A FORRESTER TOTAL ECONOMIC IMPACT STUDY The Total Economic ImpactTM Of IBM Garage Value Orchestration Services Cost Savings And Accelerated Growth Enabled By IBM Garage As Experienced By A Manufacturer And Retailer AUGUST 2023 A FORRESTER TOTAL ECONOMIC IMPACT STUDY COMISSIONED BY IBM
“IBM Garage delivered. The Garage team was able to take corrective measures when needed and scale up or scale down — fast. They are a trusted partner, so much more than a traditional supplier.” —Product team lead, home furnishings retailer
3 Key Findings Key Metrics IBM Garage offers an innovative, iterative consulting product that helps organizations abandon the traditional, siloed waterfall approach to business-critical problem solving and adopt a modern, digital, and agile methodology to promote crossfunctional, end-to-end, and incremental refinement, value orchestration, and reduced organizational risk. ROI 108% BENEFITS PV $16.26 million COSTS PV $7.81 million NPV $8.45 million $8.1M $4.6M $1.9M $1.7M Realized knowledge efficiencies across teams due to automation and derisking strategies Lowered customer acquisition cost due to value orchestration and improved customer data management Reduced footprint in infrastructure, lowering opex and capex through application modernization and hybridcloud optimization Growth in marketshare due to enhanced analytics and customer insights Benefits (Three-Year)
4 Methodology Interviewees FINANCIAL MODEL FRAMEWORK Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees. COMPOSITE ORGANIZATION Designed a composite organization based on characteristics of the interviewees’ organizations. INTERVIEWS Interviewed five decision-makers at organizations using IBM Garage services to obtain data with respect to costs, benefits, and risks. Industry Interviewee Title Revenue Home furnishings retail Marketing leader $45 billion Home furnishings retail manufacturer Product lead $40+ billion Energy Accelerator manager $4.7 billion Financial services retail VP, cloud architecture $7 billion Telecom retail Planning engineer $4 billion
5 Total Benefits Realized knowledge efficiencies across teams due to automation and derisking strategies Lowered customer acquisition cost due to value orchestration and improved customer data management Reduced footprint in infrastructure, lowering opex and capex through application modernization and hybrid-cloud optimization Growth in marketshare due to enhanced analytics and customer insights three-year total benefits PV $16.3 million Total Benefits
Transitioning from a manual, siloed, risk-fraught on-premises environment to a digitalized, centralized, and secure ecosystem results in AI-applied workflow efficiencies for customer-facing call agents, application developers and data architects, and internal audit and compliance specialists. The efficiency gains are worth $8.1 million over three years to the composite organization. . Increased efficiencies of 10% to 20% across teams due to automation and derisking strategies. Developer and data architect efficiencies gained by Year 3: 20% 50% three-year benefit PV $8.1 million
“We freed up 50 customer-facing associates that were tied up on redundant day-to-day work. Now, because of our partnership with IBM, they’re focusing on different, higher-value marketing efforts.” — Planning engineer, telecom retailer
With centralized, reliable customer data enabling improved analytics and accessibility to consumer market insights, the composite organization reduces customer acquisition costs totaling $4.6 million in savings over three years. Interviewees shared that connecting, centralizing, and automating formerly siloed customer data sources enabled accessibility, analysis, and insights, allowing the interviewees’ organizations to unify customer profiles, better predict customer demand, create targeted campaigns through segmentation, and lower their cost to acquire new customers. Lowered customer acquisition cost by 3% due to value orchestration and improved customer data management. 28% three-year benefit PV $4.6 million Total cost savings per customer acquired by Year 3: 3%
“Over the three years of the engagement we have increased the value of the customer by improving the customer experience, reducing our customer acquisition cost by 5%.” — VP, cloud architecture, financial services
Armed with automated analytics, the composite organization better predicts customer behavior and improves product turnover and inventory metrics. This allows it to decommission fulfillment centers and dynamically commission store space for those fulfillment activities. Additionally, the Garage-led digital transformation allows the composite organization to consolidate data centers and other legacy costs. The optimized footprint results in cost savings of $1.9 million over three years. Reduced footprint by 6% in infrastructure, lowering capex and opex through application modernization and hybrid cloud optimization. 12% three-year benefit PV $1.9 million Reduced fulfillment space and data center spend by Year 3: 6%
“We are now able to transform and consolidate some of our big stores and turn them into fulfillment centers. So, we’re using commercial square meters to do all the picking, packing, and shipping, all because of this co-created tool.” — Marketing leader, home furnishings retail
With better access to centralized customer data, the composite organization improves seasonally driven product stocking metrics across outlets. Additionally, with an improved data structure, the composite organization is ready for AI-enhancement, which can further improve the ability to meet existing demand and project future demand. This improved architecture leads to a just-in-time inventory approach, improved time to market, and a growth in vertical market share equaling nearly $1.7 million over three years. Growth in market share due to enhanced analytics and customer insights. 10% three-year benefit PV $1.7 million Value of market subject to IBM Garage impact: $3.5 billion
“When we started the engagement with Garage, we immediately saw that we needed to be more agile through the use of cutting-edge technology. This new tool created with Garage will safeguard our current market share and give us direction for market expansion, which comes with customer satisfaction.” — Planning engineer, telecom retail
Unquantified Benefits And Flexibility Additional benefits that customers experienced but were not quantified as well as scenarios that could yield future benefits include: Improved latency on customer-facing applications due to modernization and intelligent workflows. Enhanced employee innovation through collaboration and improved data access. Improved customer experience due to speed, visibility, and collected market insights. Increased brand recognition and accessibility. New revenue stream opportunities. Geographic expansion opportunities.
Appendix A: Total Economic Impact Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. . Total Economic Impact Approach Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution. Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated. Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.” ! Present value (PV) The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows. Net present value (NPV) The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs. Return on investment (ROI) A project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs. Discount rate The interest rate used in cash flow analysis to take into account the time value of money. Organizations typically use discount rates between 8% and 16%. The initial investment column contains costs incurred at “time 0” or at the beginning of month 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the eighteen-month period. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur. Payback period The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost.
16 Explore More FOLLOW FORRESTER Read Now Contact Forrester Download PDF Study: The Total Economic Impact Of IBM Garage Value Orchestration Services Contact IBM
17
RkJQdWJsaXNoZXIy MTUxNzA5OQ==