The Total Economic Impact™ Of A Migration To Microsoft Dynamics 365 Business Central
Cost Savings And Business Benefits Enabled By Dynamics 365 Business Central
A Forrester Total Economic Impact™ Study Commissioned By Microsoft, June 2024
Microsoft Dynamics 365 Business Central empowers small to medium-sized organizations to modernize enterprise resource planning (ERP) in the cloud, which may allow them to avoid the costs associated with scaling on-premises infrastructure, support, custom integrations, and partner fees. Finance, operations, and sales staff can utilize capabilities to support better decision-making based on real-time information, and this may create additional opportunities to support customers and employees, drive additional revenue, and increase profitability.
Microsoft Dynamics 365 Business Central is a cloud-based business management solution for small to medium-sized businesses. Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by migrating from an on-premises Microsoft ERP solution to Dynamics 365 Business Central.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of a Dynamics 365 Business Central migration for their organizations.
Return on investment (ROI)
265%
Net present value (NPV)
$529K
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives of organizations that recently migrated from an on-premises Microsoft solution to Dynamics 365 Business Central. To provide additional context, Forrester also fielded a survey of 160 decision-makers from organizations that recently migrated to Dynamics 365 Business Central. For the purposes of this study, Forrester aggregated the interviewees’ and survey respondents’ experiences and combined the results into a single composite organization that has 150 employees and annual revenue of $15 million.
Interviewees and survey participants noted that prior to using Business Central, their organizations struggled to scale ERP capabilities with the ever-increasing demands of their business. The organizations’ on-premises Microsoft tools did not always support real-time visibility and interoperability of data across the organization, which hindered decision-making across finance, sales, and operations functions. The cost to extend the life of these on-premises solutions and grow with the business also swelled as infrastructure costs, support costs, and partner fees increasingly outweighed the perpetual licenses.
The interviewees and survey respondents noted that after migrating to Dynamics 365 Business Central, their organizations saw improvements to productivity across finance, operations, and sales users while supporting decision-making that unlocked additional revenue opportunities and profitability. Cloud-based ERP solutions allow organizations to scale in the cloud at the current demand level of the business without overprovisioning infrastructure, support resources, or partner consulting hours.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Productivity improvement of 12.5% for operations staff, 15% for sales staff, and 15.6% for finance staff. Deploying Business Central allows the composite organization’s finance and operations staff to reduce the amount of time they spend on manual reporting and information reconciliation while also providing improved visibility and tools to accelerate and improve the quality of decision-making. Sales personnel have access to the records they need while in the field.
- Avoided third-party fees of more than $80,000 annually. The composite organization previously engaged third-party IT consulting services to work on customizations and integrations amid the complexity inherent to an on-premises ERP deployment. Third-party external reporting was also required to supplement personnel effort. After implementing Dynamics 365, the composite eliminates third-party consulting and report reporting costs because IT staff can internally manage integration and customization work.
- Avoided costs of legacy ERP solutions and support worth up to $53,000 annually. With its previous on-premises Microsoft Dynamics deployment, the composite was incurring infrastructure costs, maintenance personnel costs, and upgrade fees. By migrating ERP functionality on Dynamics 365 Business Central in the cloud, the organization avoids these costs traditionally associated with an on-premises deployment.
- Profitability from improved sales pipeline generation. By migrating to Dynamics 365 Business Central, the composite’s sales and support staff are better equipped to service the organization’s customer base directly from the field, which yields improved sales pipeline generation revenue, retention, and profit.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
- Improved business outcomes from more informed decision-making. Day-to-day decision-making at the composite organization’s finance and operations functions improve with Business Central due to visibility into real-time information rather than making decisions based on static information related to a single point in time.
- Improved employee experience. With Business Central, the composite’s finance and operations personnel are less burdened by manual effort and reconciliation tasks mandated by a disparate set of ERP solutions, which improves employees’ quality of life improvement. Staff also find the user interface to be intuitive and easy to navigate, and it’s easier for them to find the information for which they’re looking.
- Compatibility with Microsoft solutions. Because Business Central works natively with other Microsoft solutions, this drives additional value from these solutions while reducing the need to train users on the integrations.
- Increased customer satisfaction. Having real-time access to information translates to faster servicing of end customers and ultimately may yield additional long-term customer satisfaction for the composite organization.
