The Total Economic Impact™ Of Coursera For Business
Cost Savings And Business Benefits Enabled By Coursera For Business
A Forrester Total Economic Impact™ Study Commissioned By Coursera, October 2024
Hiring and retaining digital talent is no easy feat, with organizations facing high turnover rates and the continuous need for new specialized skills in areas like emerging tech, AI, and data and insights. Generative AI (genAI) is revolutionizing the way organizations operate, but many employees aren’t yet prepared to use AI effectively and appropriately. With only just over half of digital business strategy decision-makers reporting that their digital teams have the data science, product management, and customer-centric design competencies required for successful digital businesses, building digital competencies is a key requirement for organizations.1
Coursera’s platform improves overall employee experience (EX), helps organizations’ learning teams reduce time and effort, reduces the cost of external learning, and supports employees’ skills development, ultimately helping organizations to stay relevant in a continuously changing landscape.
Coursera commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Coursera for Business.2 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Coursera for Business on their organizations.
Return on investment (ROI)
327%
Net present value (NPV)
$4.85M
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To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed five representatives with experience using Coursera for Business For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is a global multinational organization with 55,000 employees and revenue of $20 billion per year.
Interviewees said that prior to using Coursera for Business, their organizations had a fragmented learning landscape and insufficient on-demand training and learning options for employees that lacked the necessary depth to develop skills. These limitations led to an increase in employee dissatisfaction due to insufficient training options or learning solutions.
After the investment in Coursera for Business, the interviewees have seen employee satisfaction increase due to the ease of access, high-quality courses, hands-on practice, globally recognized credentials, and certifiability of the skills they acquired. Costs for external certifications and courses decreased, and employees could more easily participate in reskilling and upskilling programs leading to professional growth and increased productivity. Key results from the investment include time savings by using prebuilt and customized Coursera academies, productivity gains, external certification cost reductions, and hiring cost reductions.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Time savings using prebuilt Coursera courses. The learning team of the composite organization saves nearly two months’ time in creating and curating course content for each academy or course collection leveraged from Coursera’s course catalog for a net present value of $4.2 million over three years. In parallel, learning is scalable to more employees due to easier access.
- Increased productivity. A high number of employees progress to advanced levels in specific skills, contributing to their professional growth and productivity in their roles as well as enabling them to learn when it best suits them through asynchronous digital learning. The composite organization’s productivity gains attributed to Coursera has a net present value of $918,000 over a three-year duration.
- Cost savings on external certifications. With the breadth and depth of courses from leading companies in their fields and top universities offered on the Coursera for Business platform, the composite organization substantially reduces spending on external certifications. Over a three-year period and with increasingly higher course completion rates, the organization saves $795,000.
- Cost savings in talent acquisition. Employees’ skills substantially advance the more courses they complete. The composite organization reskills a number of employees in the first year and increasingly more over the following two years, thereby reducing the cost of hiring new employees for a cost saving of $407,000 over a three-year period. While the reskilling effort cannot be solely attributed to Coursera, the easy access to learning and depth and quality of courses provided is a key contributor.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
- Building a learning culture. Interviewees appreciated the digital asynchronous learning option that Coursera offers to employees, which made learning easier and more accessible. Paired with the ability to gain externally recognized certificates from leading companies and top universities in their field, employees engaged more with nonmandatory training and courses as learning became a part of the organizational culture.
- Improved employee experience (EX). Employee satisfaction with learning offerings increased after the implementation of Coursera, especially for those interviewees’ organizations that lacked an in-depth learning platform. This also impacted overall EX as employees were able to upskill and earn globally recognized certificates. Interviewees shared that in internal employee surveys, there were many positive comments about Coursera, and it received high ratings for the offered courses and academies.
- Improved learning experience. While many other solutions offer introductory and surface-level learning, interviewees particularly appreciated the depth of the offered content and courses on Coursera. They shared that employees valued the verifiability of the courses, including the ability to earn certification as well as the fact that the courses come from top universities and leading organizations.
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
- License fees. Dependent largely on the number of employees Coursera is deployed to, the overall Coursera license fees for the composite organization are $1.4 million over three years.
- Implementation costs. Upfront costs of deploying Coursera include time dedicated to launching the platform and communicating the changes with employees, as well as some fees related to integrating the platform with existing learning management systems. For the composite organization, these upfront costs total slightly over $41,000.
