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.

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Return on investment (ROI)

265%

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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%.

Operations staff productivity improvement

12.5%

“Before moving to [Dynamics 365] Business Central in the cloud, our customer data was scattered across multiple on-prem environments. With centralized customer data, we’re now able to quickly access information to create and test new features that better serve our customers and unlock business growth.”

Global CIO, financial services

Key Statistics

  • icon icon

    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
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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.

  1. Due Diligence

    Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Dynamics 365 Business Central.

  2. 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.

  3. Composite Organization

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

  4. 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.

  5. 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

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