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
- Subscription fees paid to Microsoft totaling $82,000 over three years. The composite organization pays a monthly subscription fee per user for Business Central access.
- Implementation, ongoing management, and training personnel costs of $118,000 over three years. The composite organization leverages internal personnel resources to deploy Business Central over a four-month period. Once deployed, part-time staff work to maintain and upgrade the solution (e.g., making customizations and integrations).
The representative interviews and financial analysis found that a composite organization experiences benefits of $729,000 over three years versus costs of $200,000, adding up to a net present value (NPV) of $529,000 and an ROI of 265%.
Key Statistics
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Return on investment (ROI)
265%
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Benefits PV
$729K
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Net present value (NPV)
$529K
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Payback
<6 months
Benefits (Three-Year)
Improvement to staff productivity Avoided third-party fees Avoided costs of previous solutions and support Improved sales efficiency and profitability [CONTENT] [CONTENT] [CONTENT] [CONTENT]TEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering a migration to Microsoft Dynamics 365 Business Central.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Dynamics 365 Business Central can have on an organization.
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Due Diligence
Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Dynamics 365 Business Central.
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Interviews And Survey
Interviewed four representatives and surveyed 160 representatives of organizations that recently migrated to Dynamics 365 Business Central to obtain data about costs, benefits, and risks.
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Composite Organization
Designed a composite organization based on characteristics of the interviewees’ and survey respondents’ organizations.
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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 and survey respondents.
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Case Study
Employed four fundamental elements of TEI in modeling the investment 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 Dynamics 365 Business Central. For the interactive functionality using Configure Data/Custom Data, the intent is for the questions to solicit inputs specific to a prospect's business. Forrester believes that this analysis is representative of what companies may achieve with Dynamics 365 Business Central based on the inputs provided and any assumptions made. Forrester does not endorse Microsoft or its offerings. Although great care has been taken to ensure the accuracy and completeness of this model, Microsoft and Forrester Research are unable to accept any legal responsibility for any actions taken on the basis of the information contained herein. The interactive tool is provided ‘AS IS,’ and Forrester and Microsoft make no warranties of any kind.
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:
Richard Cavallaro
Zahra Azzaoui
Drivers leading to the Dynamics 365 Business Central investment
Key Challenges
The interviewees and survey respondents noted how their organizations struggled with common challenges, including:
- Expensive scaling. Each interviewee told Forrester that as their organization continued to grow, its ERP deployment struggled to meet the demands of the business. Given the on-premises state of the organizations’ ERP solutions, scaling to meet the demand as is would result in increased costs, increased personnel requirements to maintain these deployments, and additional partner support fees.
- Decision-making with static information. With on-premises solutions, decision-makers were often forced to make business decisions using incomplete and out-of-date, static information. This inherently led to suboptimal decision-making in the areas of supply-chain forecasting, budgeting, and customer support or sales opportunities. Additionally, they frequently had to export data to Excel for consolidation and analysis, which resulted in reconciliation and synchronization issues whenever updates occurred in the system. This not only increased the workload, but it also introduced the risk of errors, further compromising the quality of the decisions being made.
- Offsite access to company data. Several interviewees noted that their organization’s on-premises Microsoft ERP solution required an onsite presence for its staff to access key company or customer information, which hindered the ability to service customers in real time or to work remotely. A sales manager from a manufacturing organization spoke about the difficulties related to information coming from sales representatives in the field: “We needed a full utilization of our CRM (customer relationship management solution). Previously, the field sales reps wrote notes and then entered them all in at the end of the week or towards the end of the month when they got back into the office.”
- A need for customizations or integrations to maintain functionality. Interviewees said that as their organizations evolved with their on-premises ERP deployments, they developed customizations and integrations between different solutions/systems to create and maintain functionality as dictated by the business. These ERP deployments were not just costly from an infrastructure standpoint, but also from a personnel resource standpoint because internal or partner hours were dedicated to maintaining and/or creating these customizations and integrations. The interviewees indicated a need to return to an ERP solution that was closer to “out of the box.”
- Difficulty staying up to date. Interviewees told Forrester that updates for their specific on-premises Microsoft Dynamics ERP solution were version-dependent and required personnel resources to deploy, if the update was possible to begin with.
