The Total Economic Impact™ Of Alight Worklife
Cost Savings And Business Benefits Enabled By Alight Worklife
A Forrester Total Economic Impact™ Study Commissioned By Alight, September 2024
Today, companies face a significant challenge: Despite increased investment in benefits, employee engagement is decreasing.1 Organizations are caught in a bind, seeking to reduce costs while aiming to improve the employee experience (EX) and deliver meaningful benefits.2 Employees, too, are experiencing strain.3 They face increasing complexity of benefits choices and providers as well as a fragmented benefits ecosystem that is difficult to navigate. Escalating complexity and costs have left employers and employees in need of a solution. By connecting disparate systems, eliminating friction, and delivering personalized benefits at scale, Alight Worklife® can offer organizations a strong benefits advantage and help them optimize their benefits programs. The platform can help companies enhance employee well-being in every dimension, reduce costs, and drive superior business outcomes that lead to a thriving, healthy, and financially secure workforce.
Alight aims to provide a benefits advantage through the cloud-native Alight Worklife platform, powered by purpose-built AI trained on comprehensive US benefits data and supported by a team of benefits experts. This platform integrates with Alight’s health, wealth, well-being, navigation, and absence administration solutions, as well as over 600 benefits ecosystem programs and tools. Additionally, Alight offers professional services and customer support with Benefits Experts who serve as health professionals, medical allies, licensed advisors, and more.
Alight commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Alight Worklife.4 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Alight Worklife on their organizations.
Return on investment (ROI)
112%
Net present value (NPV)
$4.8M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed the representative of an organization who has experience using Alight Worklife. Forrester used this experience to project a three-year financial analysis.
The interviewee noted that prior to Alight, their organization manually administered its healthcare, 401(k), and pension programs internally. Furthermore, with over 30 benefits programs, the company and its employees faced significant complexity. This resulted in inefficiencies and opportunities to improve the employee experience by tying different benefit components together.
After the investment in Alight, the interviewee’s organization utilized Alight to administer its healthcare, 401(k), and pension programs. It then used Alight Worklife and other Alight solutions to tie the different components of its benefits ecosystem together, with support from Alight Benefits Experts. Key results from the investment include total rewards optimization, health-related cost savings, and productivity gains, all of which contributed to better business outcomes.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits include:
- Total rewards optimization with 4% greater benefits program utilization. The organization uses Alight Worklife to analyze its benefits programs and optimize program utilization by increasing employee participation. This results in more employees taking advantage of valuable benefits programs, leading to improved employee wellness and net positive business outcomes such as improved retention and productivity. Over three years, this benefit drives company value and is worth $4.2 million to the interviewee’s organization.
- Health cost savings of $2 million per year. With Alight Healthcare Navigation and Alight’s Health Pros, the organization reduces healthcare-related costs. Alight helps the company’s employees resolve claim issues, find in-network doctors, avoid high-cost procedures, and more, resulting in time and cost savings. Over three years, this benefit is worth $4.5 million to the interviewee’s organization.
- Improved benefits team productivity of 25%. The organization’s benefits team increases its productivity as it realizes time savings with Alight Worklife. Alight’s Benefits Experts allow the organization to spend less time supporting its employees with benefits. The benefits team reallocates this time savings to more valuable work supporting the employee experience. Over three years, this benefit is worth $322,000 to the interviewee’s organization.
Unquantified benefits. Benefits that are not quantified for this study include:
- Direct benefit, direct contribution, and healthcare administration. The organization benefits from other Alight solutions and realizes significant labor savings using Alight to administer its 401(k), pension, and healthcare programs. This efficiency gain allows the organization’s benefits and IT teams to better focus on enhancing EX and driving business outcomes.
- A better employee experience. The organization drives increased employee engagement and improved employee well-being with Alight Worklife, which results in better EX. A better employee experience yields improved employee retention, productivity, and other benefits for the company.
- A better customer experience. As the company improves EX, its employees help drive customer loyalty and improve the customer experience (CX). Its employees are well-resourced, supported, healthy, and motivated to do their best work. Improving CX then drives business growth.
