New Technology: The Projected Total Economic Impact™ Of Microsoft Copilot For Microsoft 365

Business Transformation And Cost Savings Enabled By Copilot For Microsoft 365

A Forrester New Technology Projected Total Economic Impact Study Commissioned By Microsoft, April 2024

Generative AI is viewed as a disruptive business technology on par with the adoption of the internet. Microsoft Copilot for Microsoft 365 is one of the first enterprise-grade generative AI solutions. Interviewees from early adopters are already achieving user time savings and moving toward business transformation. Based on interviews and survey responses, Copilot for Microsoft 365 is expected to transform all aspects of a business, including go to market, operations, and people and culture.

Copilot for Microsoft 365 is a workers’ generative AI assistant that helps them make better use of all the solutions within Microsoft 365. Interviewees from organizations that are using Copilot for Microsoft 365 have noted both early successes and great future potential to address challenges. The early successes include decreasing information overload and worker fatigue, compressing time frames for innovation, and managing companies’ ever-increasing competitive landscape.

Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Copilot for Microsoft 365.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Copilot for Microsoft 365 on their organizations.

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Projected return on investment (PROI)

112% to 457%

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Projected net present value (PNPV)

$19.1 million to $77.4 million

To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed eight representatives with early experience using Copilot for Microsoft 365. Forrester also surveyed 351 decision-makers from companies considering implementation of generative AI solutions like Copilot for Microsoft 365 and who have thought about the implications for their organizations. For the purposes of this study, Forrester aggregated the interviewees and survey respondents expectations and combined the results into a single composite organization. The composite organization is a 25,000-person, US-based company with an extensive presence in North America and Europe and with sales operations across the world. Annual revenues are $6.25 billion. The organization’s goal is to achieve business transformation, not just low-hanging labor efficiencies. Copilot for Microsoft 365 is rolled out to 3,000 users in Year 1, an additional 3,000 in Year 2, and an additional 4,000 in Year 3. This totals 10,000 workers, which represents 40% of the total workforce. Future rollouts are dependent on success over the first three years.

Interviewees and survey respondents said that prior to using Copilot for Microsoft 365, their organizations were awash with data and tools, but they lacked the ability to bring it all together and unlock the potential value. Previous attempts to unlock the value of their data and people yielded limited success, leaving them with frustrated employees, lagging innovation and agility, and excessive costs. All of this contributed to employee burnout, customer dissatisfaction, and diminished financial performance.

After the investment in Copilot for Microsoft 365, the interviewees and survey respondents noted their organizations leveraged internal data, people, materials, and processes to achieve business transformation across three pillars: go to market, operations, and people and culture. Collectively, these transformations increased revenues, lowered internal and external operating costs, and improved employee experience and company culture.

The Copilot for Microsoft 365 benefits, both already realized and anticipated, are shown in the figure below as part of the three business transformation pillars: go to market, operations, and people and culture. In addition to the examples of quantified benefits, this New Tech TEI also discusses drivers contributing to the benefits and how the benefits are expected to expand and evolve over time.

PTEI MS Copilot for MS365 Pillar Graphic.svg

Key Findings

Quantified projected benefits. Copilot for Microsoft 365 was released in November of 2023, so this study includes quantified benefits for each of the transformation pillars as well as a discussion of other benefits that could not yet be quantified. The three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:

  • Go-to-market transformation increased topline revenues by as much as 4%. The composite organization increases revenues by improving win rates, reducing time to market with new products and services, and generating sales proposals faster. Improvements in customer satisfaction also contribute to increased lifetime value. The benefit ramps up over time, and the total increase is commensurate with the amount of business transformation achieved. The increase in net income, after applying a net margin of 7.8%, is worth between a projected $7.5 million to $35.6 million over three years.
  • Operational transformation decreased total expenditures by up to 0.7%. Increased worker productivity across many roles and tasks is a major contributor to operational cost savings for the composite organization (see Appendix C for detailed examples of labor savings). There are also supply chain efficiencies that contribute to the increased net margin. Additionally, there is a reduction in external spend on IT contractors, as well as other generative AI licenses that are replaced with Copilot for Microsoft 365. Altogether, this reduces total expenditures by a projected $27.6 million to $56.7 million over three years. From a net-margin perspective, these cost savings increase the net margin from the baseline 7.8% to as high as 8.45%.  
  • People and organization transformation reduced new-hire onboarding times by up to 30%. Copilot for Microsoft 365 improves employee satisfaction by reducing repetitive, low-value tasks and making relevant information more accessible. Longer term, this should contribute to increased employee retention for the composite organization. An early benefit realized by the composite organization is faster onboarding of new hires, which means they are creating value for the company sooner. Faster onboarding also reduces the time managers’ spend on onboarding their new direct reports. Together, this is worth between a projected $946,000 to $2.1 million over three years.