“What organizational goals or opportunities did your organization hope to address with its investment in Dynamics 365 Business Central?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Investment Objectives
The interviewees’ organizations searched for a solution that:
- Could be deployed in the cloud and scale with the needs of the business.
- Has a modern and intuitive user interface/user experience.
- Enables employees to always have access to real-time company data.
- Could deliver the functionality required by the business out of the box without the need for involved customizations or integrations.
- Could be updated automatically.
Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected. The composite organization is representative of the four interviewees and 160 survey respondents, and it is used to present the aggregate financial analysis in the next section. The composite organization has the following characteristics:
Description of composite. The composite organization is a $15 million organization with 150 employees. It primarily operates within the region of its headquarters, but it has customers and suppliers around the globe.
Prior to deploying Microsoft Dynamics 365 Business Central, the composite organization maintained an on-premises deployment of Microsoft Dynamics NAV.2 As the organization continued to grow, its on-premises deployment limited its ability to scale due to infrastructure constraints. Budget did not allow for the overprovisioning of infrastructure. Furthermore, several staff members (notably sales staff members) did not have access to the organization’s ERP on-site, which resulted in delayed customer communication, support, and satisfaction. It was difficult for the majority of finance, operations, and sales/support staff to use hybrid work without compromise.
Deployment characteristics. In line with organizational cloud-transformation mandates, the composite organization deploys Business Central in the cloud supported by a Microsoft partner and internal staff. It also begins a phased retirement of its legacy on-premises Microsoft Dynamics tools, and it retires 90% of these costs by the third year of the Business Central deployment. The organization has 28 staff members responsible for finance, supply chain operations, and sales decisions, and they are the primary users of Business Central.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Improvement to staff productivity | $38,556 | $38,556 | $38,556 | $115,668 | $95,883 |
| Btr | Avoided third-party fees | $71,400 | $71,400 | $71,400 | $214,200 | $177,561 |
| Ctr | Avoided costs of previous solutions and support | $28,104 | $38,729 | $45,104 | $111,938 | $91,445 |
| Dtr | Improved sales efficiency and profitability | $146,400 | $146,400 | $146,400 | $439,200 | $364,075 |
| Total benefits (risk-adjusted) | $284,460 | $295,085 | $301,460 | $881,006 | $728,964 | |
Improvement To Staff Productivity
Evidence and data. Interviewees said deploying Business Central allowed their organizations’ finance and operations staff to reduce the amount of time they spent on manual reporting and information reconciliation while also providing improved visibility and tools to accelerate and improve the quality of decision-making. Automating tasks within these finance and operations processes yielded quantifiable productivity savings for the organizations’ staff. As a result, as the organizations continued to grow, they required fewer finance and operations hires because of the capacity increase due to more efficient staff. Having a modern, intuitive user experience further improved productivity, which reduced the requirement for training or re-training for new and existing staff. Ultimately, migrating to Business Central in the cloud enabled finance and operations staff to operate more effectively while offsetting subsequent hires required as the organizations grew, which yielded savings quantified in user productivity.
- The interviewee at the manufacturing organization spoke to efficiencies for finance staff resulting from the Dynamics 365 Business Central migration — notably, integration with online document signatures, real-time reporting and integration with CRM, online customer payments, and faster internal reimbursements.
- A finance manager in the food and beverage importing industry said that after migrating to Dynamics 365 Business Central, their organization was able to consolidate several business units under one ERP system, which improved the productivity of supply-chain personnel by reducing the need to consolidate information across several business units operating on Microsoft Dynamics on-premises ERP solutions.
“Has Microsoft Dynamics 365 Business Central in the cloud increased productivity in any of the following areas?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“By how much has productivity increased as a result of Microsoft Dynamics 365 Business Central?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Has Microsoft Dynamics 365 Business Central in the cloud impacted any of the following finance areas?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Has Microsoft Dynamics 365 Business Central in the cloud improved any of the following supply chain areas?"
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions.
- Four finance users save 25 hours per month through automation of finance tasks that previously required manual work.
- Four supply-chain staff members save 20 hours per month through automation of supply-chain tasks.
- The average hourly rate for a finance or operations staff member is $42.
- The composite has a 50% productivity recapture rate because not all reclaimed hours are dedicated to value-added work.