Costs. Three-year, risk-adjusted PV costs for the interviewee’s organization include:
- Alight costs of $3.9 million. The company pays Alight for the cost of Alight Worklife and Alight’s other solutions, including Healthcare Navigation.
- Implementation, ongoing management, and training costs of $331,000. After investing in Alight Worklife, the company devotes labor for implementation, ongoing management, and training to realize the full potential of the investment.
The interview and financial analysis found that the representative’s organization experiences benefits of $9.0 million over three years versus costs of $4.2 million, adding up to a net present value (NPV) of $4.8 million and an ROI of 112%.
Key Statistics
-
Return on investment (ROI)
112%
-
Benefits PV
$9.0M
-
Net present value (NPV)
$4.8M
-
Payback
<12 months
Benefits (Three-Year)
Total rewards optimization Healthcare-related cost savings Improved benefits team productivityTEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Alight Worklife.
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 Alight Worklife can have on an organization.
-
Due Diligence
Interviewed Alight stakeholders and Forrester analysts to gather data relative to Alight Worklife.
-
Interview
Interviewed the representative of an organization using Alight Worklife to obtain data with respect to costs, benefits, and risks.
-
Financial Model Framework
Constructed a financial model representative of the interview using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewee.
-
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 Alight 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 Alight Worklife.
Alight 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.
Alight provided the customer name for the interview but did not participate in the interview.
Consulting Team:
Andrew Nadler
Drivers leading to the Alight Worklife investment
Interviewee’s Organization
Forrester interviewed the representative of an organization who has experience using Alight Worklife. Their organization has the following characteristics:
- Over $15 billion in revenue.
- More than 50,000 employees, including approximately 20,000 employees using Alight Worklife.
- Headquartered in the United States with global operations.
Key Challenges
Before it was an Alight customer, the interviewee’s organization manually administered its healthcare, 401(k), and pension programs. This necessitated a significant amount of labor. The interviewee explained: “We managed health and wealth in-house, and our pension was managed in-house. Open enrollment was done internally. It was very old-school.” Additionally, the increasing number of benefits offerings (over 30) resulted in expanding benefits complexity and costs, which introduced difficulties for both the organization and its employees.
The interviewee noted how the organization struggled with common challenges, including:
- Inefficient processes. The interviewee told Forrester about how their organization previously did significant manual work to manage benefits, and the organization was not efficient as it could have been. This resulted in an opportunity to boost productivity and streamline processes with Alight, which could yield cost savings. The executive director explained, “Our goal was to streamline, to become more efficient, and to take some of that manual work off of the team.”
- An employee experience with opportunities for improvement. In addition to reducing costs by increasing productivity, the interviewee described how they saw opportunities to improve EX with solutions like Alight’s. They explained, “Employee experience quickly became one of the stronger reasons once we realized how we could tie different pieces of the benefits puzzle together.”
Use Case Description
To overcome these challenges and achieve the business’s objectives, the interviewee’s organization uses the following Alight solutions:
- Benefits Administration
- Defined Contribution
- Defined Benefit
- Healthcare Navigation
- Alight Worklife Total Rewards
- Alight Worklife Optimize
- Spending Accounts
- Various point solutions
Initially, the interviewee’s organization began utilizing Alight to administer its pension, 401(k), and healthcare programs to save labor. It then expanded to use other Alight solutions, such as Healthcare Navigation with Alight Worklife, which helped increase efficiency, reduce costs, and improve EX. Over time, the interviewee’s organization has continued to grow its relationship with Alight, driving business outcomes.
For this use case, Forrester has modeled benefits and costs over three years.