- Ongoing management and communication costs. As Coursera is designed to be self-service, there is minimal ongoing management required. Costs are related to license management and periodic communication for new or existing relevant courses or academies. For the composite organization, ongoing management costs are minimal, totaling $21,000 over three years.
The representative interviews and financial analysis found that a composite organization experiences benefits of $6.33 million over three years versus costs of $1.48 million, adding up to a net present value (NPV) of $4.85 million and an ROI of 327%.
Key Statistics
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Return on investment (ROI)
327%
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Benefits PV
$6.33M
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Net present value (NPV)
$4.85M
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Payback
<6 months
Benefits (Three-Year)
Time savings using prebuilt Coursera courses Productivity gain Cost savings on certifications Cost savings in talent acquisition
TEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Coursera for Business.
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 Coursera for Business can have on an organization.
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Due Diligence
Interviewed Coursera stakeholders and Forrester analysts to gather data relative to Coursera for Business.
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Interviews
Interviewed five representatives at organizations using Coursera for Business to obtain data about costs, benefits, and risks.
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Composite Organization
Designed a composite organization based on characteristics of the interviewees’ 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.
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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 Coursera 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 Coursera for Business. 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 Coursera for Business based on the inputs provided and any assumptions made. Forrester does not endorse Coursera or its offerings. Although great care has been taken to ensure the accuracy and completeness of this model, Coursera 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 Coursera make no warranties of any kind.
Coursera 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.
Coursera provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Antonie Bassi
Lorenzo Introna
Drivers leading to the Coursera for Business investment
Interviews
| Role | Industry | Region | Revenue |
|---|---|---|---|
| Head of corporate learning and development | Conglomerate | Headquartered in India; multinational | $28 billion |
| Global head of capability building technology and operations | Financial services | Headquartered in Switzerland | $69.9 billion |
| Knowledge manager | Aerospace, defense, and security | Headquartered in Europe; multinational | €15.3 billion (US$16.5 billion) |
| Senior director of talent management and leadership development | Software development | Headquartered in US | $1.6 billion |
Key Challenges
Prior to adopting Coursera, interviewees faced several challenges with their training and development programs. Most had disjointed or insufficient learning solutions that led to employee dissatisfaction; employees either didn’t engage in learning and development or had to look for external courses and certifications. There was a general need for a scalable learning solution that would allow for digital and asynchronous learning.
The interviewees noted how their organizations struggled with common challenges, including:
- High costs for external certifications. Interviewees experienced high costs for employees doing external certifications, as internal learning solutions were either not readily available or lacked the depth necessary to improve their skills.
- High costs for creating courses. Interviewees mentioned that the learning team had to invest large amounts of time into creating ad hoc courses and academies for employees. Conceptualizing the course, sourcing content, and curating the course required a lot of time and effort from learning team members.
- Lack of a learning culture and skills advancements. Interviewees reported that their employees lacked a broad learning solution with the necessary depth and high-quality content to really level up their skills. This resulted in many employees not engaging in any nonmandatory training and upskilling.
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 five interviewees, and it is used to present the aggregate financial analysis in the next section. The composite organization has the following characteristics:
Description of composite. A global $20 billion revenue multinational organization with a workforce of approximately 55,000 employees.
Deployment characteristics. The composite organization begins using Coursera in Year 1, following a three-week implementation and launch period. It deployed licenses across a three-year period, increasing the number of licenses each year.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Time savings using prebuilt Coursera courses | $1,693,440 | $1,693,440 | $1,693,440 | $5,080,320 | $4,211,335 |
| Btr | Productivity gain | $282,200 | $366,860 | $476,918 | $1,125,978 | $918,051 |
| Ctr | Cost savings on certifications | $191,250 | $310,781 | $484,819 | $986,850 | $794,959 |
| Dtr | Cost savings in talent acquisition | $142,800 | $164,220 | $188,853 | $495,873 | $407,425 |
| Total benefits (risk-adjusted) | $2,309,690 | $2,535,301 | $2,844,030 | $7,689,021 | $6,331,770 | |
Time Savings Using Prebuilt Coursera Courses
Evidence and data. A key pain point interviewees mentioned was that creating collections of courses or academies was a very time-consuming effort for the learning team. The process spanned from conceptualization through content sourcing and curation up until promotion and communication efforts. Coursera’s prepackaged content made this process much smoother for the learning team and proved to be a substantial time-saver. One such academy is the GenAI Academy, which multiple interviewees mentioned as a key offering that many employees had a high interest in. One interviewee mentioned that their organization had recently set up a new AI function and that they were using Coursera offerings around AI extensively.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- Learning team employees previously spent around 280 hours over several weeks creating a 16-hour course or academy outside of Coursera, which accounts for conceptualization of the course, time to source content, building the course, and promotion and communication.
