A Forrester Total Economic Impact™ Study Commissioned By Microsoft, March 2024
Organizations grappling with fragmented operations and suboptimal decision-support mechanisms increasingly can turn towards implementing a cloud-based ERP system and the integration of finance and supply chain functions to strategically address these issues. This approach promotes efficiency and scalability while transcending departmental, geographical, and divisional boundaries. A solution that consolidates data, automates workflows, reduces reliance on disparate systems, and provides instant access to essential insights is indispensable for companies seeking to navigate market fluctuations, streamline processes, achieve additional growth, and enhance overall success.
Microsoft Dynamics 365 offers a cloud-based ERP solution with Dynamics 365 Finance and Dynamics 365 Supply Chain Management in an integrated platform that offers significant benefits by centralizing and streamlining data and processes, enhancing efficiency, and improving decision-making through real-time insights. Specifically, Dynamics 365 optimizes supply chain and financial workflows, improves the accuracy of analyses and reports, and enhances productivity across various departments. Furthermore, it diminishes the need for extensive IT infrastructure and support directed toward legacy on-premises systems as well as reliance on internal data centers and disaster recovery solutions, and it lowers costs associated with overhead. The agility afforded by Dynamics 365 may allow businesses to respond more effectively to market changes and customer demands, which can foster increased profitability and competitive advantage.
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 Dynamics 365.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Dynamics 365 on their organizations.
Return on investment (ROI)
106%
Net present value (NPV)
$8.09M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed five IT leaders at four organizations and surveyed another 320 professionals with experience using Dynamics 365. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that has 5,000 employees and generates $1 billion in annual revenue.
Interviewees said that prior to using Dynamics 365, their organizations struggled with siloed data scattered across multiple, disparate legacy systems. This required excessive manual efforts to collect, process, analyze, and report accurate and timely analytics and results, which created companywide drags on performance. Inflexible legacy systems also constrained projected savings in growth opportunities and raised cybersecurity vulnerabilities with multiple systems and solutions that were not always kept up to date with adequate maintenance. Prior attempts to address these challenges often resulted in additional costs for more services or solutions attempting to create bespoke, half-baked integrations that only yielded ineffective stopgaps.
The interviewees and survey respondents reported that after the investment in Dynamics 365, their organizations saw widespread improvements that impacted finance and supply chain processes and beyond.
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
Three-year productivity improvements in finance/accounting, supply chain/logistics, and other personnel
$8.9 million
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
The representative interviews, survey, and financial analysis found that a composite organization experiences benefits of $15.8 million over three years versus costs of $7.7 million, adding up to a net present value (NPV) of $8.1 million and an ROI of 106%.
“Finance and operations now can make tangible decisions that are data-driven based on the tools and feedback that Dynamics 365 … [has] provided.”
Senior director of IT, healthcare/life sciences
Return on investment (ROI)
Benefits PV
Net present value (NPV)
Payback
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment Dynamics 365.
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 can have on an organization.
Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Dynamics 365.
Interviewed five IT leaders at four organizations and surveyed 320 other professionals at organizations using Dynamics 365 to obtain data about costs, benefits, and risks.
Designed a composite organization based on characteristics of the interviewees’ and survey respondents’ organizations.
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.
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.
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.
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:
Kris Peterson
Nahida Nisa
The interviewees noted how their organizations struggled with common challenges, including:
They continued: “[The legacy solution] had been very heavily customized to the point that it wasn’t upgradable. These other systems we were using were nonscalable [and] not really able to grow and do any of these other tasks.”
The senior director of IT in healthcare/life sciences discussed business requirements for their organization as it considered a strategic shift during the COVID-19 pandemic: “As we started working with some different specialty labs, [they have] different ERP solutions that when we try to scale with [the legacy ERP], it can be complex because of the customization within our overall core ERP platform. … The business use case was to find an ERP solution that’s scalable and has some familiarity with similar workloads across the B2B relationships that we have in scope.”
“[With Dynamics 365,] we will have a variety of benefits, including staying safe, strategic benefits around access to data, and having [all divisions and affiliates] on the same system [that] everybody else is used to and [can] speak to. There are all kinds of people benefits, safety benefits, cybersecurity benefits, [and] strategic benefits around data and data analysis that, in total, [made] us feel there is enough or more benefit there to make it worth the price.”