Unquantified benefits. Benefits that provide value for the composite organization, but are not quantified for this study, include:

  • Improvement to diversity, equity, and inclusion (DEI). Copilot for Microsoft 365 allows employees to incorporate more diverse input and examples into their work, enabling a more equitable and inclusive workplace. Their work also improves the quality of products for the composite organization and helps counteract some human biases.
  • Better work-life balance. Much of the mundane and repetitive work done by employees at the composite organization can be drafted by Copilot for Microsoft 365, with users then spending only a fraction of the time refining. This not only reduces workloads but lowers the proportion of time spent on repetitive and noncreative tasks.
  • Compliance and security. With Copilot for Microsoft 365, the composite organization’s sensitive information will stay within its business tenant rather than being entered by employees in public generative AI tools. This significantly reduces the risk of proprietary data becoming public knowledge by mishandling of employees using nonapproved generative AI tools.

Costs. Three-year, risk-adjusted PV costs for the composite organization include:

  • License costs. The composite organization already has the requisite Microsoft 365 licenses. For the financial analysis, the $30 per-user-per month cost for Copilot for Microsoft 365 is applied based on the composite’s rollout schedule. The total cost over three years is $5.7 million.
  • Implementation costs. Implementation costs consist of technical and change management efforts for the composite organization. The initial deployment requires 10 FTE (full-time equivalent) employees across a range of roles. Ongoing change and technical management requires six FTEs. There is also sizeable use of professional services from Microsoft partners. The total cost over the life of the study is $5.5 million.
  • Training and employee discovery. Forrester’s research has found that employee training is a critical component of creating productivity with generative AI, and organizations should not skimp on this investment.2 In addition to implementation costs, there is also a sizeable effort to train employees on how to use Copilot for Microsoft 365, how to create effective prompts, how to control for and recognize AI hallucinations (i.e., when inaccurate outputs are generated), and how to reimagine work. Seventy-five days are spent creating and disseminating training content in the composite’s initial period. Delivery is conducted by learning-and-development professionals and by superusers within the various departments. The cost calculation also includes the time users spend on training and discovery, which can be viewed as lost productivity. Eight hours are spent when a user is first onboarded, and 2 hours are spent in each subsequent year. The total cost is $5.7 million.

Forrester modeled a range of projected low-, medium-, and high-impact outcomes based on evaluated risk and the extent of business transformation achieved. This financial analysis projects that the composite organization accrues the following three-year, risk-adjusted projected net present value (PNPV) for each scenario by enabling Microsoft Copilot for Microsoft 365:

  • Projected high impact of a $77.4 million PNPV and PROI of 457%.
  • Projected medium impact of a $47.7 million PNPV and PROI of 281%.
  • Projected low impact of a $19.1 million PNPV and PROI of 112%.

Three-year increase in net income due to increased revenues and decreased costs

2.9% up to 7.6%

“There’s really no future without this kind of technology. This is the direction that work will go. It will be part of every single application you use in the future. It’s not if you should, it’s when you should and at what point on the adoption curve you want to be. The longer you wait, the further behind you will be.”

Account lead, professional services

Key Statistics

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    Projected return on investment (PROI):

    112% to 457%
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    Projected benefits PV:

    $36.0 million to $94.4 million
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    Projected net present value (PNPV):

    $19.1 million to $77.4 million
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    Total costs PV:

    $17.0 million
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Three-Year Projected Financial Analysis For The Composite Organization

MS365 NTTEI Copilot Projected Financial Analysis for Comp Org 3year.svg

New Tech TEI Framework And Methodology

From the information provided in the interviews and survey, Forrester constructed a New Technology: Projected Total Economic Impact™ (New Tech TEI) framework for those organizations considering an investment in Copilot for Microsoft 365.

The objective of the framework is to identify the potential cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the projected impact that Copilot for Microsoft 365 can have on an organization.

  1. Due Diligence

    Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Copilot for Microsoft 365.

  2. Early-Implementation Interviews And Survey

    Interviewed eight representatives at organizations using Copilot for Microsoft 365 as part of the Early Adopter Program and surveyed 351 respondents from organizations that are considering the use of generative AI solutions, such as Copilot for Microsoft 365, to obtain data about projected costs, benefits, and risks.

  3. Composite Organization

    Designed a composite organization based on characteristics of the interviewees’ and survey respondents’ organizations.

  4. Projected Financial Model Framework

    Constructed a projected financial model representative of the interviews and survey using the New Tech TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.

  5. Case Study

    Employed four fundamental elements of New Tech TEI in modeling the investment’s potential impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.

Disclosures

Readers should be aware of the following:

This study is commissioned by Microsoft and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.

Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in Copilot for Microsoft 365.

Microsoft reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

Microsoft provided the customer names for the interviews but did not participate in the interviews.

Forrester fielded the double-blind survey using a third-party survey partner.

Consulting Team:

Nahida Nisa

Jonathan Lipsitz

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