- The composite organization uses 120 prebuilt academies or courses from Coursera.
- The fully burdened hourly rate for learning team employees is $63.
Risks. The potential risks associated with this benefit include the following:
- Variation in salary ranges of an employee.
- The learning team still needs to invest time in the communication and promotion of courses and academies.
- The demand for prebuilt academies varies by organization size or scope.
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 $4.2 million.
Time Savings Using Prebuilt Coursera Courses
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| A1 | Number of hours needed to create one course (16-hour course) | Interviews | 280 | 280 | 280 |
| A2 | Fully burdened hourly rate for a learning team employee | TEI standard | $63 | $63 | $63 |
| A3 | Number of courses | Interviews | 120 | 120 | 120 |
| At | Time savings using prebuilt Coursera courses | A1*A2*A3 | $2,116,800 | $2,116,800 | $2,116,800 |
| Risk adjustment | ↓20% | ||||
| Atr | Time savings using prebuilt Coursera courses (risk-adjusted) | $1,693,440 | $1,693,440 | $1,693,440 | |
| Three-year total: $5,080,320 | Three-year present value: $4,211,335 | ||||
Productivity Gain
Evidence and data. Productivity gain can be a challenging metric to capture; however, interviewees indicated that the use of Coursera had a positive impact on employees’ productivity. The improvement in productivity was mainly on two levels:
- Interviewees tracked the skill progression of employees who completed courses. One interviewee reported a 168% growth in the number of learners at an advanced level in one or more skills. The progression to more advanced levels in a specific skill contributed to their professional growth and increased productivity in their roles.
- Given that Coursera learning solutions are digital and asynchronous, interviewees reported how employees were able to progress on their learning when was most convenient for them, leading to less absenteeism during working hours.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- The number of course completions is 850 in Year 1 and increases by 30% each year as the composite organization gains access to more licenses and learning becomes more common among employees.
- Employees see productivity gains of 5% after completing their course on Coursera.
Risks. The potential risks associated with this benefit include the following:
- Variation in salary ranges of employees.
- Other factors not associated with Coursera that contribute to an increase in productivity.
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 $918,000.
Productivity Gain
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| B1 | Number of course completions | Interviews | 850 | 1,105 | 1,437 |
| B2 | Productivity gains | Assumption | 5% | 5% | 5% |
| B3 | Fully burdened annual salary for an employee | TEI standard | $83,000 | $83,000 | $83,000 |
| B4 | Attribution to Coursera | Assumption | 10% | 10% | 10% |
| Bt | Productivity gain | B1*B2*B3*B4 | $352,750 | $458,575 | $596,355 |
| Risk adjustment | ↓20% | ||||
| Btr | Productivity gain (risk-adjusted) | $282,200 | $366,860 | $477,084 | |
| Three-year total: $1,126,144 | Three-year present value: $918,176 | ||||
Cost Savings On Certifications
Evidence and data. Interviewees reported that since the implementation of Coursera, costs for external certifications decreased substantially. One interviewee mentioned that since implementing Coursera, 40% of the annual learning budget available for employees was unused as most learning happened on the Coursera platform. Interviewees mentioned the wide breadth of courses and topics offered on Coursera and the fact that employees received certificates at course completion as reasons that the need for external certifications and courses decreased.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- Interviewees reported the average cost of an external certification to be $1,250.
- In Year 1, the number of course completions is 850, increasing by 30% each year as the composite organization gains access to more licenses and learning becomes more common among employees.
- Coursera creates easy access to learning, and therefore Forrester assumes that only 20% of all completed courses on Coursera would have been completed externally without the Coursera platform. The percentage increases by 5% in Years 2 and 3 as learning becomes more standard for employees.
Risks. The number of certifications completed without or before Coursera vary by organization. The risk adjustment accounts for this and the following additional risks:
- Cost per certification varies by institution and type of course.
- The number of course completions using Coursera varies based on the size of the organization and the learning awareness of employees.
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 $795,000.