Vice president of IT, manufacturing/construction
Based on the interviews and survey, 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 five interviewees and the 320 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 generates $1 billion of annual revenue with 5,000 employees distributed across numerous locations. It has operated with a patchwork of disparate legacy ERP systems, each catering to different regions, divisions, and aspects of the business, such as finance, supply chain management, and other operational areas. The legacy solutions were siloed, which led to inefficiencies in data sharing and process integration and required significant manual intervention to reconcile information across departments. The organization relied heavily on on-premises hardware and data centers, which led to substantial costs in maintenance, IT support, and disaster recovery efforts. The need to integrate with various third-party software for extended functionalities (e.g., IoT integration, mobile device management, analytics) further amplified operational costs and complexity. The lack of a unified system also made it challenging to consolidate business processes across offices, regions, subsidiaries, or after acquisitions, which led to inconsistencies in data and processes, higher professional service costs for audits and compliance, and an overall lack of agility and scalability in responding to market changes.
Deployment characteristics. The composite organization deploys Microsoft Dynamics 365 ERP with finance and supply chain modules in a phased implementation that is fully integrated in nine months.
Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|
Atr | Increased profitability | $270,000 | $540,000 | $675,000 | $1,485,000 | $1,198,873 |
Btr | Increased productivity | $1,236,098 | $4,944,394 | $4,944,394 | $11,124,886 | $8,924,798 |
Ctr | Reduced infrastructure and IT operations spend from cloud migration | $535,275 | $2,141,100 | $2,141,100 | $4,817,475 | $3,864,758 |
Dtr | Cost savings from organizational simplification | $246,825 | $987,300 | $987,300 | $2,221,425 | $1,782,110 |
Total benefits (risk-adjusted) | $2,288,198 | $8,612,794 | $8,747,794 | $19,648,786 | $15,770,539 | |
Evidence and data. Study participants said implementing Dynamics 365 led to real-time visibility into operations and financials, better informed and expedited decision-making, and increased operational agility in a competitive marketplace. They noted improvements in accounts receivable, collections inventory, inventory turnover, order accuracy, on-time delivery, and the management of accounts payable. These improvements helped with stock level optimization, improved demand forecasting, and reduced excess inventory, while more efficient order processing led to faster fulfillment and enhanced supplier collaboration.
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. This benefit can vary across organizations depending on:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.2 million.
“If we had any disruptions in the supply chain … we are already structured enough and prepared enough to have the data and answer those questions quicker than our competitors. We can steer ourselves to resolve things, have supply chain resiliency, and execute changes more quickly than our competitors.”
Vice president of IT, manufacturing/construction
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
A1 | Revenue | Composite | $1,000,000,000 | $1,000,000,000 | $1,000,000,000 | |
A2 | Profit margin | TEI standard | 10% | 10% | 10% | |
A3 | Profitability increase attributable to Dynamics 365 ERP from real-time visibility and enhanced decision making | Survey | 0.30% | 0.60% | 0.75% | |
At | Increased profitability | A1*A2*A3 | $300,000 | $600,000 | $750,000 | |
Risk adjustment | ↓10% | |||||
Atr | Increased profitability (risk-adjusted) | $270,000 | $540,000 | $675,000 | ||
Three-year total: $1,485,000 | Three-year present value: $1,198,873 |
Evidence and data. Study participants said using Dynamics 365 saves the time and effort of personnel in finance, accounting, supply chain, logistics, and other areas through unified data access, streamlined processes, and ease of use. They explained that automating routine tasks improved accuracy of analytics and reporting by reducing manual data entry and errors and that Dynamics 365 reduced efforts around cross-departmental workflows, inventory management, compliance management, closing cycles, and audit processes. Interviewees also said Dynamics 365 is easy to learn and use because of the similarity of its commands, navigation, and functionality to other Microsoft applications.
The interviewee continued: “Our scalability has gotten exponentially better, so even though our business has grown and we’ve brought in a lot of customers and our volume has grown and our revenue has grown, we haven’t really staffed like we would in the past because the automation has afforded us to scale better in the back office.”
