Too many organisations are rushing into social networking without considering the risks or return on investment, warned IT analyst Gartner.

With more than 60% of Fortune 1000 companies planning to establish their own online communities by 2010, IT research organisation Gartner warned that many will be wasting their money and eroding customer value through unplanned initiatives, reports FinanceWeek.co.uk [1].

"Rushing into social computing initiatives without clearly defined benefits for both the company and customer will be the biggest cause of failure," said Adam Sarner, research director at Gartner. Social networking investments should focus primarily on customers' online buying processes, and be based on a defined business case where it can deliver a direct return on investment in terms of sales, awareness and customer loyalty.

In a paper entitled The Business Impact of Social Computing on CRM, Sarner explained that many organisations make the mistake of neglecting to assess the business case of social network because many of the applications are free.

Every project should start with the basic questions:
• Can the company make money from social initiatives?
• Is social networking going to be critical to the way it manages customer relationships, or is the organisation merely jumping on the bandwagon?
• How much investment is required in time as well as in budget?
• Who exactly are we trying to reach — internal or external audiences?
• What legal, financial and reputational risks will the project expose the organisation to?

If customers feel that they're being "used" as part of the process, they will stop participating and will shun an entity on Twitter or Facebook if all they receive in return are untargeted advertising. Although "soft" benefits can be achieved by investing in an community, any initiative should focus on the measurable business benefit for establishing the application, and a customer motivation for participating.

Sarner also highlighted the short life-span of many social networking fads, and emphasised that this presented a development and ongoing cost issue. "Enterprises must recognise that their social applications will be superseded, possibly in a matter of months, as trends and fashions evolve. Users will follow the latest and most interesting idea, giving companies a narrow window in which to operate.

Those organisations that do invest in online communities must treat them as "disposable" and plan to cover their costs before the community and its application are superseded, the Gartner analyst advised.

"To attain the necessary flexibility and to quickly implement niche capabilities in disciplines such as sales, marketing and customer service, enterprises should also investigate alternative ways of delivering applications, such as software as a service, cloud computing, service-oriented architecture applications and modern design tools," he added.