Cost Savings On Certifications
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| C1 | Average cost per certification | Interviews | $1,250 | $1,250 | $1,250 |
| C2 | Course completions | Interviews | 850 | 1,105 | 1,437 |
| C3 | Percentage of courses that would have been completed without Coursera | Assumption | 20% | 25% | 30% |
| Ct | Cost savings on certifications | C1*C2*C3 | $212,500 | $345,313 | $538,875 |
| Risk adjustment | ↓10% | ||||
| Ctr | Cost savings on certifications (risk-adjusted) | $191,250 | $310,781 | $484,987 | |
| Three-year total: $987,018 | Three-year present value: $795,086 | ||||
Cost Savings In Talent Acquisition
Evidence and data. Some interviewees reported that several employees were able to reskill and either move into a more senior role and advance their career or move to another part of the business due to courses they had taken on the Coursera platform. One interviewee highlighted how they strategically gave more junior employees, who relied on Coursera to upskill and grow, access to Coursera; this in turn had an impact on retention as these employees tended to stay with the organization for many years. Another interviewee said that their organization gave Coursera access to interns that they were then able to hire as employees.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- The average cost of hiring a new employee is $68,000.
- The composite organization is able to reskill 30 employees in Year 1, 10% of which is attributed to Coursera.
Risks. Reskilling and upskilling is a complex process; learning is just one aspect. Other potential risks associated with this benefit include the following:
- The number of reskilled employees varies based on the size of the organization and the number of licenses.
- Additional factors contribute to reskilling and upskilling.
Results. To account for these risks, Forrester adjusted this benefit downward by 30%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $407,000.
Cost Savings In Talent Acquisition
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| D1 | Cost of hiring a new employee | TEI standard | $68,000 | $68,000 | $68,000 |
| D2 | Number of employees reskilled through Coursera | Interviews | 30 | 35 | 40 |
| D3 | Reskilling attributed to Coursera | Assumption | 10% | 10% | 10% |
| Dt | Cost savings in talent acquisition | D1*D2*D3 | $204,000 | $238,000 | $272,000 |
| Risk adjustment | ↓30% | ||||
| Dtr | Cost savings in talent acquisition (risk-adjusted) | $142,800 | $166,600 | $190,400 | |
| Three-year total: $499,800 | Three-year present value: $410,554 | ||||
Unquantified Benefits
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
- Building a learning culture. Before implementing Coursera, one interviewee mentioned that only 13% of employees were engaging in any kind of nonmandatory training. After three years with Coursera and after rolling out other initiatives around increasing learning awareness and employee upskilling, the interviewee reported that 97% of employees engaged in nonmandatory training. Coursera was a key part of their new learning strategy and program, and while this increase cannot solely be attributed to Coursera, it showcases how Coursera contributed to building a learning culture within this interviewee’s organization and providing frictionless access to training.
- Improved EX. Interviewees mentioned that employee engagement and satisfaction with learning offerings increased since implementing Coursera. Employees were satisfied with the training offered and appreciated the easy access to learning. Interviewees said that employees always rated the content of the courses highly and that they saw an improved overall learning experience.
- Improved learning experience. Some interviewees mentioned using additional learning solutions within their organization but that they promoted Coursera as their deep learning and specialized training solution. They particularly appreciated the high-quality courses provided by leading learning institutions and the fact that employees could gain externally recognized certificates.
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Coursera for Business and later realize additional uses and business opportunities, including:
- Course Builder. One interviewee mentioned that their organization was already using the Course Builder functionality to more easily curate its own ad hoc courses. They particularly appreciated the ability to customize courses using a mix of their organization’s internal content and content available on Coursera, pulling from different courses as needed. Many other interviewees mentioned that they were planning to start using the Course Builder functionality soon.
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 | License fees (yearly) | $0 | $495,000 | $550,000 | $687,500 | $1,732,500 | $1,421,074 |
| Ftr | Implementation costs — platform launch and communications | $41,316 | $0 | $0 | $0 | $41,316 | $41,316 |
| Gtr | Ongoing management and communications effort | $0 | $8,316 | $8,316 | $8,316 | $24,948 | $20,681 |
| Total costs (risk-adjusted) | $41,316 | $503,316 | $558,316 | $695,816 | $1,798,764 | $1,483,071 | |
License Fees (yearly)
Evidence and data. Interviewees noted the primary cost component for Coursera was license fees for users to access courses. The interviewees’ organizations had different strategies for deploying Coursera across the organization, but the most common was to deploy it within certain business units or functions.