The interviewee added: “[Automation] takes out a lot of the manual processes. … It does help speed up a lot of mundane tasks, and now you’re looking at more actionable data [from which] you can build models and forecasting.”
“If you’re a person who can make Excel sing and dance, you can make Dynamics 365 sing and dance.”
Vice president of IT, manufacturing/construction
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. Productivity improvements can vary across organizations due to differences in:
Results. To account for these risks, Forrester adjusted this benefit downward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $8.9 million.
“[I can’t put a number on] the overall reduction in Excel usage. But I can tell you the code name for our project was ‘QUEST,’ [which stands for] ‘Quit Using Excel Spreadsheets Today.’ [That’s a] true story. They used to historically dump the entire general ledger into Excel and use pivot tables to close their books, and now … we’ve automated a lot of that, use a lot of reporting and dashboards, and complemented it with a reporting and budgeting forecasting platform that injects the data straight from Dynamics 365.”
Vice president, energy
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
B1 | Finance and accounting employees reliant on manual and other inefficient processes and systems prior to Dynamics 365 | Composite | 50 | 50 | 50 | |
B2 | Time saved per week from automated tasks, streamlined processes, and enhanced compliance management (hours) | Survey | 14.5 | 14.5 | 14.5 | |
B3 | Fully burdened average hourly salary of a finance and accounting team member | TEI standard | $60 | $60 | $60 | |
B4 | Subtotal: Finance and accounting productivity improvements | B1*B2*B3*50 | $2,175,000 | $2,175,000 | $2,175,000 | |
B5 | Supply chain and logistics employees reliant on manual and other inefficient processes and systems prior to Dynamics 365 | Composite | 250 | 250 | 250 | |
B6 | Time saved per week from improved inventory management, demand forecasting, and more efficient order processing (hours) | Survey | 8.7 | 8.7 | 8.7 | |
B7 | Fully burdened average hourly salary of a supply chain or logistics team member | TEI standard | $65 | $65 | $65 | |
B8 | Subtotal: Supply chain and logistics productivity improvements | B5*B6*B7*50 | $7,068,750 | $7,068,750 | $7,068,750 | |
B9 | Other employees with workflows impacted by Dynamics 365 | Composite | 50 | 50 | 50 | |
B10 | Time saved per week from unified data access, automated workflows, and enhanced collaboration tools (hours) | Survey | 7.4 | 7.4 | 7.4 | |
B11 | Fully burdened average hourly salary of other employees | TEI standard | $63 | $63 | $63 | |
B12 | Subtotal: Other employee productivity improvements | B9*B10*B11*50 | $1,165,500 | $1,165,500 | $1,165,500 | |
B13 | Productivity recapture | TEI standard | 50% | 50% | 50% | |
B14 | Ramp-up period | TEI standard | 25% | 100% | 100% | |
Bt | Increased productivity | (B1*B2*B3)*B13*B14 | $1,301,156 | $5,204,625 | $5,204,625 | |
Risk adjustment | ↓5% | |||||
Btr | Increased productivity (risk-adjusted) | $1,236,098 | $4,944,394 | $4,944,394 | ||
Three-year total: $11,124,886 | Three-year present value: $8,924,798 |
Evidence and data. Study participants reported that deploying the cloud-based Dynamics 365 allowed their organizations to migrate away from legacy on-premises solutions, which reduced related expenditures and offloaded a variety of internal efforts. They said expenditures for purchasing, supporting, and maintaining on-premises solutions, servers, hardware, and third-party systems decreased and built-in disaster recovery and business continuity features diminished the need for expensive disaster recovery plans and infrastructure.
Participants also explained that their organizations reduced or eliminated expenses associated with maintaining physical data centers, including the costs of space, electricity, and cooling. Other reductions noted included costs associated with IoT, scanner, and mobile device functionalities, which respondents said are easily integrated with Dynamics 365 and reduces the need for expensive third-party solutions and custom integrations.
