IDC has provided a study on a useful topic, Determining the Value of Social Business ROI: Myths, Facts, and Potentially High Returns developed by Erin Traudt, Mary Wardley, Michael Fauscette, Dr. Natalie Petouhoff, Kathy Herrmann. It explores the criteria for validating enterprise social software purchases and social business transformation through return-on-investment (ROI) measurement. They also looked at the market potential. IDC’s Social Business Survey reports that enterprise social software adoption still has room to grow, with 41% of respondents indicating that they have already implemented an enterprise social software solution. This leaves 59% who have not implemented a solution. With this much adoption anticipated, IDC forecasts that emerging social platforms market will generate revenues of nearly $2 billion by 2014, experiencing a compound annual growth rate of 38.2% over the 2009-2014 forecast period.

However, IDC cautions that work needs to be done to reach these numbers. Erin Traudt, research director, Enterprise Collaboration and Social Solutions at IDC is quoted, “widespread industry adoption of enterprise social software is relatively immature and executives want a clearer understanding of the potential gains, costs, and return on investment that social business initiatives can have on a company’s bottom line.”

The reports goes on to state that when conducting ROI on social business initiatives, the traditional rules of business still apply. This is regardless if a company deploys social business initiatives to assist customer service, marketing, public relations, product innovation, employee collaboration, or other functional areas of the organization. The report comments, “It is rare that organizations know how to calculate ROI for traditional company projects; the addition of social business initiatives adds another twist, making it seem difficult to calculate social business ROI, but in reality it is possible.”

I agree that it is possible. However, to be effective it should demonstrate how social software improves performance on key business metrics that are often process aligned. One of the obstacles to getting a clear ROI is that much of the well-publicized social media use cases have been in the area of marketing, an area where ROI is more elusive. McKinsey showed us that ROI can come from both external marketing use cases and internal ones that are more aligned with work processes.  They found improvements through the use of social software in such metrics as reduction of communication costs, increased speed of access to internal experts, decreased travel costs, and increased employee satisfaction. This is a nice mix of hard edge and softer returns but each gets to the bottom line.

McKinsey also found that usage is strong as nearly half of the companies that have implemented social technologies have at least 51 percent of their employees using them. Like IDC, McKinsey saw firms increasing their investment in social software. In 2010, nearly two-thirds of respondents at companies using social technologies say they will increase future investments in these technologies, compared with just over half in 2009.  These two reports complement each other.

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