Modeling and assumptions. For the composite organization, Forrester assumes Coursera licenses for a total value of over $1.5 million are deployed over the span of three years.
Risks. License fees will vary based on the volume of licenses, as well as deployment strategies across the organization.
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 $1.4 million.
License Fees (yearly)
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| E1 | Average annual license fees | Interviews | 0 | $450,000 | $500,000 | $625,000 | |
| Et | License fees (yearly) | E1 | $0 | $450,000 | $500,000 | $625,000 | |
| Risk adjustment | ↑10% | ||||||
| Etr | License fees (yearly) (risk-adjusted) | $0 | $495,000 | $550,000 | $687,500 | ||
| Three-year total: $1,732,500 | Three-year present value: $1,421,074 | ||||||
Implementation Costs — Platform Launch And Communications
Evidence and data. As interviewees’ organizations transitioned from other learning solutions to Coursera for Business, they required some change management efforts for this migration and needed to introduce employees to the new learning platform.
Interviewees described the transition as smooth and straightforward. Each interviewee said their organization integrated Coursera into its learning management system (LMS) or learning experience platform (LXP) and therefore incurred a one-time fee for integrating Coursera with their existing LMS/LXP.
Modeling and assumptions. For the composite organization, Forrester assumes the following:
- It takes four HR managers about 30 hours of their time over three weeks to manage the implementation and communications plan to employees.
- There is an integration fee of $30,000.
Risks. Implementation costs may vary based on the scale of deployment, as well as the technical complexity of integrating Coursera with other learning systems that are already in place within the organization..
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 $41,000.
Implementation Costs — Platform Launch And Communications
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| F1 | Number of HR managers | Interviews | 4 | |||
| F2 | Fully burdened hourly rate for an HR manager | TEI standard | $63 | |||
| F3 | Hours spent on implementation | Interviews | 30 | |||
| F4 | Integration costs into LMS/LXP | Interviews | $30,000 | |||
| Ft | Implementation costs — platform launch and communications | F1*F2*F3+F4 | $37,560 | $0 | $0 | $0 |
| Risk adjustment | ↑10% | |||||
| Ftr | Implementation costs — platform launch and communications (risk-adjusted) | $45,447 | $0 | $0 | $0 | |
| Three-year total: $41,316 | Three-year present value: $41,316 | |||||
Ongoing Management And Communications Effort
Evidence and data. To ensure that employees have ongoing support and guidance for using Coursera, most interviewees assigned a learning team employee for ongoing management and communications related to Coursera. As the platform was easily accessible from their organizations’ LMS/LXP and very user-friendly, interviews shared that minimal time and effort was required to actively guide employees on how to access courses within Coursera.
Modeling and assumptions. For the composite organization, Forrester assumes that one FTE spends about 10 hours a month on administrative management (e.g., managing licenses) and employee communications (e.g., launching new academies).
Risks. Although ongoing management needs are fairly minimal, time and effort may vary depending on the size of the organization or adjustments required to the Coursera deployment over time (e.g., expanding use across different business groups).
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 $21,000.
Ongoing Management And Communications Effort
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| G1 | Number of HR managers | Interviews | 1 | 1 | 1 | |
| G2 | Monthly hours spend on ongoing management and communication | Interviews | 10 | 10 | 10 | |
| G3 | Fully burdened hourly rate for an HR manager | TEI standard | $63 | $63 | $63 | |
| Gt | Ongoing management and communications effort | G1*(G2*12)*G3 | $7,560 | $7,560 | $7,560 | |
| Risk adjustment | ↑10% | |||||
| Gtr | Ongoing management and communications effort (risk-adjusted) | $0 | $8,316 | $8,316 | $8,316 | |
| Three-year total: $24,948 | Three-year present value: $20,681 | |||||
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 | ($41,316) | ($503,316) | ($558,316) | ($695,816) | ($1,798,764) | ($1,483,071) |
| Total benefits | $0 | $2,309,690 | $2,537,681 | $2,845,912 | $7,693,283 | $6,335,151 |
| Net benefits | ($41,316) | $1,806,374 | $1,979,365 | $2,150,096 | $5,894,519 | $4,852,080 |
| ROI | 327% | |||||
| 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
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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.
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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.
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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
The State Of Digital Skills In 2023, Forrester Research, Inc., November 13, 2023.
Appendix C: Endnotes
1 Source: The State Of Digital Skills In 2023, Forrester Research, Inc., November 13, 2023.
2 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.
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