The Business Value of Web 2.0 in the Enterprise

A lot of business and IT people still tend to think of anything related to the term Web 2.0 as being a consumer phenomenon. But over the last few years a wide variety of Web 2.0 technologies have wormed their way into the enterprise. The question that a lot of people have is just what has the business impact of all these Web 2.0 technologies actually been.

Cisco this week offered itself up as a prime example of a company that has derived substantial benefits from Web 2.0 applications and technologies in the enterprise. Cisco wants other companies to follow it lead because it is gearing up to bring a Web 2.0 collaboration platform to market and customers that adopt Web 2.0 technologies tend to consume a lot more network bandwidth, which usually means an upgrade to the network infrastructure.

Cisco says its journey on the Web began 10 years ago when it started shifting business processes to the Web. This Web 1.0 phase of investments continue to yield significant returns, with Cisco attributing about $3.7 billion worth of benefits in fiscal 2008 alone to these investments. Cisco says that its more recent investments in Web 2.0 technologies over a 12-month period yielded a return of $691 million in benefits in fiscal 2008, providing a total benefit from Web technologies in fiscal 2008 of $4.4 billion.

Behind the numbers, Cisco is saying that it invested roughly $82 million in Web 2.0 technologies to create about $772 million worth of returns on that investment. The primary benefits that Cisco cites when describing those returns are improved remote collaboration that reduced travel requirements, more time spent working thanks to more robust telecommuting capabilities, better optimization of employees with specialized skills, and improved sales productivity. Specifically, Cisco says collaboration software reduced costs by $251 million a year, increased margins by $142 million and generated employee time savings of $380 million a year.

The problem a lot of financial people are going to have with these numbers if that, outside of the sales figures, how they get measured is open to interpretation. But no matter how you measure them exactly, the purpose of making technology investments in the first place is to improve the productivity of employees. Cisco estimates that increased collaboration on the Web is going to increase the productivity of every employee by 3 percent to 5 percent over the next five years, which it says will prove to be the main driver behind increased corporate productivity over the next 10 years. Cisco claims that it saw a 4.9 percent productivity increase in fiscal 2008 as a result of improved collaboration on the Web.

To whatever degree that proves to be true, the simple fact is that corporations are going to have a very hard time attracting the kind of talent they are looking for if they are not providing the latest in Web application software. To underscore that point, the Economist Intelligence Unit predicts that by 2010, 62 percent of all employees will be working with teams of people distributed across multiple locations.

When it comes to anything related to Web 2.0 in the enterprise, there is no doubt that the business mileage derived from these investments will vary widely. But the simple truth of the matter is that these technologies are necessary to staying competitive, especially in the worst of times when we need to get the most out of every employee. As always, what will ultimately separate one business from the next is not necessarily the technology itself, but how they use it.

But if you don’t use it, then you don’t stand a chance at all.