Out With The Old…Rethinking Outdated Intranet Portal Models Part I – Introduction

Sean R. Nicholson

Sean R. Nicholson

Over the last few years, the social media boom has forced Intranet portal vendors to rethink some of their licensing models and expand their feature functionality. “Traditional” intranet portals that are simply presentations layers with a back-end content management system just don’t cut it anymore. Instead, organizations want their employees to generate peer-to-peer content using 2.0 functionality like blogs, wikis, and tagging instead of relying on one-way messages from the top.

The collaborative efforts of the open source community have also delivered new products into the marketplace, driving the cost of software down and injecting healthy competition into the portal industry.  On top of new features and pricing models, new hosting options such as Software as a Service (SaaS) and cloud hosting provide organizations additional options to consider when building or upgrading their portal. All of this spells opportunity for Intranet pros looking to make changes.

In future articles, we’ll take a look at some of the specific software vendors and new platforms that are reshaping portal price tags, but before we jump into the specific products, let’s take a look at a recent, real-world example of how much the climate has changed and how big the impact can be to a company.

flashbackIn 2006, I was involved in an Intranet project for a Fortune 500 telecommunications company with an employee base of around 25,000. After identifying the requirements for the portal, the search for a suitable software package led the project team to three real contenders: BEA Systems’ Aqualogic portal (now Oracle WebCenter), Sun Microsystems’ SunOne portal (now defunct), and the Vignette Intranet portal (now part of OpenText).  All three offered a customizable presentation portal, content management system, search, forums and emerging blog/wiki functionality. However, each solution also required significant server hardware to be purchased and resources to be devoted to the maintenance of the hardware and the application.  After the final solution was selected and the appropriate hardware was purchased, the pricetag for the selected software and hardware tallied up to more than $2 million. Take note that the selected solution was the least expensive of the three.

Now, flash forward to 2009. I recently had lunch with the current manager of that specific Intranet solution and he and I were discussing the changes to the industry and the merits of both open source and hosted (SaaS) solutions. Knowing the price tag of the original solution and the annual software maintenance fees (20% of initial software costs), it took some simple math to come to the conclusion that he could take the annual maintenance of about $225,000 and easily replace the existing system for a hosted solution costing about $75,000 annually.

With the less expensive solution, he would get:

  1. A 37% reduction in software costs ($200,000 dropped to $75,000) in year one.
  2. A 93% reduction in annual software maintenance costs ($200,000 dropped to $15,000) in the following years.
  3. A reduction in hardware costs, allowing $200,000 in hardware to be re-purposed in the enterprise or decommissioned.
  4. No employee headcount required to maintain hardware, so reduced costs in employee overhead.
  5. The SaaS vendor would now be accountable for a 99% server uptime (No more outage calls at 3am when the servers stop responding or a load balancer fails).
  6. Continued evolution of the product since the annual maintenance buys him product upgrades from the vendor.
  7. New Web 2.0 functionality offered by SaaS vendors that isn’t offered by the current vendor.

thinking_money2So basically, this Intranet Manager gets more functionality for his users, a stable platform that allows him and his team to sleep at night, and a significant reduction in annual software costs that makes him a corporate hero with the Accountant and Execs!

A second option that we discussed was looking at a lower cost software vendor or an open source solution. In these situations, he would still reduce his annual software licensing costs significantly, but would still require the hardware and headcount to maintain it. The ROI, however, is still positive in year one due to the huge reduction in software maintenance fees.

Obviously, the ROI for this organization is magnified by the size and extensive software/hardware requirements of the company. However, it’s likely that any Intranet portal built on the traditional perpetual software licenses/standalone hardware model could benefit from a review of the existing system and an analysis of potential replacement technologies. So, before you cut that next software maintenance check, take a few moments to think about how much you’re paying and where you might get some additional bang for your buck.

Check out part II of this series where we’ll take a look at some of the existing replacement platforms that could positively impact your Intranet bottom line.