Risks. This benefit will vary among organizations based on:
- The skill and effectiveness of the organization’s finance and/or operations staff.
- The functionality gap between Business Central and the organization’s legacy ERP solution(s) as it relates to the possibility of automating manual tasks.
- The organization’s industry as it affects its ability to customize Business Central for industry-specific functionality.
Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $96,000.
Improvement To Staff Productivity
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| A1 | Finance users (baseline) | Composite | 4 | 4 | 4 |
| A2 | Time savings on manual reporting per month (hours) | Interviews and survey | 25 | 25 | 25 |
| A3 | Percentage of time reclaimed per working month (rounded) | A2/160 | 15.6% | 15.6% | 15.6% |
| A4 | Hourly rate for a finance personnel FTE (rounded) | TEI standard | $42 | $42 | $42 |
| A5 | Subtotal: Savings due to automated reporting with Business Central | A1*A2*A4*12 months | $50,400 | $50,400 | $50,400 |
| A6 | Operations users | Composite | 4 | 4 | 4 |
| A7 | Time savings on operations activities per month (hours) | Interviews and survey | 20 | 20 | 20 |
| A8 | Percentage of time reclaimed per working month (rounded) | A7/160 | 12.5% | 12.5% | 12.5% |
| A9 | Hourly rate for an operations personnel FTE (rounded) | TEI standard | $42 | $42 | $42 |
| A10 | Subtotal: Savings due to operations task automation with Business Central | A6*A7*A9*12 months | $40,320 | $40,320 | $40,320 |
| A11 | Total savings for finance and operations users due to saved time | A5+A10 | $90,720 | $90,720 | $90,720 |
| A12 | Productivity recapture | TEI standard | 50% | 50% | 50% |
| At | Improvement to staff productivity | A11*A12 | $45,360 | $45,360 | $45,360 |
| Risk adjustment | ↓15% | ||||
| Atr | Improvement to staff productivity (risk-adjusted) | $38,556 | $38,556 | $38,556 | |
| Three-year total: $115,668 | Three-year present value: $95,883 | ||||
Avoided Third-Party Fees
Evidence and data. Interviewees said that despite the fact that their organizations “owned” licenses for their on-premises Microsoft Dynamics ERP solutions, the complexity resulting from years of customizations and integrations required significant ongoing partner/IT consulting investments to maintain. In addition, functionality gaps often meant the organizations paid for additional external reporting on a monthly or quarterly basis. Interviewees said that once Business Central was implemented, their firms eliminated third-party reporting costs while internal IT staff could manage any integration or customization work because Business Central operates closer to “standard.”
- A global CIO in financial services explained: “One of the areas we’ve found especially valuable is the ability to produce reports in-house. We’re less reliant on outside help with Business Central.”
- Of the 160 survey respondents, 86% reported a reduction in IT support costs (partner/consulting fees) and average annual savings of $69,703, which is a 55.2% reduction.
“You noted that you were able to reduce costs as a result of using Microsoft Dynamics 365 Business Central. In what areas have you reduced costs?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions:
- The composite previously paid $5,000 per month for external report preparation. It eliminates this cost once Business Central is implemented.
- The composite avoids 80 IT consulting hours annually (20 per quarter) at a rate of $300 per hour, which results from a more out-of-the-box configuration that requires fewer partner hours to maintain customizations and integrations.
Risks. This benefit will vary among organizations based on:
- The organization’s current spending on third-party reporting and consulting hours as mandated by current functionality and level of customization.
- The skills of the organization’s personnel and the firm’s capacity to manage historically third-party activities internally once Business Central is implemented.
- Industry- or organization-specific customizations or integrations that still may require third-party consulting.
Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $178,000.
