When Renting Beats Building or Buying
By Paul Gustafson

The business case for hosted collaboration management solutions.

No one can say they didn’t try. For two years, the IT department at a Fortune 500 company tried to piece together a collaboration management solution using various pre-packaged software applications and low-level development tools. In the end, the labor and materials costs simply outweighed the benefits of the solution.

This problem is not unique. In fact, it’s common to many large enterprises, whose event management needs are growing faster than the company’s ability to manage them efficiently. 

Collaboration management solutions automate scheduling, marketing, registration, payment, follow-up, and reporting for global events, conferences, and training sessions. Traditionally, these processes were organized manually by company marketing, training, and customer service staff.  But because of the growing availability of Web-based technology solutions that streamline such processes, the decision to automate is an easy one. 

In an effort to provide these tools at a reasonable price, many solution providers are offering the technology on a hosted basis. When the necessary hardware and software for a given system resides in the data center of the provider, the customer is spared the expense and complication associated with owning, installing, maintaining, and updating the solution. Now, a company can deploy collaboration management solutions quickly and affordably, while redirecting  staff to the management of other activities associated with a particular event.

Traditional, manual event management

To be sure, advances in technology and the Internet have alleviated many business problems. But for most organizations, person-to-person contact is still the ideal approach to effective communications. For small and medium-sized companies, such as a local art dealer or regional building contractor, it’s more practical for a single person or team of two office administrators to handle event management. With a little training, these workers can take registrations for events over the telephone, enter attendee details into a spreadsheet, print and mail marketing brochures and confirmation letters, and even process credit card transactions. 

But for larger businesses and events, manual organization is not only impractical but horribly expensive. The reasons are numerous. For example, because of the Internet, companies can reach more customers, partners, prospects, and investors than ever before. It’s not uncommon for product training and marketing seminars to happen in real time over the Web with hundreds or thousands of participants from all over the world. To manage multiple events at disparate  locations simultaneously often requires dozens of support staff working full-time. The labor costs can become overwhelming—not to mention, there's the likelihood for important details to fall through the cracks. And if one of the support staff changes jobs, training a new person increases the expense. 

What’s more, the practice of manually updating materials for such training and marketing events can be an enormous undertaking. Too often, event schedules are out-of-date, and customers must rely on telephone inquiries to obtain correct information. Playing telephone tag to connect event staff with customers is a burden for both parties. There’s the potential for unrealized revenue each time a customer is unable to reach someone during peak hours, evenings, weekends, and holidays. In the end, whether it’s securing meeting rooms or sending confirmation notices, manual event management isn’t the best option. Rather, such processes can waste a company’s financial and human resources, as well as demoralize all of those involved.

Analysis

• Investment costs: US$50,000 and higher per employee per year (includes employee, personal computer, database or spreadsheet application, and credit card processing system) 
• Development costs: $0 
• Maintenance and enhancement costs: $0 
• Time: Available within a few weeks 
• Unknown factors: Employee turnover, training costs, system availability during vacation and sick time, and inability to handle changes in transaction volume 
• Potential results: High costs, out-of-date class information, inaccessibility after business hours, valuable time eaten up in telephone interactions, lost business and lost customers 

Build your own

At first glance, the prospect of building your own event management system may sound attractive. After all, this approach allows a company to specify exactly the features and functionality it wants. In addition, the task of developing the application can be handled by a company’s own in-house team of professionals. Perhaps, the organization can host the solution with equipment that's already paid for and on the premises.

The wise management team will think again, though. A common business rule states that any activity not considered a core strength of the company should be outsourced to a qualified service provider. For instance, it makes little sense to expect the IT department at a financial services company to have an expertise in building every sort of application. 

Successful development and maintenance of an homegrown application requires significant experience with the needs of that system’s business users and basic materials. For example, a powerful collaboration management system needs an infrastructure that will support a high-performing, accessible, and dependable Website. Also, the application most likely will need a Web server, database server, firewall, and network upgrades. In some cases, IT departments can extend and enhance existing infrastructure to accommodate the application; additional infrastructure must be purchased for other implementations. 

In addition, the IT staff will need to create detailed specifications for the application, then develop, maintain, and enhance them over time. Even skilled staff or consultants are not likely to have the requisite depth of experience in developing training and marketing event management systems—such domain expertise is easy to underestimate. In this respect, a collaboration management system is akin to payroll. At first glance, payroll is simple. Anyone can write a check, right? But when you start to calculate withholding, insurance, flexible spending, commission plans, direct deposit, or 401K contributions, it becomes less prudent to build and maintain a home-grown payroll application.

Finally, even when the application is delivered, the job is not complete. To have the application work over time and continue to meet the needs of staff and customers, the IT staff must be available to maintain the application and hardware environment, while planning for ongoing feature enhancements and upgrades.

