Knowledge management software and services: understanding corporate investment priorities

By Brian McDonough

Knowledge has to be improved, challenged and increased constantly, or it vanishes.—Peter F. Drucker

The knowledge management software and services market is exhibiting strong growth as more companies begin to understand how to apply KM practices for the improvement of enterprise value. The technologies used to support knowledge management initiatives are evolving rapidly, with new vendors entering as others leave. The demands for improved integration between those technologies and daily operations across the enterprise are proliferating. Understanding demand for various technologies and services allows IT-buyer organizations to compare their strategies with early adopters. It further helps vendors align supply with the market needs.

This article discusses the findings of a knowledge management study by IDC IDC based on survey data collected in February and March 2002. The respondents were recruited through banner ads and e-mail promotions in partnership with KMWorld magazine. The survey collected the responses of 740 people interested in KM topics. Information from companies involved in KM initiatives gives insight into their interest in using various supporting technologies and services. The data cannot be extrapolated to the overall worldwide market, but provides insight into current and future trends within the KM buying segment.

Respondents by industry

The survey respondents were concentrated in the business and legal services industry, which suggests a higher interest in knowledge management among that segment. Of the 740 respondents, 19% were in business and legal services, 12% in software, 10% in discrete manufacturing, 6% in government, 6% in financial services, 5% in process manufacturing, 4% in education, 2% in retail, 2% in telecommunications, 2% in healthcare and 1% in utilities. Thirty-one percent responded "other."

Project leaders or key decision makers comprised nearly 62% of the respondents.

Of the respondents who said they did not have a KM initiative in place yet, one-third said that they are considering doing so, and are looking at options. Eighteen percent said they lack management support, and 16% said they lack funding. Other less commonly cited reasons for not having a KM plan were "no need" and lack of technical infrastructure.

Among respondents who said that their companies are involved in a KM initiative, enhancement of internal collaboration and capturing and sharing best practices were top on the list of business reasons for embarking on a KM initiative. Other reasons were providing e-learning, improving customer relationship management, providing a project workspace and enhancing competitive intelligence. In general, internal business problems are being addressed by KM initiatives.

The survey found that 65% of the respondents involved in a KM initiative do not have performance metrics in place to measure the financial impact of their initiative.

The survey also found that internal intranet users are the primary audience for a KM initiative. And after addressing the enterprisewide need for KM, the marketing and sales departments are targeted for such an initiative. Other important audiences for KM include the consulting, R&D, customer services, executive, IS and human resources departments.

Those audiences require a variety of IT products and services to support their requirements. Among them, business consulting services will be the type most widely purchased. Spending on software to support the KM initiative is concentrated in content management software, collaborative applications and enterprise information portals. Companies involved in implementing a KM initiative had an average of 35% of their KM budget allocated to external vendors.

Although firms will spend significant budget dollars on enterprise information portal software, content management software and search engines, it is important to understand interest levels in adopting more emerging technologies. Interest levels in using various applications, combined with budget data and market intelligence, allows for plotting those technologies along an adoption curve. Such a curve suggests that interest levels in more advanced textual analysis tools is low, even among the early adopter segment.

As companies seek to enhance internal collaboration and retain expertise of key personnel, they turn to knowledge management technologies and services to support those goals. The slew of technologies can be overwhelming but early adopters are investing in content management software for their knowledge infrastructure and then applying portal software and search capabilities to enhance access to corporate information. Emerging technologies will be adopted later to extend the value of content from a variety of sources, know-how inside and outside the enterprise and productivity enhancing applications.

Communities of practice are rapidly emerging as a means to make applications and information personally relevant to the knowledge worker within a collaborative environment.

Securing budget dollars from management can still be time-consuming due to the lack of financial performance indicators available to measure the success of knowledge management. In the absence of financial measures, companies must understand the implicit benefits of improved collaboration, communication and employee effectiveness. E-mail is considered mission-critical in most firms, yet ROI analysis of e-mail implementations has never been a prominent tool used to support the purchase decision of e-mail. A corporate knowledge management initiative and the technology and services to support it must be treated with the same understanding in today’s knowledge economy.

By Brian McDonough is research manager, Knowledge and Content Management Software, IDC (idc.com), e-mail bmcdonough@idc.com