New Technology: The Projected Total Economic Impact™ Of Azure OpenAI Service In Reinventing Customer And Constituent Engagement

Cost Savings And Business Benefits Enabled By Azure OpenAI Service In Reinventing Customer And Constituent Engagement

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

Understanding and engaging with people is core to the success of any organization, be that their customers or the public. The availability of generative AI (genAI) technology serves as an enabler for organizations — including for-profit businesses, schools, health care providers, and government agencies — to deliver smooth customer or constituent interactions in their physical locations and digital spaces, and it creates targeted content that drives better engagement with the intended audience. Combined, this has the potential to greatly enhance the efficiency and creativity of these content-intensive interactions, enabling organizations to achieve higher impact and improve stakeholder engagement that results in better service delivery and even potentially higher revenue growth for commercial organizations.

Microsoft Azure OpenAI Service is a fully managed service that allows developers to integrate OpenAI models into their applications. It is a key element to Copilot Stack, which is a collection of foundational elements needed to build transformative AI solutions. Copilot Stack brings together purpose-built AI infrastructure, foundational models, data platform, a collection of models and AI tooling, and other developer solutions that are all supported by Microsoft’s enterprise-grade commitments to ensure AI privacy, safety, and security. Advanced by Microsoft’s own experience building genAI applications, this stack powers Microsoft Copilot. Organizations can leverage this along with other solutions in Microsoft Cloud to reinvent customer or constituent engagement, enrich employee experience, reshape organizational processes, and better enable innovation.

Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the projected financial benefits enterprises may realize by deploying Azure OpenAI Service, specifically for use cases that aim to reinvent customer or constituent engagement.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Azure OpenAI Service on their organizations. This study is also supplemented by eight industry spotlights that demonstrate the impact of generative AI on industry specific KPIs.

Projected annual revenue growth from better engagement with existing customers

Up to 8.42% in Year 3

Projected annual revenue growth from better engagement with prospective customers

Up to 6.85% in Year 3

Projected improvement in chatbot resolution at contact centers

Up to 50% per year

Projected efficiency gain in content-generation activities

Up to 60% per FTE per year

To better understand the projected benefits associated with this investment, Forrester interviewed 20 representatives from 16 organizations with experience using Azure OpenAI Service. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is an organization with an annual revenue of $10 billion and 10,000 employees.

Interviewees said that prior to using the solutions built on Azure Open AI Service, their organizations struggled with customer and constituent engagement. Creating personalized content was often a manual and time-intensive process, so those responsible for generating this content often resorted to creating generalized, impersonal materials. Additionally, contact centers were often overwhelmed with calls and inquiries, with contact center agents often ill-equipped to address specific questions or requests. These inefficiencies burdened content creators, customer service agents, and other internal teams while satisfaction of the engaged audience suffered. For commercial organizations, this potentially impacted metrics such as conversion rates, customer satisfaction scores, and customer retention numbers.

After the implementation of Azure OpenAI Service, the organizations were able to boost efficiency in both content creation and interactions with their targeted audiences. For commercial organizations, this improved engagement led to higher expectations of business growth as the organizations anticipate increases in conversion rates and the number of leads, improved customer retention, and higher revenue per customer. Even in industries not focused on revenue, such as government or public education, Azure OpenAI Service unlocked efficiencies that significantly increased access to public services and government programs.

Azure OpenAI Service’s customer engagement benefits, both realized and anticipated, are shown in the figure below. In addition to the examples of quantified benefits for the composite organization, this New Tech TEI also discusses drivers contributing to the benefits and how the benefits are expected to expand and evolve over time.

Value From Azure OpenAI Service To Reinvent Customer Engagement

Value From Azure
                                OpenAI Service To Reinvent Customer Engagement

Key Findings

Quantified projected benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:

  • Better engagement with existing customers that results in improved retention rates and an increase in revenue per customer. The composite organization implements Azure OpenAI Service at its contact centers and support organizations, empowering agents to quickly address customer issues, improving customer satisfaction, and reducing churn. The composite also uses Azure OpenAI service to improve efficiency and productivity related to marketing campaigns, which enables it to create highly personalized content for customers at the individual level. This leads to increased cross-sell and upsell opportunities and higher average revenue per customer. Over three years, the reduction in churn rate and improvement in revenue per customer results in an operating income increase worth between a projected $18.7 million and $93.3 million for the composite organization.
  • Better engagement with prospective customers that results in more prospects and better conversion rate. For prospective customers, the composite organization applies the same personalization techniques used for existing customers, which leads to more engaging experiences for prospects and increases the likelihood of conversion into actual sales. Additionally, the AI-generated content is also more effective in driving top-of-funnel prospects to the organization, be that through more personalized newsletters, targeted requests for proposal (RFPs), and better search engine optimization (SEO) content. The improvement in sales conversion rates and increase in top-of-funnel prospects increases the organization’s operating income. Over the course of the three-year analysis, this benefit is projected to be worth between $14.9 million and $75.8 million for the composite organization.
  • Improvement in contact center chatbot resolution rate. With AI-enabled chatbots, the composite organization helps its contact center resolve more calls by handling simple queries, which frees human agents for the more complex engagements. The chatbots provide up-to-date information and access to customer and interaction data, filling the gap in contact center insights. Over three years, the efficiency gain related to contact center operations is worth between $7.5 million and $17.5 million for the composite organization.
  • Productivity gains in generating go-to-market (GTM) content. With solutions built on Azure OpenAI Service, the composite organization can generate more GTM content, allowing their content creation teams to shift focus to content review. At a high level, this enables the creation of derivative content, while ensuring consistency in message, brand, and tone. Over three years, the efficiency gain related to content generation is projected to be worth between $4.8 million and $10.9 million for the composite organization.