Analysis

• Investment costs: $50,000+ (includes Web server, database server, firewall, RAID, network upgrades, database license, and application development environment) 
• Development costs: $150,000–$200,000 (includes requirements planning and in-house development or consulting) 
• Maintenance and enhancement costs: $50,000-$100,000 per year (includes cost to maintain the hardware and software, hosting and/or VPN transaction expense, and personnel to maintain and enhance system) 
• Time: 4-6 months for initial requirements, 6-12 months for development and testing (includes equipment purchase and delivery, requirements, development, and testing) 
• Potential results: High hosting costs, ineffective requirements, long development cycle, continued needs for in-house support, and maintenance 

Off-the-shelf software application

A primary responsibility of a CIO is to evaluate the costs associated with procuring a new enterprise application versus the value it provides to the organization. While many will argue that there’s more risk involved with the decision to build an application from scratch, there are at least as many hazards deploying a packaged software application. With little effort, most CIOs can conjure memories of enterprise software implementations that took too long and cost significantly more than the original budget estimate.

Nevertheless, a variety of collaboration management systems are currently on the market, many of which offer full feature sets and a rich customer experience. These systems typically are geared to handle many of the more advanced requirements for organizing and executing a collaborative event, such as online payment, Web and audio conferencing, and reporting.

Unfortunately, prepackaged applications share many of the disadvantages of the homegrown application. A company still needs to invest in the equipment and infrastructure necessary to host the solution in-house. The licensing fees for the application itself can easily meet or exceed the consulting costs that would be incurred to custom develop the application. 

Moreover, most software applications require customization that's costly or difficult to execute. Companies routinely spend many months and thousands of dollars to redesign an off-the-shelf product, and many of these deployments still require the support of professional consultants and systems integrators, whose time is yet another expense the company must incur. In addition, system upgrades can be expensive and a significant time sink, especially when customizations are part of the picture.   

As a result, most CIOs require managers to make a definitive business case prior to implementing an enterprise software system. The IT department, in conjunction with line managers, must be able to show how the cost to deploy the application will be offset by the return-on-investment. Given the high costs of such projects, this is a difficult case to make. And, with so many variables unclear, the decision to use an off-the-shelf software application is no easier than the choice to build your own system.

Analysis

• Investment costs: $75,000+ (includes Web server, database server, firewall, RAID, network upgrades, database license, and application development environment) 
• Application costs: $75,000-$100,000 (includes the purchase of the application, customization, and deployment consulting) 
• Maintenance and enhancement costs: $50,000-$100,000 per year (necessary for staff to continue using and getting value from the application) 
• Time: 6-9 months (includes deployment and customization) 
• Potential results: High hosting costs, high application costs, long implementation cycle, ongoing maintenance, and costly and difficult upgrades 

A hosted solution

Despite the bleak picture painted above, there’s hope for the progressive CIO.  Conveniently, the hosted model is rising to the top of CIO strategies. Fortune 500 companies are leveraging hosted services from application suppliers that deliver all of the benefits of the best in-house and application software while eliminating high costs and long implementation cycles.

Hosted collaborative event management solutions simplify all of the steps required to organize and execute global events, in-person conferences, and marketing or training Webinars. A comprehensive service captures and combines the relevant information for both in-person and virtual events, and integrates the content for use across the enterprise. Typical features include event planning, scheduling, registration, online payment, communications, certification, approval, and reporting. This sort of functionality streamlines the collaboration management process, replacing the disparate combination of custom programs, manual spreadsheets, and repetitive tasks. Better yet, most hosted offerings integrate easily with other Web and audio conferencing services. 

By nature, a hosted collaboration management solution removes the burden of installing, maintaining, and upgrading the event management system, freeing IT and training staff to manage other pressing tasks. And in most cases, a hosted solution can be deployed across the enterprise in less than 30 days. 

Of equal importance, the cost to use a hosted service can be significantly less than the purchase price of an off-the-shelf or homegrown application. In a hosted engagement, a company pays for the number of event registration it needs and nothing more. The combination of these factors allows most companies to see a quantifiable ROI after the very first event. 

Analysis

• Investment costs: None (a custom site is hosted by the application provider) 
• Minimal annual subscription fee. Most hosted service providers offer a low-cost solution branded to the customer’s corporate look-and-feel 
• Maintenance fees. None; the provider maintains the company’s Website and generates upgrades automatically 
• Time: Typically less than 30 days; the provider sets up the company’s Website and provides a login to plan and enter training classes or marketing Webinars 
• Potential results: No capital investment; fast deployment; maintenance and upgrades included in subscription fees

Take a closer look

Few CIOs would argue that collaboration tools are established as a key building block in the enterprise. Collaborative solutions, including Web conferencing and instant messaging, initially were useful for reducing the costs of business travel. Now, they're strategic resources to the most advanced organizations. 

By engaging a hosted collaboration management system, companies retain optimum system flexibility, which is necessary to balance organizational growth and evolving business and technology requirements. As a company adds staff, expands its product line, and moves into new markets, the demand it makes on a solution will likely change. To ensure these transitions are managed fluidly, a hosted solution is your best bet.

The most advanced hosted collaboration management system providers already have close relationships with complementary collaboration technology companies. The emergence of Web and audio conferencing are driving forces behind what is quickly becoming a multibillion dollar global market. Making the correct decision to deploy a hosted solution will most definitely have an impact on a company’s bottom line. It’s incumbent on a company’s senior management and IT staff to choose wisely.