.

On top, there are no frameworks or procedure models that can guide the selection, adaptation, and use of the appropriate evaluation method according to the needs of a portal project, often resulting in an asymmetric consideration of benefits, costs, and risks; altogether no reliable starting point to come to reasonable IT investment decisions.

However, a procedure model based on the stages plan, do, check, act, can be used to carry out a structured analysis, taking into account the whole life cycle of a portal project. One of its key features is its adaptability to different IT projects by providing a classification where measurable key factors of portal costs, benefits, and risks are collected and structured (according to the main portal types). Based on this classification, existing methods to measure the economic impact can be assigned to the corresponding items of the classification.

What are the next steps in the development of the PDCA approach? First, the applicability of the approach has to be proved for different portal projects. W are working on the development of easy to use SW tools to support all stages of the PDCA approach, for example,, integrating templates for different portal types, such as templates with already preconfigured values for typical benefits, costs, and risks of employee portal projects.

KEY TERMS

Economic Valuation: Economic valuation is the process of comparison of costs, benefits, and risks of a portal project. We distinguish between ex ante and ex post valuations. The main challenge during the ex ante valuation is the prediction of exact values for cost and benefit categories, and identification and valuation of risks. The ex ante valuation serves as the decision basis whether to start a project or not. The ex post valuation serves as a controlling instrument to compare actual values with target values.

Enterprise Portal: An enterprise portal is an application system that provides secure, customizable, personalizable, integrated access for employees and business partners to a variety of different and dynamic content, applications and services, enabling core e-business strategies. It provides basic functionality with regard to the management, the structuring, and the visualization of content, collaboration, and administration.

PDCA Approach: PDCA approach derives originally from the domain of quality management, and describes a controlled process of continuous improvement. Defining four phases, Plan, Do, Check, and Act, the PDCA approach suggests a structured approach during a system’s life cycle, including controlling activities. Through repeated execution of the PDCA cycle, there is a permanent improvement of a deployed system or processes.

Portal Business Case: The portal business case represents the results of the analysis of different aspects of a portal, for example, requirements on IT infrastructure, description of required self-service applications and features, recommended standards and best practices, and the basic concept of the portal solution. The objective of the business case is to describe the project in order to support the decision-making process in an organisation. Furthermore, the business case serves as a requirement catalogue for the project team.

Portal Engineering: The engineering process is characterized by the systematic use of engineering-like methods and tools, for example, roadmaps, reference models, and so forth, in all stages of the implementation process. Typical tasks within the development process comprise the development of portlets, the customization and integration of portlets in a portal framework, and the roll out of the portal solution.

Portal Strategy: A portal strategy, as described in the business case, outlines the development, introduction, and evolution of the portal. The strategy should be aligned with the e-business and overall corporate strategy. Different types of portals for example, enterprise partner portals, knowledge portals, electronic commerce portals, support different ebusiness strategies (B2B, B2E, B2C).

Portlet: A portlet can be viewed from different perspectives. For the end, a portlet is nothing more than a window displaying the preferred content, whereas the portal administrator views portlets as content container resources. From a technical perspective of a portal developer, a portlet is an individual application component (servlet) hosted and running in a portal server.