The Total Economic Impact™ Of The Microsoft Commercial Marketplace

Cost Savings And Business Benefits Enabled By The Microsoft Commercial Marketplace

A Forrester Total Economic ImpactTM Study Commissioned By Microsoft, December 2023

As the software landscape becomes more complex, organizations face a growing need to simplify software purchasing while maintaining strong security, corporate, and governance policies and balancing costs. With a variety of solutions available, organizations require a streamlined platform to efficiently purchase and manage their software assets. The Microsoft commercial marketplace provides a single hub for organizations to access a wide range of vetted solutions, simplify sourcing processes, and meet their software needs to successfully drive business outcomes.

The Microsoft commercial marketplace  is a centralized platform that offers a diverse catalog of software solutions for organizations to procure and implement. Through the Microsoft commercial marketplace, businesses can find, try, buy, and deploy various software offerings, ranging from productivity and infrastructure to AI tools and industry-specific applications.

Forrester research shows that cloud marketplaces play a crucial role in balancing speed and agility while minimizing the challenges of SaaS sprawl.1  Marketplaces provide businesses with a trusted platform to research and explore applications, which ultimately reduces costs and mitigates risk. Forrester research has found that cloud marketplace users have realized significant cost savings by leveraging bundled offerings or meeting minimum spend requirements.

Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) organizations may realize by using the Microsoft commercial marketplace.2  The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of adopting the Microsoft commercial marketplace for their organizations.

To better understand associated benefits, costs, and risks, Forrester interviewed 10 customers with experience using the Microsoft commercial marketplace. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single  composite organization  that is a global organization with 5,000 employees and annual revenue of $4 billion. The composite organization has a Microsoft Azure Consumption Commitment (MACC) agreement, which commits it to a certain level of Azure cloud usage in exchange for discounted pricing. While this impacts benefits around preserving discounted pricing, it does not impact other financial benefits described in the study.

Interviewees mentioned that prior to using the Microsoft commercial marketplace, their organizations struggled to efficiently identify and implement new software solutions. Their legacy procurement processes were slow, labor-intensive, and required several months of effort to vet, onboard, and integrate new applications. Some interviewees shared that their teams purchased tools from resellers and suppliers on an ad hoc basis, which sometimes resulted in departments purchasing redundant applications or risks to security and compliance.

After adopting the Microsoft commercial marketplace, the interviewees’ organizations saved money on their overall Azure spends, improved their procurement processes, reduced proof of concept fees, and enhanced vendor onboarding efficiencies. This led to cost savings, streamlined operations, and increased agility in software acquisition and integration.


Key Findings

Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:

  • Reduced employee effort required for each procurement engagement by 50%. The Microsoft commercial marketplace simplifies the composite organization’s procurement by streamlining the process of researching, vetting, and approving software purchases. By reducing the number of employees required to buy new solutions, the composite organization saves a risk-adjusted $2.0 million in internal labor costs over the course of the three-year analysis period.
  • Optimized Azure cloud budget due to marketplace purchases, recapturing up to 50% of at-risk spend. Purchasing software through the Microsoft commercial marketplace allows the composite organization to fulfill a portion of its minimum spend outlined in its MACC agreement. By optimizing its Azure cloud spend through the Microsoft commercial marketplace, the composite organization realizes savings of $2.1 million in preserved discounts over three years.
  • Improved time savings of 30% for the payments and finance purchasing team. With the Microsoft commercial marketplace, the composite organization significantly reduces the amount of employee time devoted to processing and consolidating invoices, correcting billing errors, and other manual finance processes. The productivity gains are worth a risk-adjusted $570,700 to the composite organization over three years.
  • Avoided proof-of-concept fees. The Microsoft commercial marketplace provides the composite organization with free access to trial versions of software solutions, enabling it to evaluate and test the solutions before committing to full purchases. Over the three-year analysis period, the composite organization saves a risk-adjusted $173,400 on proof-of-concept fees it would otherwise incur.
  • Reduced employee time required for onboarding new vendors by 75%. The Microsoft commercial marketplace simplifies the vendor onboarding process for the composite organization, lessening the amount of internal labor it requires to enroll each new vendor. This benefit is worth $50,900 to the composite organization over the three-year analysis period.

Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:

  • Faster deployment of new solutions. By procuring software through the Microsoft commercial marketplace, the composite organization significantly reduces the time required to implement new applications. This enables users to experience the benefits of these solutions at an accelerated pace compared with traditional procurement processes.
  • Improved security and compliance. The Microsoft commercial marketplace offers a wide selection of software solutions that have undergone rigorous security and compliance assessments, and this enables the composite organization to choose and deploy applications that align with its specific policy and regulatory requirements.
  • Ability to maintain flexible payment terms. The Microsoft commercial marketplace offers flexible payment terms that can accommodate both the composite organization and the supplier’s specific needs. This allows the composite organization to maintain its preferred payment terms and ensures a smooth and successful buying process.
  • Improved visibility into the software tech stack. Using the Microsoft commercial marketplace provides the composite organization with a single platform to access and manage its software in one place. This allows for better tracking and monitoring of software usage, which optimizes costs.

Costs. While there are no direct costs to the composite organization for adopting the Microsoft commercial marketplace, it does incur labor costs for implementation and management. Three-year, risk-adjusted PV costs for the composite organization include:

  • Implementation and training time. The composite organization assigns an internal team to handle change management and setup tasks during the implementation process. Additionally, its employees require a varying degree of training based on their roles. In total, the composite organization devotes $69,000 in labor costs to implementation and training over the three-year analysis period.
  • Ongoing management costs. Two of the composite organization’s employees are responsible for managing the organization’s usage of the Microsoft commercial marketplace. Over three years, the composite organization spends $656,500 on ongoing management costs.

The representative interviews and financial analysis found that a composite organization experiences benefits of $4.98 million over three years versus costs of $726,000, adding up to a net present value (NPV) of $4.26 million and an ROI of 587%. The organization’s payback period is less than six months.

Reduction in employee effort required to procure new software

50%

“The Microsoft commercial marketplace is like a lens that allows you to capture all the companies around the world that are working on that solution. It will dramatically speed up that ability to [adopt] new software.”

Machine learning engineer, global education firm

Key Statistics

  • icon icon

    Return on investment (ROI):

    587%
  • icon icon

    Benefits PV:

    $4.98M
  • icon icon

    Net present value (NPV):

    $4.26M
  • icon icon

    Payback:

    <6 months

Benefits (Three-Year)

Savings in procurement process Azure discount retained Time savings for payments and finance purchasing team Reduced proof of concept fees Vendor onboarding efficiencies

TEI Framework And Methodology

From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering adopting the Microsoft commercial marketplace.

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 the Microsoft commercial marketplace can have on an organization.

  1. Due Diligence

    Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to the Microsoft commercial marketplace.

  2. Interviews

    Interviewed 10 representatives at organizations using the Microsoft commercial marketplace to obtain data about costs, benefits, and risks.

  3. Composite Organization

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

  4. Financial Model Framework

    Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.

  5. Case Study

    Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see  Appendix A  for additional information on the TEI methodology.

Disclosures

Readers should be aware of the following:

This study is commissioned by Microsoft and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.

Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of adopting the Microsoft commercial marketplace.

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:

Sam Sexton

Matt Dunham

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