A Forrester Total Economic Impact™ Study Commissioned By Microsoft, July 2024
According to Forrester research, 89% of developers have spent at least some of their development time in the past 12 months on a low-code platform, and 79% use low-code, no-code, or digital process automation (DPA) solutions.1 These figures indicate not just high adoption, but also a willingness among developers to self-identify as “users.” Microsoft Power Apps aims to enable both professional and citizen developers with low-code development through a suite of apps, services, and connectors, as well as a data platform that provides a rapid development environment to build custom apps for a variety of business needs.
Power Apps is a suite of apps, services, connectors, as well as a data platform, that provides a rapid development environment to build custom apps to address a variety of business needs. Using Power Apps, organizations are enabled to quickly build custom business apps that connect to their data stored either in underlying data platforms or to connect to various online and on-premises data sources. Power Apps democratizes the experience of building business apps by enabling both professional and citizen developers to create feature-rich, custom business apps with less need to write code.
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 standalone Power Apps licenses.2 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Power Apps on their organizations.
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed five representatives of four companies with experience using Power Apps Premium. Additionally, 8 other companies were interviewed for their use of other components of the Power Platform which is inclusive of the combined benefits of using Power Apps with other tools in the platform. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that has 30,000 employees and $10 billion in annual revenue.
Interviewees said that prior to using Power Apps, their organizations addressed business problems either using high-code applications and manual processes with long development timelines and complexity or individuals would utilize shadow IT solutions as an unsanctioned way to solve for problems. This left them with lengthy application approval and implementation processes and the risk of shadow IT. However, prior attempts yielded limited success, leaving the organizations with lengthy application approval and implementation processes, long high-code development timelines and complexity, inefficient manual processes, and the risk of shadow IT. These limitations impacted end-user and professional developer efficiencies.
Interviewees said that after the investment in Power Apps, their organizations were enabled to address a wider range of use cases that would not have been possible previously. Key results from the investment include an increase in end-user efficiencies, professional developer efficiencies, improved compliance and governance, a reduction in shadow IT, and improved employee experience.
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
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 and financial analysis found that a composite organization experiences benefits of $46.1 million over three years versus costs of $15.1 million, adding up to a net present value (NPV) of $31.0 million and an ROI of 206%.
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 Power Apps.
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 Power Apps can have on an organization.
Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Power Apps.
Interviewed five representatives at four organizations using Power Apps to obtain data about costs, benefits, and risks.
Designed a composite organization based on characteristics of the interviewees’ 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.
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 Power Apps.
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:
Nikoletta Stergiou
Matt Dunham
Role | Industry | Region | Number of employees | Number of Power Apps Licenses | |
---|---|---|---|---|---|
Product owner | Energy | Global | 30,000 | 36,000 | |
IT leader | Energy | North America | 25,000 | N/A | |
Director | Professional services | Global | More than 100,000 | 150,000 | |
Product owner | Banking | Global | 45,000 | 46,000 | |
Interviewees said that prior to adopting Microsoft Power Apps, people at their organizations addressed business problems either through high-code applications, manual processes, or shadow IT solutions. The interviewees noted how their organizations struggled with common challenges, including:
The interviewees’ organizations searched for a solution that could:
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. The composite organization is a global organization with 30,000 employees and $10 billion in annual revenue.
Deployment characteristics. The organization adopts both Microsoft Power Apps and Power Automate (another Microsoft Power Platform tool) to address a wide range of use cases. The composite gradually trains 200 professional developers and 1,800 citizen developers to use Power Apps.
Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|
Atr | Power Apps end-user efficiencies | $6,507,600 | $13,015,200 | $19,522,800 | $39,045,600 | $31,340,132 |
Btr | Power Apps professional developer efficiencies | $5,923,125 | $5,923,125 | $5,923,125 | $17,769,375 | $14,729,935 |
Total benefits (risk-adjusted) | $12,430,725 | $18,938,325 | $25,445,925 | $56,814,975 | $46,070,067 | |
Evidence and data. Interviewees said their organizations leveraged the connection of Power Apps with Power Automate to address and streamline a wide range of use cases. The interviewees noted that Power Apps provided a platform to create custom apps tailored to specific business processes and that some use cases only require Power Automate entitlements in Power Apps, while others require a Power Automate standalone license. Interviewees said that using both Power Apps and Power Automate allowed their organizations to integrate data from different sources and trigger automated approval and notification processes, expanding the range of processes they could digitize. This led to time savings for non-technical “makers” who were able to easily build custom applications and productivity gains for the applications’ end users whose work was streamlined with the applications built.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The degree of time savings users will see from Power Apps will vary depending on:
Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $31.3 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
