COM H. El-Gabri, F. Caldwell, B. Oppenheimer

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1 H. El-Gabri, F. Caldwell, B. Oppenheimer Research Note 1 December 2003 Commentary How Companies Will Invest in KM Technology in 2004 A Gartner survey conducted in July and August showed which knowledge management technologies companies are investing in, as well as how they implement projects and what they hope to achieve from those projects. A Gartner survey revealed key requirements of the broad market for knowledge management (KM) technology. In July and August, Gartner surveyed 133 self-identified "knowledge managers" involved with making decisions about this technology or setting budgets for it. They work for companies that planned to invest in this area during the next year and represent North America, Europe and Asia/Pacific. Gartner's questions included the following: What technology is your company investing in? What are your company's business goals? How does you company manage KM project implementation? The survey results offer a good overview of a diverse, rapidly changing field. Methodology The purpose of the study was to understand the capacity in which organizations are using and planning to use software to support collaborative work processes and KM, including segments such as content management, , portals and smart enterprise suites. Gartner sent invitations to select participants that were self-identified "knowledge managers." We then further screened the participants to ensure the following: Their organizations had recently invested in or were planning (during the next 12 months) to invest in software to support collaboration and KM. The respondents played a role in the decision making, budgeting, selection or recommendation of software to support collaboration and KM. A total of 133 respondents answered yes to these questions and were invited to complete the survey. A few respondents were architects, business analysts or consultants, but most of the titles were CEO, CIO, chief technology officer (CTO), knowledge officer, and vice president, director or manager of IT. However, Gartner 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 the respondents indicated that they played a role in the decision making, budgeting, selection or recommendation of software. What Companies Are Investing In Gartner first asked what type of KM initiatives not just technologies that companies had invested in during the preceding six months. They were given a list of technologies and were not limited to a number of segments that they could answer. The responses showed a remarkably even distribution (see Figure 1) for the top three Web content management, e-learning and real-time collaboration. If a relationship exists between these three, it is the need to provide in-depth information and robust interpersonal connections in a distributed environment. E-learning itself, with the investment in expensive media and simulations and the need to provide interactivity for participants, requires good Web content management and real-time collaboration. Web Content Management E-Learning Real-Time Collaboration or Anti-Spam Enterprise Portal Content Management Search and Information Retrieval Team Support System Smart Enterprise Suite Record Management Virtual Communities Management Intellectual Asset Management Expertise Location and Management Taxonomies Others Source: Gartner Research (November 2003) Figure 1 KM Initiatives, 1H Percent of Organizations Invested When asked what specific technologies were the top two priorities for investment during the next 12 months, enterprise portal, Web content management, or anti-spam, and search/information retrieval led (see Figure 2). The remainder of the survey's questions was asked specifically and separately for those top priorities. 1 December

3 Enterprise Portal Web Content Management or Anti-spam Search/Information Retrieval Content Management Smart Enterprise Suite Real-Time Collaboration Records Management Team Support Virtual Communities Management Intellectual Asset Management Expertise Location and Management Taxonomies Figure 2 Top Priorities for KM Investment, 1H04 E-Learning Source: Gartner Research (November 2003) Percent of Organizations Invested Portals and Web content management were the most frequently cited investments. Surprisingly, these two choices were among the most venerable technologies in the KM field. The strength of interest in smart enterprise suites was surprising, as it is a newer category that is transforming the content management and portal markets. A noteworthy investment that ranked high as an initiative and investment is records management this high rating probably reflects concerns about compliance with changing corporate governance rules, such as Sarbanes-Oxley. Interest in records management investment should continue to increase during the next year. A noteworthy discontinuity between the figures is expertise location and management. About 20 percent of respondents said that they have invested in an expertise location initiative during the past six months. That only 3 percent of respondents indicated expertise location management a top priority for technology in 2004 suggests that it is sliding into the Gartner Hype Cycle's "trough of disillusionment" initiatives that may not be generating the expected value. This situation may reflect on the immaturity of technology or lack of good return on investment from implementations. The lack of interest in taxonomies could be misleading. Stand-alone taxonomy projects are relatively rare and often included in Web content management, content management, portal and other information management projects. If taxonomies and other operational support investments are missing, information management projects will not usually provide the expected return on investment. Although investment in operational support for KM was not part of the survey, respondents were asked about their KM budgets. About 57 percent of respondents said that their companies plan to increase their budgets for KM initiatives in 2004, and 10 percent expected budgets to decrease. The Challenges and Goals of Knowledge Technologies 1 December