Quantified benefit data
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Total rewards optimization | $872,640 | $1,745,280 | $2,617,920 | $5,235,840 | $4,202,571 |
| Btr | Healthcare-related cost savings | $1,800,000 | $1,800,000 | $1,800,000 | $5,400,000 | $4,476,334 |
| Ctr | Improved benefits team productivity | $129,375 | $129,375 | $129,375 | $388,125 | $321,736 |
| Total benefits (risk-adjusted) | $2,802,015 | $3,674,655 | $4,547,295 | $11,023,965 | $9,000,641 | |
Total Rewards Optimization
Evidence and data. The interviewee’s organization used Alight Worklife to analyze and optimize its benefits programs and increase employee participation within those programs. Alight Worklife and the Alight Benefits Experts helped drive employee engagement, leading to increased utilization. The interviewee’s organization was then able to support a healthy workforce, driving financial value.
- The interviewee’s organization had 30-plus benefits programs for its 20,000 North American employees and was progressively optimizing these programs over time. These programs included benefits for childcare, wellness tracking, counseling, and more.
- Since the organization began to optimize its programs with Alight, the interviewee observed increased program utilization. For tax-advantaged plans, they said, “Yes, I do see increased participation in those plans.” Overall, they noted: “Since utilizing Alight, we have been driving program utilization. We can see increased program utilization.”
- Forrester’s research shows that employees who are well, across the full range of employee wellness, perform better and that employees’ fitness for adapting to the future is directly tied to how well they are.5 Supporting employee wellness starts with traditional health and wellness programs and goes beyond. Investing in employee wellness can lead to benefits including reduced healthcare costs and absenteeism, increased engagement, reduced burnout, and better performance overall, all of which have quantifiable business impacts.6
- The interviewee echoed the sentiment of this research, specifically highlighting increased retention due to employees’ participation in the benefits program. They stated, “Our benefits are causing employees to stay.”
Modeling and assumptions. Based on the interview, Forrester assumes the following about the company:
- The company optimizes three new programs per year. This results in six total programs optimized in Year 2 and nine total programs optimized in Year 3.
- The company has 20,000 employees eligible for various programs that Alight Worklife optimizes. While the total eligible population may vary per program, Forrester assumes that all 20,000 employees are eligible.
- Alight Worklife increases the percentage of employees utilizing each program.
- Based on TEI research, the average program net value per user (less costs) is $404.
Risks. This benefit may vary based on:
- The total number of programs the organization has and the number it optimizes.
- The organization’s total eligible population of employees for the programs it is optimizing with Alight Worklife. This is based on the organization’s size, the location of its employees, their employment status, and other factors.
- The organization’s total target population of employees for the programs it is optimizing with Alight Worklife. This is based on the total eligible population of employees, the nature of the programs, and the resulting number of employees that could benefit from utilizing the programs.
- The organization’s current utilization rate and the corresponding utilization gap or opportunity to increase the number of participants.
- The organization’s change management capabilities and ability to work with Alight to successfully increase program utilization.
- The nature of the programs and the corresponding potential benefits and costs per employee.
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 $4.2 million.
Total Rewards Optimization
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| A1 | Number of programs optimized | Company | 3 | 6 | 9 |
| A2 | Number of employees | Company | 20,000 | 20,000 | 20,000 |
| A3 | Average increased utilization per program | Interview | 4% | 4% | 4% |
| A4 | Average program net value per user | Assumption | $404 | $404 | $404 |
| At | Total rewards optimization | A1*A2*A3*A4 | $969,600 | $1,939,200 | $2,908,800 |
| Risk adjustment | ↓10% | ||||
| Atr | Total rewards optimization (risk-adjusted) | $872,640 | $1,745,280 | $2,617,920 | |
| Three-year total: $5,235,840 | Three-year present value: $4,202,571 | ||||
Healthcare-Related Cost Savings
Evidence and data. In conjunction with driving value through increased benefits program utilization with Alight Worklife, the interviewee highlighted how their organization was able to reduce healthcare-related costs. The interviewee described how Alight Healthcare Navigation and Alight Health Pros helped resolve claim issues, find in-network doctors, schedule appointments, and more. As a result, the interviewee noted, “Alight assessed savings of $1 million to $2 million for our first year.” They explained: “The savings could be time the employee would have spent if they had to do it themselves. It could also be finding network doctors for them as opposed to going out-of-network. That’s savings to the plan. It could be avoiding high-cost medical procedures as well.” The company then reinvested this time and cost savings elsewhere to improve EX and drive growth.