Avoided Third-Party Fees
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| B1 | Cost per customized report | Interviews | $5,000 | $5,000 | $5,000 |
| B2 | Reports | Composite | 12 | 12 | 12 |
| B3 | Subtotal: Avoided third-party reporting fees | B1*B2 | $60,000 | $60,000 | $60,000 |
| B4 | Avoided IT consulting time per quarter for ongoing support, upgrades, integrations, and strategy (hours) | Interviews | 20 | 20 | 20 |
| B5 | Avoided IT consulting time (hours) | B4*4 | 80 | 80 | 80 |
| B6 | Cost per IT consulting hour | Assumption | $300 | $300 | $300 |
| B7 | Subtotal: Avoided IT consulting costs | B5*B6 | $24,000 | $24,000 | $24,000 |
| Bt | Avoided third-party fees | B3+B7 | $84,000 | $84,000 | $84,000 |
| Risk adjustment | ↓15% | ||||
| Btr | Avoided third-party fees (risk-adjusted) | $71,400 | $71,400 | $71,400 | |
| Three-year total: $214,200 | Three-year present value: $177,561 | ||||
Avoided Costs Of Previous Solutions And Support
Evidence and data. Interviewees told Forrester their organizations incurred increasingly expensive costs associated with maintaining their on-premises Microsoft ERP solutions. Notably, the organizations paid for infrastructure, maintenance (personnel costs), and upgrade costs, where possible (personnel hours). As the organizations grew, overprovisioning infrastructure would be required to support peak demands of the business. Interviewees concluded that by adopting Dynamics 365 Business Central, their organizations were able to avoid most of these costs as a result of their cloud migration.
- Of the 160 survey respondents, 77% reported a reduction in infrastructure or datacenter costs, with a median annual savings of $112,500, a 52.4% reduction.
- The global CIO in financial services explained that they were able to reallocate IT resources after moving to Business Central in the cloud: “Our IT team members are able to spend less time supporting and maintaining infrastructure and focus their energy on building more robust architecture to support more transactions and enable our business to continue to grow.”
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions:
- The annual cost of the organization’s legacy ERP solutions was $50,000, including all infrastructure and/or datacenter fees.
- With Business Central, the composite avoids 50% of these costs by the end of Year 1, 75% by Year 2, and 90% eliminated by Year 3.
- The composite previously dedicated 16 hours per month among two IT personnel to basic ERP solution maintenance work. It avoids this with Business Central.
- The average hourly rate of an IT FTE is $42.
Risks. This benefit will vary among organizations based on:
- The scope of the organization’s previously deployed Microsoft ERP solution(s) and its related infrastructure as it relates to the total cost of infrastructure or datacenter spend.
- Contract or “owned” infrastructure specifics as they relate to an organization’s ability to avoid infrastructure fees once migrated to Microsoft Dynamics 365 Business Central.
- The skill and capacity of the organization’s IT personnel who support the ERP solution(s).
Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $91,000.
Avoided Costs Of Previous Solutions And Support
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| C1 | Cost of infrastructure supporting legacy MS solution(s) | Composite | $50,000 | $50,000 | $50,000 |
| C2 | Percentage of total spend retired | Interviews and survey | 50% | 75% | 90% |
| C3 | Subtotal: total retired spend | C1*C2 | $25,000 | $37,500 | $45,000 |
| C4 | IT personnel supporting and developing previous tool(s) | Composite | 2 | 2 | 2 |
| C5 | Hours per month spent on support and development (per IT FTE) | Interviews | 8 | 8 | 8 |
| C6 | IT FTE hourly rate (rounded) | TEI Standard | $42 | $42 | $42 |
| C7 | Subtotal: cost of infrastructure, support, and development for previous tool(s) | C4*C5*C6*12 months | $8,064 | $8,064 | $8,064 |
| Ct | Avoided costs of previous solutions and support | C3+C7 | $33,064 | $45,564 | $53,064 |
| Risk adjustment | ↓15% | ||||
| Ctr | Avoided costs of previous solutions and support (risk-adjusted) | $28,104 | $38,729 | $45,104 | |
| Three-year total: $111,938 | Three-year present value: $91,445 | ||||
Improved Sales Efficiency And Profitability
Evidence and data. Interviewees said that with their organizations’ previous on-premises Microsoft ERP solutions, constant access to company and customer data was not a given because accessing these records required onsite presence. They also noted that this often delayed the ability of sales staff to deliver timely proposals or provide support in real time, which affected sales, satisfaction, and retention. Interviewees noted that by migrating to Dynamics 365 Business Central, their organizations’ sales and support staff became better equipped to service their customer bases and ultimately drive revenue.