4 Gartner asked participants what internal challenges their companies are facing and expect to face. The following answers were given but in different order for each question: Improving business processes by applying knowledge to services and workflow Coordination and collaboration between organizational units Encouraging and enforcing a culture of knowledge sharing Justifying return on investment Restructuring organizations or business processes Gartner asked participants to rate the importance of the benefits they sought from their investments in KM technology. Time-honored investment goals such as improving productivity and processes topped the priorities. However, newer uses for technology have crept onto the list. Capturing tacit knowledge, for instance, even beat out customer retention. Although most enterprises with successful KM programs have started with customer-facing functions such as sales, call centers, marketing and business development, a possible explanation for why customer retention ranked so low on the list is because periods of economic weakness provide limited opportunities to increase revenue. Thus, most organizations have a heightened need to lower costs and focus on improving efficiency, reducing costs, and better managing resources and opportunities. Capturing tacit knowledge probably indicates the growing strategic importance in collaboration investments, which comes second in priority as "improving coordination and collaboration between organizational units and partners." The survey asked respondents to rate the importance of different factors when selecting a vendor or a product. Given the tight economy and companies' zealous rein on IT budgets, cost and return on investment would have been expected to be the most important factors in determining which products enterprises buy from which vendors. Instead, the top three criteria involved fitting technology smoothly in the enterprise. If a product is not easy to use, scalable or easily integrated with applications and infrastructure, then return on investment cannot be realized. While technology is not the determinant of KM success, difficulty in implementation, technology integration challenges and a long time to implement the technology lengthen the amount of time that it takes to get payback from a KM initiative. Minimizing the difficulty and time of implementation allows for more management attention to those factors that are important to KM success such as building the user base, gaining executive support and establishing an operational team to manage the ongoing KM process. The importance of "one-stop shopping" to the selection of a vendor may indicate a readiness for the smart enterprise suite and other integrated "out-ofthe-box" functionality. Managing KM Project Implementations The survey revealed a couple of significant findings about how companies implement KM projects. First, the IS organization takes the lead role in most companies. The respondents that knew where the budget was coming from for next year's investments indicated that, on average, the IS organization would contribute 58 percent of the budget. Furthermore, Gartner asked who in the respondents' organizations had primary responsibility for the following: Communications and business process change management Implementation and deployment 1 December

5 Ongoing management and operation of the software Most of the respondents identified the CIO or another IT manager as responsible for all three. Knowledge officers and managers were much less likely to be in charge even of the business process change management elements of deployment in which they should have the expertise. CIOs were nine times more likely than knowledge officers to lead change management, and a senior IT manager was twice as likely as a knowledge manager to lead change management. A manager in the affected business unit was half as likely as a knowledge manager to lead the change in management efforts. Given the lack of management attention outside of the IS organization, it is no wonder that so many KM initiatives fail to deliver the expected business results. Questions about how companies will implement KM projects revealed some unexpected findings. In describing their approach to rolling out technology, an equal number of respondents said that their companies planned enterprisewide rollouts as those that said their companies would run pilot projects first, then decide on scaling up. The following significant findings show that companies have recognized that in-house tools are not feasible and they do not plan to use them: About 68 percent plan to use prepackaged software for upcoming projects, compared with 66 percent for ongoing projects. Thirteen percent will use a service provider, compared with 11 percent at this time. The percentage of respondents using in-house tools will drop from 19 percent to 1 percent. Bottom Line: Gartner's survey on enterprises' investments in knowledge management reveals a market split that is surprisingly even among different technologies. Enterprises continue to stay focused on roughly the same challenges and business goals. Perhaps most striking is the way that enterprises implement KM technologies the IS organization takes charge in most companies, and they have given up on in-house tools to aid implementation. Although this survey shows what companies are doing, Gartner cautions that clients should not always imitate them these findings do not necessarily reflect best practices; in particular, the focus on internal organizational issues and IT control of KM, a missioncritical business process in the knowledge economy, could lead most KM initiatives to flounder or fail. 1 December