Modeling and assumptions. Based on the interview, Forrester assumes the following about the organization:
- The organization utilizes Alight Healthcare Navigation and the Alight Health Pros, among other solutions and services, to save on healthcare-related costs.
Risks. This benefit may vary based on:
- The total number of employees and the wellness of those employees.
- The organization’s change management capabilities and ability to work with Alight to successfully reduce healthcare-related costs.
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 $4.5 million.
Healthcare-Related Cost Savings
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| B1 | Healthcare-related cost savings | Interview | $2,000,000 | $2,000,000 | $2,000,000 |
| Bt | Healthcare-related cost savings | B1 | $2,000,000 | $2,000,000 | $2,000,000 |
| Risk adjustment | ↓10% | ||||
| Btr | Healthcare-related cost savings (risk-adjusted) | $1,800,000 | $1,800,000 | $1,800,000 | |
| Three-year total: $5,400,000 | Three-year present value: $4,476,334 | ||||
Improved Benefits Team Productivity
Evidence and data. The interviewee highlighted how their organization’s benefits team leveraged Alight Worklife and the Alight Benefits Experts to realize time savings engaging with and supporting employees. The interviewee explained: “There has been improved productivity for our benefits team. All first-tier questions go to Alight before coming to our team. Only the escalated issues come to us now.” As a result, the company’s benefits team was able to focus on higher-priority work to support and improve EX, leading to better business outcomes.
Modeling and assumptions. Based on the interview, Forrester assumes the following about the company:
- The company has five benefits team members who realize productivity improvements.
- Those employees increase their productivity by 25%.
- The average fully burdened salary for a benefits employee is $115,000.
Risks. This benefit may vary based on:
- The size of the organization’s benefits team and the number of employees who benefit from productivity improvements.
- The organization’s change management capabilities and ability to work with Alight to realize productivity gains.
- The roles of the employees who benefit and their corresponding salaries.
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 $322,000.
Improved Benefits Team Productivity
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| C1 | Number of benefits employees | Company | 5 | 5 | 5 |
| C2 | Increased benefits team productivity | Interview | 25% | 25% | 25% |
| C3 | Average blended fully burdened salary for a benefits employee | TEI standard | $115,000 | $115,000 | $115,000 |
| Ct | Improved benefits team productivity | C1*C2*C3 | $143,750 | $143,750 | $143,750 |
| Risk adjustment | ↓10% | ||||
| Ctr | Improved benefits team productivity (risk-adjusted) | $129,375 | $129,375 | $129,375 | |
| Three-year total: $388,125 | Three-year present value: $321,736 | ||||
Unquantified Benefits
The interviewee mentioned the following additional benefits that the organization experienced but was not able to quantify.
- Direct benefit, direct contribution, and healthcare administration. While not quantified for this case study, the interviewee’s organization benefitted from having Alight administer its 401(k), pension, and healthcare programs. This yielded significant labor savings. The interviewee explained: “We went from all in-house to all outsource. Efficiency and streamlining alone were important benefits.” With this labor savings, the interviewee’s organization could then focus on enhancing EX and driving business outcomes.
- A better employee experience. Forrester research states that employee well-being plays a key role in amplifying EX.7 The interviewee told Forrester how Alight Worklife increased the utilization of their organization’s benefits programs, thereby offering the opportunity for improved employee wellness and contributing to a better employee experience. They elaborated, saying: “The Alight Benefits Experts are helping to resolve employees’ issues. The website and the app give employees easier access, which makes for a better experience.” Beyond that, the interviewee shared that their organization’s employees were satisfied with their experiences using Alight Worklife.
