Calculating the Cost Savings of a Board Portal vs. Building In-House
Last week a prospective client asked us how BoardEffect users typically measure organizational cost savings from using our product. This is a relatively common question, which isn’t surprising given that virtually all organizations today operate with budget constraints. But this frequent and seemingly simple request implies a range of related questions centered around calculating Return on Investment (ROI). In an effort to address this question completely but concisely, I’ve broken this into a two-part response. The first post articulates a way to think about and justify the general cost of implementing a board portal versus the most common, “free” alternatives. This second post offers a framework for comparing the cost of commercial off-the-shelf software versus the prospect of making a larger investment to build one’s own custom board portal solution.
The costs of implementing a commercial board portal are pretty straightforward. For products like BoardEffect, there is an annual subscription cost and the cost of internal resources needed to administer the system.
For organizations with in-house development resources with time and talent, building a solution in-house to manage board information is a more complex, but nonetheless alluring, option. This path has the inherent advantage that your organization can tailor the solution to your specifications, and have in-house support for training, implementation and ongoing maintenance. Additionally, this approach can be made less daunting and faster to execute by using an existing framework, such as your organization’s website or SharePoint, as a foundation. This can then be leveraged by having your in-house IT team customize it to your needs. For some organizations this can seem like an attractive, cost-effective way to get a board portal solution that is fit for purpose.
That said, our observation is that this approach is being abandoned by many organizations in favor of commercial offerings. The primary reason we hear for this switch is that the in-house build option quickly becomes too costly. Here’s why:
- Maintenance: Making ongoing updates to homegrown software is rarely included in the planning. Many homegrown systems are “one and done,” meaning, they get built once, but not regularly updated (as internal project teams move onto the next pressing and exciting project). This is a problem for board information management, because boards are not static – the governance landscape is rapidly changing, board members transition, and organizational needs evolve over time – all of which require customizable workflows.
- Expertise: Building in-house means you lose out on the benefit of having access to industry knowledge and the experience of companies that ONLY focus on board management software. In-house IT teams that are capable of executing these kinds of projects are inherently and impressively broad in their skills. However, it is unlikely that they can provide you the same level of expertise on issues such as: application usability among board members, the legal nuances of using board management software, and best practices for training board members. Nor will they bring strategies for using board management software in common governance situations such as managing conflicts of interest disclosures, access to the feedback, and insight of thousands of other boards and board members.
- Security: The level of security your in-house IT team might be able to provide on your board documents may not rival that of board portal providers. This might seem counterintuitive, because having information stored on your in-house servers means you retain absolute control over where your data resides and what happens to it. However, it also means you retain all the liability and all the responsibility for data security. Board portal providers invest hundreds of thousands of dollars annually in maintaining security standards such as NIST 2014, HIPAA compliance, SSAE16, and more. Most conduct annual technical and security audits, regular penetration testing of their software, and provide this documentation as inherently part of what they charge their customers.
- Ongoing Innovation: You gain incredible value by buying off-the-shelf because you don’t have to pay for ongoing development costs. How available and responsive can your over-taxed in-house team be to downstream requests to build a Mobile App that augments the board portal. How about ensuring the site is platform-neutral and can be used on any device? Will the system your in-house team builds be enhanced to work online and offline? And yet, such enhancements – and a long list of other ongoing innovations — have become industry standard, competitive necessities for board portal providers.
- Support: Very few homegrown systems offer 24 x 7 x 365 support for board members, admins, and anyone else that uses the system. Board portal providers typically offer training and ongoing support as part of the basic package, as well as access to a robust knowledgebase that includes self-paced videos, written help guides, FAQs, a searchable knowledgebase, and ongoing webinars every week.
In short, homegrown systems often struggle to deliver on these points, irrespective of cost considerations. Meanwhile, commercial systems tend to do so in exchange for a very reasonable annual fee.
Calculating the ROI of Board Members’ Experiences
With that as a backdrop, we come back to the question of ROI. While gaining efficiencies in preparing and delivering board books is important (and can help reduce costs), the more important calculation to consider is how a board portal system will improve the experience of the board member. At the end of the day, this is what matters most.
Board members are extremely important stakeholders. Almost always, they are highly influential within the organization and a given industry / community. They are also often high net-worth individuals who play a key role in organizational development / fundraising strategy. Such people have precious little time to accomplish their board work; and it would be shortsighted on many levels to undermine their efforts to do so. Making the process easier, more streamlined, and more personalized to the interests of each board member can have a profound impact on the board’s ability to perform well now and in the future.
The nature of that board work is becoming more complex – board members are expected to know more, have greater insight, better foresight, and be effective agents of change for our organizations. When we make it cumbersome for them to find information, or we don’t facilitate their ability to engage in their board work, we do so to our own detriment. Keep in mind, many board members are very likely using board portals already – on other boards they serve. We should factor into our calculations the cost of NOT improving their experience: they might disengage from our mission, or worse, leave altogether.
These two posts have offered some points to consider and frameworks to follow in thinking about and justifying the costs of implementing board portal technology. Part 1 examined “free” alternatives, while this post focused on “build versus buy” options. In all scenarios, it is important to consider both overt and hidden costs and to make a decision that acknowledges the strengths of one’s organization versus how those strengths may be complemented by the work of commercial board portal providers.