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. The value of this benefit can vary across organizations due to differences in:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $3.9 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|
C1 | Reduced IT support costs | Survey | $440,000 | $440,000 | $440,000 |
C2 | Reduced disaster recovery costs | Survey | $267,000 | $267,000 | $267,000 |
C3 | Reduced data center costs | Survey | $359,000 | $359,000 | $359,000 |
C4 | Reduced hardware costs | Survey | $313,000 | $313,000 | $313,000 |
C5 | Reduced maintenance efforts compared to legacy solutions | Survey | $283,000 | $283,000 | $283,000 |
C6 | Reduced third-party software costs | Survey | $505,000 | $505,000 | $505,000 |
C7 | Reduced IoT, scanner, and mobile device costs | Survey | $212,000 | $212,000 | $212,000 |
C8 | Ramp-up period | Composite | 25% | 100% | 100% |
Ct | Reduced infrastructure and IT operations spend from cloud migration | (C1+C2+C3+C4+C5+C6+C7 )*C8 | $594,750 | $2,379,000 | $2,379,000 |
Risk adjustment | ↓10% | ||||
Ctr | Reduced infrastructure and IT operations spend from cloud migration (risk-adjusted) | $535,275 | $2,141,100 | $2,141,100 | |
Three-year total: $4,817,475 | Three-year present value: $3,864,758 |
“We did a high-level review, and we’re looking at a half a million dollars plus in hardware and software on the server side, as well as extending our colocation contract for the footprint we had at our facility. When we bundled that all together and compared it to the licensing, there was a good amount of savings or cost avoidance we would incur by going to the cloud versus staying on-prem.”
Vice president, energy
Evidence and data. Study participants said the centralization of business operations enabled by Dynamics 365 allowed their organizations to simplify and realize additional cost savings beyond those previously discussed. They noted savings in overhead and from the unification of offices, regions, subsidiaries, or acquisitions and explained that consolidated operations and streamlined processes reduced the need for external consultants and professional services in areas such as legal representation, financial audits, and compliance reporting.
The interviewee continued: “There has been a reduction of onboarding costs [for mergers and acquisitions] — setting up financial resourcing and sales resourcing complements that ability to be able to scale up fairly quickly in that environment. Startup costs associated with that have been reduced … probably up to 25% because you have a lot of good benchmarks on identifying the initial startup steps, requirements, resources and all that good stuff.”
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. The value of this benefit can vary across organizations due to differences in:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.8 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|
D1 | Reduced overhead | Survey | $339,000 | $339,000 | $339,000 |
D2 | Reduced professional service costs | Survey | $398,000 | $398,000 | $398,000 |
D3 | Savings from unification of offices, regions, subsidiaries, or acquisitions | Survey | $360,000 | $360,000 | $360,000 |
D4 | Ramp-up period | Composite | 25% | 100% | 100% |
Dt | Cost savings from organizational simplification | (D1+D2+D3)*D4 | $274,250 | $1,097,000 | $1,097,000 |
Risk adjustment | ↓10% | ||||
Dtr | Cost savings from organizational simplification (risk-adjusted) | $246,825 | $987,300 | $987,300 | |
Three-year total: $2,221,425 | Three-year present value: $1,782,110 |
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Dynamics 365 and later realize additional uses and business opportunities, including:
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|---|
Etr | Subscription fees | $0 | $1,785,600 | $1,785,600 | $1,785,600 | $5,356,800 | $4,440,523 |
Ftr | Implementation and ongoing administration | $0 | $2,966,250 | $351,750 | $317,625 | $3,635,625 | $3,225,930 |
Total costs (risk-adjusted) | $0 | $4,751,850 | $2,137,350 | $2,103,225 | $8,992,425 | $7,666,453 | |
Evidence and data. Study participants said their organizations pay subscription fees to Microsoft on a per-user, per-month basis. They said the monthly cost of an employee using either the finance or supply chain application is $180 and the monthly cost of an employee using both is $210.
