Costs and benefits associated with the adoption of virtual collaboration tools

Executive summary This report is an analysis of the costs and benefits associated with the adoption of virtual collaboration tools from an organization point of view. The paper is structured in two main parts costs and benefits- and provides a comprehensive description of direct, indirect and relational costs associated with every of the three stages of adoption identified and respectively direct, indirect and strategic benefits. Introduction Modern organizations achieve great success locally and internationally through teamwork, among other important aspects. As an organization extends its reach, it is crucial for coworkers to be able to communicate efficiently and rapidly. Internet is the fastest and most efficient way to communicate and for this reason, adopting modern virtual collaboration practices is a must for a fast-growing and competitive organization. Virtual collaboration, sometimes known as e-collaboration, implies a form of collaboration facilitated by the use of digital technology where individuals are working together, interdependently, when completing a task. The responsibility falls, thus, not on a single person, but on everybody. There is no face-to-face communication and people can be dispersed across one country or internationally. The communication is mediated by various collaboration tools. This report tries to indentify the main categories of benefits and costs associated with the adoption of the virtual collaboration tools within an organization. Only organizations which fall in the early adopters category of virtual collaboration tools will be referred in this paper.

COSTS In this section, the discussion will be based on indentifying the costsvan organization has to support when adopting virtual collaboration tools.

Costs have been related to three main stages in the adoption process: generation, acceptance and Implementation. This three stages model was identified by Thompson (1965). According to Smart and Bunduchi (2010), there are six main types of costs within the adoption process: initiation, development, switching, cost of capital, implementation and relational. These costs can be different to every stage in part, but this does not mean that some of them cannot be specific to more than one adoption stage. Generation Stage In the generation stage of adoption, there can be either development costs or initiation costs (also known as awareness building costs) incurred by the organization. It depends if the innovative technology is developed (internally or by collaborating with another organization) or acquired from an outside developer (Bunduchi and Smart, 2010) Most of the organizations are acquirers when it comes to virtual collaboration tools because they buy the technology from a developer. Before making a technology acquisition from another company, there are a series of activities that need to be undertaken. Firstly, there is a need for a research to identify the appropriate tools the organization requires. Resources such as time and money have to be allocated to conduct these activities. Secondly, the purpose of the management is to analyze the products available on the market and the offers the developers have in terms of price and customer service capabilities. Acceptance stage At this stage, the organization has made the decision to adopt the new technology and different costs occur to facilitate the support of it. Financial resources need to be allocated along with human capabilities to modify or assimilate the product. Switching costs and cost of capital are the main categories specific for this particular stage (Bunduchi and Smart, 2010). Switching costs are incurred by an organization when it adopts a new technology which replaces the existing ones. They are also called compatibility costs since the organization needs to make sure the new technology matches the existing software or hardware technological resources. Cost of capital refers to the fear of investment loss by adopting the new technology. According to Bunduchi and Smart (2010), costs related to uncertainty for the virtual collaboration tools are based on different categories of risk: financial, technical, political and security. Financial risk appears when the benefits of the new technology are bellow forecast and the costs are higher than expected. Technical risk implies the technology is below expectations in terms of reliability, novelty or ease of use. Political risk occurs when there is a strong resistance from the inside of the organization and finally, security risk means lack of trust and fear of privacy infringement from the use of the new technology.

Another important fact to take into account is the cost incurred when the new technology is incompatible with the software programs or hardware devices already existent in the organization. Implementation stage This is the last step in the adoption process and is about buying, installing and any other adaptation or development of the new technology in the organization. The costs that have to be supported at the implementation stage are divided into two main categories: direct costs and indirect costs (Bunduchi and Smart, 2010). Direct costs consist of buying any necessary hardware and software equipment and their installation. This may involve costs with the consultancy or IT support. The new technology may require different type of hardware, more powerful or more complex equipment. For a virtual collaboration tool, it is crucial to set up protection software. All this issues related to security against malware or any other diverse technology abuses are also direct costs. Finally, in this category enters maintenance and service costs as well. The virtual collaboration technologies are still very expensive, especially for SMEs (small to medium enterprises) and SOHOs (small office, home office). Based on a study undertaken by Forbes Magazine, a fully equipped telepresence room costs 300 thousand dollars, which is a lot for a small organization. Indirect costs, on the other hand, are costs that cannot be easily identified, hence their appellation of hidden costs. Their identification requires a lot of effort and good analysis techniques. Indirect costs consist of human and organizational costs. Human costs mainly occur with the employees training and time wasted by the management or IT teams to clarify any difficulties with the new technology. Organizational costs, strictly for the adoption of virtual collaboration tools, may involve a decrease in the productivity level of the organization as employees spend more time interacting online or because they are not used with the new system completely. The organization may also be in the position of facing restructuring and work process modification. Relational costs represent the third category of implementation costs and are associated with the lack of trust in the new technology. The employees of partners of the organization may feel unprotected and conflicts may appear due to misperceiving of the virtual collaboration tools, in this case.