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The interviewee at the manufacturing organization spoke to the ability of their company’s sales representatives to log customer interactions, deliver customer proposals and support from the road, which drives more accurate customer information, acquisition, retention, revenue, and customer satisfaction: “Now [the sales representatives] are able to come out of their meetings with customers and log information right away. It’s been recorded more timely, so it’s more accurate. It’s better for us as a senior management team to see the information in real time. We’re able to respond to the customers’ needs a lot quicker than chasing our sales reps for them to update CRM when they’re next back in the office.”
They continued: “In our industry, time is key. We operate in a saturated market with a lot of competitors, and if we’re not getting big quotes to customers or samples to customers quickly enough and our competitor can, we will ultimately lose the business.” - Of the 160 survey respondents, 85% noted that it required fewer sales personnel to maintain the same level of sales and support for their organization’s customer base. They said that on average, they required 2.6 fewer sales personnel to maintain the same level of efficiency.
- Across the survey respondents, efficiencies to sales processes (e.g., faster proposal generation/RFP response, more efficient customer data search capabilities, additional buying options, and resulting shorter sales cycles) yielded an average revenue improvement of 4.8% attributable to Dynamics 365 Business Central capability improvements.
“By how much did your annual revenue increase with the investment in Microsoft Dynamics 365 Business Central on the cloud?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions:
- Twenty sales representatives support the organization’s prospects and customers.
- Based on real-time access to customer and company data, each of these sales representatives becomes 15% more productive, resulting in potentially avoided hires.
- The composite organization experiences a 5% increase in deals closed per sales representative with Business Central. As a result, each sales representative closes one additional deal per year.
- Each sales opportunity at the composite organization is worth an average of $30,000.
- The composite’s operating margin is 8%.
- The average annual salary for a sales representative is $90,000.
- The composite has a 50% productivity recapture rate because not all reclaimed hours are dedicated to value-added work.
Risks. This benefit will vary among organizations based on:
- The organization’s customer base as it relates to sales representatives’ ability to provide support from the field.
- The skill of the organization’s sales staff and its capacity to generate sales opportunities.
- Industry or company specifics that will affect the revenue and profitability such as average deal size, average close rate, and operating margin.
Results. To account for these risks, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $364,000.
Improved Sales Efficiency And Profitability
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| D1 | Sales representatives | Composite | 20 | 20 | 20 |
| D2 | Efficiency improvement with Dynamics 365 Business Central | Interviews and survey | 15% | 15% | 15% |
| D3 | Average salary for a sales representative | TEI standard | $90,000 | $90,000 | $90,000 |
| D4 | Productivity recapture | TEI standard | 50% | 50% | 50% |
| D5 | Subtotal: Sales productivity improvement | D1*D2*D3*D4 | $135,000 | $135,000 | $135,000 |
| D6 | Revenue | Composite | $15,000,000 | $15,000,000 | $15,000,000 |
| D7 | Average deal size | Composite | $30,000 | $30,000 | $30,000 |
| D8 | Deals | D6/D7 | 500 | 500 | 500 |
| D9 | Deals per sales representative | D8/D1 | 25 | 25 | 25 |
| D10 | Increase in deals closed per sales representative with Business Central | Interviews and survey | 5% | 5% | 5% |
| D11 | New deals per sales representative | D9*D10 | 1 | 1 | 1 |
| D12 | New revenue from new deals attributable to Business Central | D1*D11*D7 | $600,000 | $600,000 | $600,000 |
| D13 | Operating margin | Composite | 8% | 8% | 8% |
| D14 | Subtotal: Profitability increase attributable to Business Central | D15*D16 | $48,000 | $48,000 | $48,000 |
| Dt | Improved sales efficiency and profitability | D5+D11 | $183,000 | $183,000 | $183,000 |
| Risk adjustment | ↓20% | ||||
| Dtr | Improved sales efficiency and profitability (risk-adjusted) | $146,400 | $146,400 | $146,400 | |
| Three-year total: $439,200 | Three-year present value: $364,075 | ||||
Unquantified Benefits
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
- Improved business outcomes from more informed decision-making. Interviewees told Forrester that their organizations’ finance and operations functions improved their day-to-day decision-making with Business Central due to visibility into real-time information.
- Improved employee experience. Interviewees said that with Business Central, finance and operations personnel are less burdened by manual effort and reconciliation tasks mandated by a disparate set of ERP solutions. They noted this is a quality-of-life improvement for employees because the user interface is more intuitive, easier to navigate, and easier for staff to find the information for which they’re looking.