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. This cost can vary across organizations due to differences in:
Results. To account for these risks, Forrester adjusted this cost upward by 0%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $4.4 million.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
E1 | Employees who use finance or supply chain application | Composite | 640 | 640 | 640 | ||
E2 | Monthly subscription cost for single application users | Interviews | $180 | $180 | $180 | ||
E3 | Employees who use finance and supply chain application | Composite | 160 | 160 | 160 | ||
E4 | Monthly subscription cost for two application users | Interviews | $210 | $210 | $210 | ||
Et | Subscription fees | ((E1*E2)+(E3*E4 ))*12 | $0 | $1,785,600 | $1,785,600 | $1,785,600 | |
Risk adjustment | 0% | ||||||
Etr | Subscription fees (risk-adjusted) | $0 | $1,785,600 | $1,785,600 | $1,785,600 | ||
Three-year total: $5,356,800 | Three-year present value: $4,440,523 |
Evidence and data. Interviewees explained that internal IT and business personnel worked with a systems integrator or other professional service provider in the implementation of the Dynamics 365 solution and that they provided ongoing administration of the solution after deployment. The number of personnel varied depending on the complexity and structure of the organization and its operations. Some organizations utilized a phased approach starting with a limited number of business units or geographies before expanding to the rest of the organization. Internal efforts continued after Year 1 to provide refinement and optimization of the ERP solution.
Modeling and assumptions. Based on the interviews and survey, Forrester assumes the following about the composite organization:
Risks. This cost can vary across organizations due to differences in:
Results. To account for these risks, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $3.2 million.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
F1 | IT FTEs who assist with implementation and ongoing administration | Composite | 10 | 10 | 10 | ||
F2 | Fully burdened average annual salary of an IT FTE | TEI standard | $135,000 | $135,000 | $135,000 | ||
F3 | Portion of time IT FTEs spend on implementation and ongoing administration | Interviews | 50% | 20% | 20% | ||
F4 | Business workers who assist with implementation and ongoing administration | Composite | 50 | 10 | 5 | ||
F5 | Fully burdened average annual salary of a business worker | TEI standard | $130,000 | $130,000 | $130,000 | ||
F6 | Portion of time business workers spend on implementation and ongoing administration | Interviews | 10% | 5% | 5% | ||
F7 | Professional services | Interviews | $1,500,000 | ||||
Ft | Implementation and ongoing administration | (F1*F2*F3)+(F4* F5*F6)+F7 | $0 | $2,825,000 | $335,000 | $302,500 | |
Risk adjustment | ↑5% | ||||||
Ftr | Implementation and ongoing administration (risk-adjusted) | $0 | $2,966,250 | $351,750 | $317,625 | ||
Three-year total: $3,635,625 | Three-year present value: $3,225,930 |
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.
Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
---|---|---|---|---|---|---|
Total costs | $0 | ($4,751,850) | ($2,137,350) | ($2,103,225) | ($8,992,425) | ($7,666,453) |
Total benefits | $0 | $2,288,198 | $8,612,794 | $8,747,794 | $19,648,786 | $15,770,539 |
Net benefits | $0 | ($2,463,652) | $6,475,444 | $6,644,569 | $10,656,361 | $8,104,086 |
ROI | 106% | |||||
Payback | 17.0 months | |||||
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.
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows.
The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made unless other projects have higher NPVs.
A project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs.
The interest rate used in cash flow analysis to take into account the time value of money. Organizations typically use discount rates between 8% and 16%.
The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost.
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.
Role | Industry | Region | Employees | Revenue |
---|---|---|---|---|
Head of delivery and innovation | Agriculture | APAC | 1,400 | $1B |
Vice president | Energy | North America | 500 | $90M |
Vice president of IT IT director |
Manufacturing/construction | Global | 9,000 | $3B |
Senior director of IT | Healthcare/life sciences | Global | 50,000 | $9B |
Survey Demographics
Related Forrester Research
The Technology Architect’s Essential ERP Research, Forrester Research, Inc., September 11, 2023.
Change Management For Modern ERP, Forrester Research, Inc., November 30, 2023.
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.
Forrester provides independent and objective research-based consulting to help leaders deliver key transformation outcomes. Fueled by our customer-obsessed research, Forrester’s seasoned consultants partner with leaders to execute on their priorities using a unique engagement model that tailors to diverse needs and ensures lasting impact. For more information, visit forrester.com/consulting.
© Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies.
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