Comments And Reactions

  1. Sean, all good points. Here’s one I’d love to get your take on. Even in the face of significant savings, why is it so many senior execs won’t make a change because of their perceived loss of face for the previous huge investment. We keep running into this. The client needs to make a change to get better performance, functionality and lower cost. But the powerful won’t pull the trigger because they think they’ll be seen as having made a mistake with the earlier system. Everything evolves, right?

    Also, love to see you address why so many large organizations don’t even want to talk about open source.

    • Stacy,

      Your point on cultural change an excellent one! Part of the “out with the old” has to be giving up the old mentality of purchasing perpetual licenses, loads of hardware, and staffing to support both. Executives focused on protecting their silos will naturally resist with arguments like “we don’t need social media inside the firewall to waste or employees time” or “the conversion costs alone would make the transition cost prohibitive”. Trust me, I’ve heard them all. The reality is that executives, when faced with the raw ROI numbers of a migration to a modern platform, rarely have a leg to stand on. The key is to have clear, defined cost reductions that will improve processes. More to come on this cultural shift!

      With respect to Open Source, traditionally it has been all about risk and fear of being involved in or impacted by lawsuits. Big companies tend to avoid the risk associated with Open Source because they don’t want to replace technologies if a suit is filed. I see that trend changing, even in the face of big suits like SCO/IBM and the Microsoft vs. TomTom case (which was settled, not decided). Executives are realizing that the cost of operating Open Source is so much cheaper, it’s worth the risk to cut costs in these touch economic times.

      Both situations pretty much lead us to the fact that cash is king right now and any corporate citizen who can show a significant reduction in costs and improvement in business processes could be a corporate hero :)

      More to come on both topics, thanks for the great comment!

      –Sean

  2. David Taylor says:

    Sean,

    I would argue that its less about the possibility of being sued, and more about the fact that most open source projects (I say most, not all) don’t have a unified support structure for a user to call into to get assistance. Most of the time its limited to forums and emails. This works fine for initial implementation, but in a ‘system down’ type scenario, you want to be able to pickup the phone and get someone right away to start solving the solution. Since Open Source often means no-charge, the project doesn’t have the ability to provide that kind of 1on1 support.

    While open source might just be the right answer for the problem in how it solves it, disaster recovery and outage resolution drive business decisions moreso then cost to implement and maintain.

    Now I am a user of open source, don’t get me wrong, just pointing out where I’ve seen the decisions come from in my experience.

    • I’m with you, David, and I agree that support is another major risk that has kept some companies from jumping on the open source bandwagon. Companies like Novell, JBoss, and Sun have offered subscription support options for some open source platforms for a while now, but some orgs are hesitant to give up that security blanket offered by commercial, off-the-shelf software (COTS). The closer these subscription services get to mirroring those offered by COTS vendors, the easier it will be to make the shift.

      Thanks for the great comment! Keep em coming!

      –Sean

  3. Michael O'Connor says:

    Sean

    Interesting article. So much has changed in the intranet/portal world in the last 5 years – both in terms of technology and the demands of users. My question is around the implications of this on strategy. Obviously one of the key factors in determining technology solution should be the functionality required both in the immediate future and over time. How can we then chose a technology platform with confidence that it will continue to meet the business needs even in 3 years time?

    • Great question, Michael! Since technology changes to frequently, the best we can do is make solid decisions using the best datapoints and research available. The key, though, is to revisit the technology periodically to validate that it’s meeting the organizations needs and is returning the investment that was made. As new technologies come to market, we have to be willing to review their value and make changes if necessary. Unfortunately, these heavy investments in portals have made it difficult for some to let go of that initial investment in lieu of something better and cheaper. Hopefully, the social media explosion and shift in portal platforms and licensing options is making that review easier, since the ROI on change in platform can be realized relatively quickly.

      Thanks for the great comment!

      –Sean

  4. RT @shobankr: RE: Intranet pricing. Many factors that go into the answer. See this post & part 2 for thoughts http://www.intranetexperience.com/ourblo

  5. I blog quite often and I seriously appreciate your content.
    This great article has truly peaked my interest.

    I will bookmark your website and keep checking for new details about once a week.

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  1. [...] the first article in this series on rethinking the old model of Intranet portals, I covered the basics of why the old [...]

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