- A better customer experience. In addition to improving employee retention and productivity, Forrester’s research states that positive EX is a key contributor to CX improvements.8 In turn, investing in CX drives business growth.9
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Alight Worklife and later realize additional uses and business opportunities, including:
- Improved effectiveness with AI. The interviewee highlighted how Alight LumenAI™ could better help their organization expand its use of Alight Worklife and be even more effective. They explained how AI could capitalize on data and help guide their organization’s employees as they made decisions. They detailed: “We direct employees to Alight as the front door. We have 30-plus programs, and sometimes that’s overwhelming. We have been using Alight to help us present them in an organized fashion, so employees have a better sense of what is available to them and where to find the information. We are trying to target communications to employees, which is where AI comes in. We’re using it for more targeted messages at just the right time. That’s a new horizon that we’re approaching.”
- Greater scalability. The interviewee’s organization has been an Alight customer for several years. As a result, the interviewee described how Alight was able to scale with the growth of their organization, supporting its needs and progressively adding new functionality. They said: “Alight has made our organization faster, more agile, and more scalable. The fact that Alight can help us with initiatives we’ve been working on has been a big help.”
- Diversity, equity, and inclusion. The interviewee indicated that Alight Worklife could help their organization ensure equity for their employees by analyzing and addressing benefits program utilization gaps. They explained: “There is talk about ensuring that all employees have ample opportunity to save for their retirement and that our programs are equitable across all employee categories or all employee locations.”
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Quantified cost data
Total Costs
| Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Dtr | Alight costs | $0 | $1,575,000 | $1,575,000 | $1,575,000 | $4,725,000 | $3,916,792 |
| Etr | Implementation, ongoing management, and training costs | $165,000 | $66,550 | $66,550 | $66,550 | $364,650 | $330,500 |
| Total costs (risk-adjusted) | $165,000 | $1,641,550 | $1,641,550 | $1,641,550 | $5,089,650 | $4,247,292 | |
Alight Costs
Evidence and data. The interviewee’s organization paid Alight for use of the Alight Worklife platform, solutions, and services. Additionally, the company also paid Alight for direct benefit, direct contribution, and healthcare administration.
Pricing may vary. Contact Alight for additional details.
Modeling and assumptions. Based on the interview, Forrester assumes the following about the company:
- The company purchases Alight Worklife (with Optimize) and Healthcare Navigation.
- While the company purchases Defined Benefit, Defined Contribution, and Benefits Administration, the cost and resulting quantifiable benefits are not included for the purpose of this financial model.
Risks. This cost may vary based on:
- The size of the organization.
- The Alight solutions and services the organization chooses to purchase.
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 $3.9 million.
Alight Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| D1 | Alight costs | Company | $0 | $1,500,000 | $1,500,000 | $1,500,000 | |
| Dt | Alight costs | D1 | $0 | $1,500,000 | $1,500,000 | $1,500,000 | |
| Risk adjustment | ↑5% | ||||||
| Dtr | Alight costs (risk-adjusted) | $0 | $1,575,000 | $1,575,000 | $1,575,000 | ||
| Three-year total: $4,725,000 | Three-year present value: $3,916,792 | ||||||
Implementation, Ongoing Management, And Training Costs
Evidence and data. In addition to the cost of Alight Worklife, the interviewee’s organization also invested sufficient labor to adopt Alight Worklife, including implementation, ongoing management, and training. This allowed the organization to realize the benefits of the investment.
Modeling and assumptions. Based on the interview, Forrester assumes the following about the company:
- The company devotes sufficient labor to adopt Alight Worklife, manage the investment post-adoption, and train both its employees and Alight’s employees.
- For implementation, multiple benefits employees cumulatively devote the equivalent labor of 60% of one role for implementation. IT employees cumulatively devote the equivalent of 40% of one role for implementation.
- For ongoing management and training, multiple benefits employees cumulatively devote the equivalent labor of 20% of one role for training initially. This increases to 40% of one role for ongoing management and training in years 1 to 3. IT employees cumulatively devote the equivalent of 10% of one role for ongoing management and training in years 1 to 3.
- The average fully burdened salary for a benefits employee is $115,000.
- The average fully burdened salary for an IT employee is $145,000.
Risks. This cost may vary based on:
- The solutions that the organization purchases from Alight.
- The duration of the adoption process, the activities involved, and the corresponding number of labor hours required.