Non-Commercial Spotlight

Projected Benefits Related To Public Sector And Education Organizations

Interviewees from public sector and education organizations told Forrester they saw the following benefits of Azure Open AI Service:

∙ Better engagement with existing recipients to improve service delivery. Interviewees from non-commercial organizations said using Azure OpenAI Service allowed them to enhance people’s access to specific public services. People have more channels to express their concerns and issues with particular programs, which allows the implementing organizations to use that feedback to improve the service quality.

∙ Improvement in effort to increase service awareness among the general public. These interviewees also said Azure OpenAI Service allows their organizations to expand public awareness of their programs to pockets of the population they previously could not engage with. They explained that this is a result of using genAI to better understand what messaging or framing attracts people to their services and using genAI again to repurpose the messaging — with the appropriate adjustments if needed — to other parts of the population.

∙ Improvement in contact center chatbot resolution rate. These interviewees said that because contact centers are key channels for public sector and education organizations to engage with their audiences, their organizations use AI-enabled chatbots to help their agents better engage callers. Similar to the commercial application, as chatbots handle the simpler queries, human agents can focus on more complex engagements.

∙ Productivity gains in generating public-facing content. Similar to the commercial application, interviewees from public sector and education organizations said they can benefit from being able to generate more personalized content while scaling the production of public-facing content. This allows their public service employees to shift focus to value-added activities.

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

  • Speed to value in creating translated content. Generative AI can break language barriers and improve global communication for companies. By using AI-powered translation tools, organizations can create translated content in different languages more efficiently, which reduces the need for human translators and related costs. This enables sharing of information between different groups, leading to speed-to-value benefits and improved productivity.
  • Better incorporation of user feedback into product development. By leveraging Azure OpenAI Service, the composite organization streamlines the process of gathering and analyzing user input, which empowers it to make user-informed decisions in its product development cycles. This not only accelerates development times, but it also optimizes resource allocation, allowing product and service makers to dedicate more time and energy to generating novel ideas and enhancing overall innovation.
  • Impact on employee satisfaction as a key part of customer engagement. With Azure OpenAI Service, the composite organization moves employees away from manual, redundant work and dedicates them to more strategic work, which ultimately drives an improvement in employee satisfaction. Additionally, having an AI-powered product suite helps the composite organization attract and retain technically skilled individuals. Having a more engaged, empowered employee base allows the composite to better support customers, which further improves customer and constituent experiences.

Forrester modeled a range of projected low-, medium-, and high-impact outcomes based on evaluated risk. This financial analysis projects that the composite organization accrues the following three-year present value (PV) for each scenario by enabling Azure OpenAI Service:

  • Projected high impact benefits of $197.4 million over three years.
  • Projected medium impact benefits of $98.4 million over three years.
  • Projected low impact of $45.9 million over three years.

“[This is the] key to understanding our customers better. [Azure OpenAI Service] can really transform companies across all different dimensions [and allow] the business to be more automated, [which leads to] quality improvement and better time to market.

Head of data, telecommunications

Key Statistics

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    Improvement in sales conversion rate:

    10% – 40%
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    Increase in top-of-funnel prospects:

    5% 20%
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    Improvement in annual customer retention:

    10% – 30%
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    Increase in revenue per customer:

    1% – 7%
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    Productivity gain in content generation:

    10% 60%
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    Reduction in calls requiring human agent:

    10% – 50%
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Three-Year Projected Benefits For The Composite Organization

Profit gain from better engagement with prospective customers Profit gain from better engagement with existing customers GTM content generation efficiency Improvement in contact center chatbots

Progression Of Projected Benefits For The Composite Organization

Low Mid High Initial Year 1 Year 2 Year 3

New Tech TEI Framework And Methodology

From the information provided in the interviews, Forrester constructed a New Technology: Projected Total Economic Impact™ (New Tech TEI) framework for those organizations considering an investment in Azure OpenAI Service.

The objective of the framework is to identify the benefits that affect the investment decision. Forrester took a multistep approach to evaluate the projected impact that Azure OpenAI Service can have on an organization.

  1. Due Diligence

    Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Azure OpenAI Service

  2. Early-Implementation Interviews

    Interviewed 20 representatives at 16 organizations using Azure OpenAI Service in a pilot or beta stage to obtain data about projected financial benefits.

  3. Composite Organization

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

  4. Projected Financial Model Framework

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

  5. Case Study

    Employed fundamental elements of New Tech TEI to modeling the investment’s potential benefits. Given the increasing sophistication of financial 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 benefits 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 Azure OpenAI Service.

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.

Consulting Team:

Adi Sarosa

Matt Dunham

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