- Compatibility with Microsoft solutions. Because Business Central works natively with other Microsoft solutions, it drives additional value from these solutions. The interviewee at the manufacturing organization said Business Central integrates nicely across their firm’s Microsoft solutions, including Excel and Power BI for reporting. They also noted that Business Central is intuitive and that it’s easy to train staff members who are already familiar with Microsoft solutions. The interviewee at the food and beverage importing firm said that after consolidating several business units under one ERP on Business Central, their organization benefited from consolidated reporting with PowerBI.
- Increased customer satisfaction. Several interviewees noted that having real-time access to information translated to faster servicing of end customers and ultimately may yield additional long-term customer satisfaction. Among the survey respondents, 85% reported an improvement in customer satisfaction (CSAT) scores, while 71% noted an improvement to customer retention, which is an average estimated improvement of 3.7% resulting from the migration to Business Central.
“You indicated that your organization has improved customer experience. Which of the following areas have you seen an impact?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Dynamics 365 Business Central and later realize additional uses and business opportunities, including:
- Scalability in the cloud. Nearly every interviewee said their organization now has the ability to scale users and capabilities for its current business demands. They said that amid periods of growth, their organizations have been able to provision their ERP resources accordingly on Business Central and save on costs.
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Quantified cost data as applied to the composite
Total Costs
| Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Etr | Subscription fees paid to Microsoft | $0 | $32,844 | $32,844 | $32,844 | $98,532 | $81,678 |
| Ftr | Implementation, ongoing management, and training personnel costs | $89,286 | $11,537 | $11,537 | $11,537 | $123,896 | $117,976 |
| Total costs (risk-adjusted) | $89,286 | $44,381 | $44,381 | $44,381 | $222,428 | $199,654 | |
Subscription Fees Paid To Microsoft
Evidence and data. Interviewees said their organizations pay Microsoft a subscription fee for their usage of Business Central. Their firms pay license fees on a per-month, per-user, or per-device basis.
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions:
- The composite has 28 Dynamics 365 Business Central users divided among finance, operations, and sales staff.
- Assuming an even split between Business Central Essentials ($70) and Premium ($100) licenses, the composite pays $85 per user per month.
- Pricing may vary. For more details, contact Microsoft.
Risks. This cost will vary among organizations based on:
- The specific tier of Dynamics 365 Business Central license the organization uses.
- The organization’s number of Business Central licenses and/or users.
Results. To account for these risks, Forrester adjusted this cost upward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $81,700.
Subscription Fees Paid To Microsoft
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| E1 | Total subscribed users | A1+A6+D1 | 0 | 28 | 28 | 28 |
| E2 | Monthly price per user (assuming an even split between Business Central Essentials and Premium licenses) | Interviews | $0 | $85 | $85 | $85 |
| Et | Subscription fees paid to Microsoft | E1*E2*12 months | $0 | $28,560 | $28,560 | $28,560 |
| Risk adjustment | ↑15% | |||||
| Etr | Subscription fees paid to Microsoft (risk-adjusted) | $0 | $32,844 | $32,844 | $32,844 | |
| Three-year total: $98,532 | Three-year present value: $81,678 | |||||
Implementation, Ongoing Management, And Training Personnel Costs
Evidence and data. The interviewees described migration experiences for Business Central that averaged four months from concept to implementation, were often staged in phases, and typically leveraged Microsoft partners. While the level of partner support varied, partner involvement in some capacity was consistent among the interviewees’ organizations.
Modeling and assumptions. For the composite organization, Forrester makes the following assumptions:
- Two IT and business FTEs spend 25% of their working time over four months on the initial implementation of Business Central.
- The composite pays a partner fee of $45,000 throughout the duration of the implementation.
- The average annual rate for an IT or business FTE who works on implementation is $90,000.
- The composite organization uses 20 hours of third-party professional services at an hourly rate of $75 to assist with customizations and integrations each year.
- Once Business Central is deployed, one IT FTE spends 8 hours of their time managing and continuing to develop on it during the subsequent years of this analysis.
- Each of the 28 Business Central users undergoes an initial 15 hours of training to maximize their effectiveness on the platform from initial implementation.