- The number of team members initially requiring training, and the amount of training required.
- The number of hours required to train Alight employees.
- The organization’s turnover rate and the corresponding number of hours required for ongoing training.
- The organization’s ongoing management activities and the corresponding number of hours for ongoing management.
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $331,000.
Implementation, Ongoing Management, And Training Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| E1 | Percentage of effort for a benefits employee for implementation | Company | 60% | 0% | 0% | 0% |
| E2 | Percentage of effort for an IT employee for implementation | Company | 40% | 0% | 0% | 0% |
| E3 | Fully burdened salary for a benefits employee | TEI standard | $115,000 | $115,000 | $115,000 | $115,000 |
| E4 | Fully burdened salary for an IT employee | TEI standard | $145,000 | $145,000 | $145,000 | $145,000 |
| E5 | Subtotal: Implementation costs | (E1*E2)+(E3*E4) | $127,000 | $0 | $0 | $0 |
| E6 | Percentage of effort for a benefits employee for ongoing management and training | Company | 20% | 40% | 40% | 40% |
| E7 | Percentage of effort for an IT employee for ongoing management and training | Company | 0% | 10% | 10% | 10% |
| E8 | Subtotal: Ongoing management and training costs | (E6*E3)+(E7*E4) | $23,000 | $60,500 | $60,500 | $60,500 |
| Et | Implementation, ongoing management, and training costs | E5+E8 | $150,000 | $60,500 | $60,500 | $60,500 |
| Risk adjustment | ↑10% | |||||
| Etr | Implementation, ongoing management, and training costs (risk-adjusted) | $165,000 | $66,550 | $66,550 | $66,550 | |
| Three-year total: $364,650 | Three-year present value: $330,500 | |||||
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 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 | ($165,000) | ($1,641,550) | ($1,641,550) | ($1,641,550) | ($5,089,650) | ($4,247,292) |
| Total benefits | $0 | $2,802,015 | $3,674,655 | $4,547,295 | $11,023,965 | $9,000,641 |
| Net benefits | ($165,000) | $1,160,465 | $2,033,105 | $2,905,745 | $5,934,315 | $4,753,349 |
| ROI | 112% | |||||
| Payback period (months) | <12 months | |||||
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.
-
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: Supplemental Material
Related Forrester Research
Lessons Learned On Employee Excellence And Actualization, Forrester Research, Inc., December 27, 2023.
Diversity, Equity, And Inclusion Video Case Study: Forrester Research, Forrester Research, Inc., September 19, 2023.
Real Diversity Activated: Seeing Challenges As Strengths, Forrester Research, Inc., July 19, 2023.
The People Leader’s Guide To Burnout, Forrester Research, Inc., January 11, 2022.
The ROI Of EX, Forrester Research, Inc., September 3, 2019.
Appendix C: Endnotes
1 Source: Tracking Changes in Benefit Costs, U.S. Bureau Of Labor Statistics, Spring 1999; Employer Costs For Employee Compensation, U.S. Bureau Of Labor Statistics, June 18, 2024; Predictions 2024: The Future Of Work, Forrester Research, Inc., October 26, 2023.
2 Source: US Technology Executives: The Priorities That Matter, 2024, Forrester Research, Inc., June 24, 2024.
3 Source: Take Employee Wellness Beyond Benefits, Forrester Research, Inc., June 18, 2021.
4 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.
5 Source: Take Employee Wellness Beyond Benefits, Forrester Research, Inc., June 18, 2021; The Customer-Obsessed Leader, 2023, Forrester Research, Inc., June 12, 2023.
6 Source: Take Employee Wellness Beyond Benefits, Forrester Research, Inc., June 18, 2021.
7 Source: Combine Well-Being, Belonging, And Cultural Alignment To Amplify EX, Forrester Research, Inc., September 18, 2023.
8 Source: Understand The Differences Between EX And CX, Forrester Research, Inc., August 2, 2021.
9 Source: How Customer Experience Drives Business Growth, 2023, Forrester Research, Inc., October 13, 2023.
PDF 