BENEFITS According to Bunduchi and Smart (2010) the benefits associated with the process of innovation adoption are classified in direct, indirect and strategic benefits. The main direct benefits of virtual collaboration tools are lower costs with employees transportation and improvement of meeting experience, especially if the organization is a multinational company with subsidiaries across the world. For example, video conferencing market reached 30% in 2009 as companies cut their travel budgets for meetings. This situation came as a consequence of the economic crisis as well. Virtual collaboration at Accenture PLC, for instance, which is a global management consulting, technology services and outsourcing, is crucial and the company invested aggressively in it, reaching in 2009 more than 50 telepresence rooms. This technology helps the company in cutting costs as well as connecting talents worldwide. Another example of direct benefits can be viewed looking at the practice Cisco engaged in 2009. Cisco is an American company that designs and manufactures networking equipment. It has more than 200 offices worldwide. In 2009 Cisco decided to set up a virtual meeting for its Cisco Strategic Leadership Offsite meeting. Through their collaborative solutions and WEB 2.0 technologies, Cisco managed to connect more than 3100 executives. In the previous years it had to pay for travel and other expenses of the participants, but with this virtual meeting the company reduced expenses by almost 75% and reduced the time loss as well. The productivity within the company was boosted as well as the virtual meeting was far more time efficient. The meeting was able to be extended to three days, instead the usual two and served more participants and also the content of the meeting was increased and live and recorded sessions were made available via the collaboration tools. The conclusion which can be extracted from Ciscos case study is that even though setting up a virtual event is very complex and involves a lot of resources, all of these are more than offset by the gain with the travel budget reduction for the participants. In addition, with virtual collaborations tools it is fairly easy to check the status of a particular project, for example. One of the fastest growing virtual collaboration tools in this sense is Huddle a platform where employees can work together, in real time. They can upload documents, edit them, share files and create teams online. The location of the employees is not important. Within the online teams, tasks can be assigned among them and help can be provided straightforward. Another benefit is the organized method in which employees can work even though they are dispersed around the globe. Best teams can be set up together from different regions or countries in order to accomplish different tasks or to complete diverse projects.

Virtual collaboration tools are highly appreciated for their ease of reporting. Detailed reports can be easily generated fast enough not to waste the time of the teams concerned with completing a project. One last direct benefit mentioned here is the possibility of storing and sharing files via secure devices, regardless of the employees location. Indirect benefits of virtual collaboration tools result from the flexibility these technologies offer to participants, boosting creativity and innovation which in many cases might have been intimidated by cultural differences, physical or organizational boundaries. Fast and real-time communication across the world is an important factor for increasing competitive advantage and will definitely improve the overall performance at the organizational level. Strategic benefits are related to indirect benefits and refer to any profitable changes in the relation with other parties, such as collaborators, suppliers and customers.

Conclusion The aim of this report was to identify, in the first part, the main costs categories associated to different stages in the adoption process of virtual collaboration tools. These costs were analyzed from the organizational perspective and not from the individual view. The second part of the report highlighted the main benefits the virtual collaboration tools are providing for an organization. The most obvious were direct benefits, which can be observed immediately, but indirect benefits, related to the overall performance of the organization have the same importance level.

References
Bunduchi R. & Smart, A.U. (2010) - Process innovation costs in supply networks: A synthesis. International Journal of Management Reviews, 12(4), p. 365-383

Bunduchi, R., Weisshaar, C. & Smart, A. (2011) - Mapping the benefits and costs associated with process innovation: the case of RFID adoption. Technovation, 31(9), p. 505-521.

Cisco IT case study - Global Virtual Collaboration: How Cisco Connected Executives Worldwide for Strategic Meeting , [online] http://www.cisco.com/web/about/ciscoitatwork/downloads/ciscoitatwork/pdf/Cisco_IT_Case_St udy_SLO_Global_Virtual_Event.pdf (Accessed on 20 March 2013)

Mitra, S. (2010) CIO Priority Virtual Collaboration, Forbes Magazine, [online] http://www.forbes.com/2010/01/28/telepresence-entrepreneurs-citrix-technology-cio-networkvirtual.html (Accessed on 20 March 2013)

Smart, A.U., Bunduchi R. & Gerst, M. (2010) - The costs of adoption of RFID technologies in supply networks, International Journal of Operations and Production Management, 30(4), p. 423447.