Risks. This cost will vary among organizations based on:
- The skill and effectiveness of the personnel or third-party partner that manage the organization’s Business Central deployment.
- The organization’s change management tendencies as they relate to user training and effectiveness.
Results. To account for these risks, Forrester adjusted this cost upward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $118,000.
Implementation, Ongoing Management, And Training Personnel Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| F1 | Required personnel for implementation | Composite | 2 | |||
| F2 | Implementation and initial ramping duration (months) | Composite | 4 | |||
| F3 | Percentage of personnel time spent on implementation | Composite | 25% | |||
| F4 | Average rate for a personnel FTE | TEI standard | $90,000 | |||
| F5 | Total personnel cost for implementation | F1*F2*F3*F4 | $15,000 | |||
| F6 | Total partner cost for implementation | Composite | $45,000 | |||
| F7 | Time spent on ongoing management by third-party professional services per quarter (hours) | Composite | 20 | 20 | 20 | |
| F8 | Hourly rate of third-party professional services for ongoing management | Composite | $75 | $75 | $75 | |
| F9 | Total third-party professional services cost for ongoing management | F7*F8*4 | $6,000 | $6,000 | $6,000 | |
| F10 | Required personnel for ongoing management | Composite | 1 | 1 | 1 | |
| F11 | Personnel time spent per month on support and development | Composite | 8 | 8 | 8 | |
| F12 | Hourly rate for a personnel FTE (rounded) | TEI standard | $42 | $42 | $42 | |
| F13 | Total personnel cost of ongoing management | F10*F11*F12*12 months | $4,032 | $4,032 | $4,032 | |
| F14 | Total users who require training | A1+A6+D1 | 28 | |||
| F15 | Training time per user (hours) | Composite | 15 | |||
| F16 | Hourly rate for a user who requires training (rounded) | TEI standard | $42 | |||
| F17 | Total personnel cost of training | F14*F15*F16 | $17,640 | |||
| Ft | Implementation, ongoing management, and training personnel costs | F5+F6+F9+F13+F1 7 | $77,640 | $10,032 | $10,032 | $10,032 |
| Risk adjustment | ↑15% | |||||
| Ftr | Implementation, ongoing management, and training personnel costs (risk-adjusted) | $89,286 | $11,537 | $11,537 | $11,537 | |
| Three-year total: $123,896 | Three-year present value: $117,976 | |||||
Consolidated Three-Year Risk-Adjusted Metrics
Cash Flow Chart (Risk-Adjusted)
Total costs Total benefits Cumulative net benefits Initial Year 1 Year 2 Year 3-
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Cash Flow Analysis (Risk-Adjusted Estimates)
| Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
|---|---|---|---|---|---|---|
| Total costs | ($89,286) | ($44,381) | ($44,381) | ($44,381) | ($222,428) | ($199,654) |
| Total benefits | $0 | $284,460 | $295,085 | $301,460 | $881,006 | $728,964 |
| Net benefits | ($89,286) | $240,080 | $250,705 | $257,080 | $658,578 | $529,310 |
| ROI | 265% | |||||
| Payback period (months) | <6 | |||||
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.
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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.”
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. 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.
Appendix B: Interview And Survey Demographics
Interviews
| Role | Industry | Region | Migrated from |
|---|---|---|---|
| Sales manager | Manufacturing | Europe | Dynamics Business Central (on-premises) |
| Finance manager | Food and beverage importing | Europe | Dynamics NAV |
| Global CIO | Financial services | North America | Dynamics GP |
| Manager of finance and integrations | Healthcare | Europe | Dynamics NAV |
“In which country are you located?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Using your best estimate, how many employees work for your firm/organization worldwide?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Using your best estimate, what is your organization’s annual revenue (USD)?"
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Which of the following best describes the industry to which your company belongs?"
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
“Which title best describes your position at your organization?”
Base: 160 decision-makers with experience using Dynamics 365 Business Central at their organization
Source: A commissioned TEI study conducted by Forrester Consulting on behalf of Microsoft, June 2024
Appendix B: Endnotes
1 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.
2 The financial model aggregates insights from organizations who have migrated from multiple legacy Microsoft systems, including Dynamics NAV, GP, and Business Central online. While the composite organization migrates from Dynamics NAV, the findings of this study are representative of migrations from any of these systems.
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