A1 | Total employees | Composite | 30,000 | 30,000 | 30,000 | |
A2 | Percentage of employees affected by high- or medium-impact solutions built with Power Apps | Composite | 22% | 44% | 66% | |
A3 | Total users affected by high- or medium-impact solutions | A1*A2 | 6,600 | 13,200 | 19,800 | |
A4 | Percentage of employees impacted by high-impact Power Apps solutions | A2*20% | 4.4% | 8.8% | 13.2% | |
A5 | Average time saved per end user impacted by high-impact Power Apps solutions (hours) | Interviews | 250 | 250 | 250 | |
A6 | Total end-user time saved with high-impact Power Apps solutions (hours) | A1*A4*A5 | 330,000 | 660,000 | 990,000 | |
A7 | Average fully burdened hourly rate for a business end user | TEI standard | $40 | $40 | $40 | |
A8 | Productivity recapture | TEI standard | 50% | 50% | 50% | |
A9 | Subtotal: End-user efficiencies from Power Apps for high-impact use cases | A6*A7*A8 | $6,600,000 | $13,200,000 | $19,800,000 | |
A10 | Percentage of employees impacted by medium-impact Power Apps solutions | A2-A4 | 17.6% | 35.2% | 52.8% | |
A11 | Average time saved per end user impacted by medium-impact Power Apps solutions (hours) | Interviews | 10 | 10 | 10 | |
A12 | Total end-user time saved with medium-impact Power Apps solutions (hours) | A1*A10*A11 | 52,800 | 105,600 | 158,400 | |
A13 | Subtotal: End-user efficiencies from Power Apps for medium-impact use cases | A7*A8*A12 | $1,056,000 | $2,112,000 | $3,168,000 | |
At | Power Apps end-user efficiencies | A9+A13 | $7,656,000 | $15,312,000 | $22,968,000 | |
Risk adjustment | ↓15% | |||||
Atr | Power Apps end-user efficiencies (risk-adjusted) | $6,507,600 | $13,015,200 | $19,522,800 | ||
Three-year total: $39,045,600 | Three-year present value: $31,340,132 |
Evidence and data. Interviewees reported that Power Apps’ simple user interface, low-code functionalities, and integration capabilities allowed their organizations to reduce the amount of effort required to build applications to address internal workflows. Professional developers gained the ability to leverage prebuilt templates, reusable components, and drag-and-drop functionality in conjunction with traditional code extensibility to quickly build and deploy robust applications. Interviewees said this accelerates their work and allows them to spend more attention on more complex and critical development tasks.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The professional developer time savings will vary 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 $14.7 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
B1 | Professional developers dedicated to building apps for internal workflows | Composite | 200 | 200 | 200 | |
B2 | Percent of professional developer time dedicated to building apps for internal workflows in the prior environment | Composite | 75% | 75% | 75% | |
B3 | Percent reduction in app development time with Power Apps | Interviews | 50% | 50% | 50% | |
B4 | Average fully burdened salary for a professional developer | Composite | $175,500 | $175,500 | $175,500 | |
B5 | Productivity recapture | TEI standard | 50% | 50% | 50% | |
Bt | Power Apps professional developer efficiencies | B1*B2*B3*B4*B5 | $6,581,250 | $6,581,250 | $6,581,250 | |
Risk adjustment | ↓10% | |||||
Btr | Power Apps professional developer efficiencies (risk-adjusted) | $5,923,125 | $5,923,125 | $5,923,125 | ||
Three-year total: $17,769,375 | Three-year present value: $14,729,935 |
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 Power Apps 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 |
---|---|---|---|---|---|---|---|
Ctr | Power Apps licensing costs | $0 | $4,536,000 | $4,536,000 | $4,536,000 | $13,608,000 | $11,280,361 |
Dtr | Power Apps implementation and training costs | $1,164,488 | $483,863 | $316,800 | $0 | $1,965,150 | $1,866,181 |
Etr | Power Apps ongoing management | $0 | $772,200 | $772,200 | $772,200 | $2,316,600 | $1,920,347 |
Total costs (risk-adjusted) | $1,164,488 | $5,792,063 | $5,625,000 | $5,308,200 | $17,889,750 | $15,066,889 | |
Evidence and data. Interviewees’ organizations incurred licensing costs for using Power Apps. Power Apps licensing includes various features and options depending on the specific licensing plan. These Power Apps standalone licenses generally provide access to the Power Apps platform and allow users to create, customize, and run canvas- and model-driven apps.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. Licensing costs will vary depending on:
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 $11.3 million.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
C1 | Power Apps licensing costs | Composite | $0 | $4,320,000 | $4,320,000 | $4,320,000 | |
Ct | Power Apps licensing costs | C1 | $0 | $4,320,000 | $4,320,000 | $4,320,000 | |
Risk adjustment | ↑5% | ||||||
Ctr | Power Apps licensing costs (risk-adjusted) | $0 | $4,536,000 | $4,536,000 | $4,536,000 | ||
Three-year total: $13,608,000 | Three-year present value: $11,280,361 |
Evidence and data. Interviewees reported that their organizations incurred internal labor costs for implementing Microsoft Power Apps and for training professional developers during the adoption period. They said using a Center of Excellence (CoE) helped with Power Apps adoption across their organizations and established governance policies, standards, and best practices for consistent and secure usage. They also said CoEs provide developers and users with training and enablement programs to educate employees and build a skilled workforce and that they support app creators through collaboration platforms, templates, and troubleshooting services. Together, this fostered cultures of continuous learning and drove wider adoption of Power Apps.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. Implementation and training costs will vary depending on:
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 $1.9 million.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
D1 | Total software engineers involved in Power Platform setup | Composite | 20 | 0 | 0 | 0 | |
D2 | Time spent for planning and setup (months) | Composite | 10 | 0 | 0 | 0 | |
D3 | Percent of time dedicated to Power Apps planning and setup | Composite | 30% | 0% | 0% | 0% | |
D4 | Average fully burdened monthly salary for a software engineer involved in Power Platform setup | Composite | $12,000 | ||||
D5 | Subtotal: Initial planning and implementation costs | D1*D2*D3*D4 | $720,000 | $0 | $0 | $0 | |
D6 | Initial Power Apps builders (professional developers) | Composite | 50 | 150 | 0 | 0 | |
D7 | Power Platform certification time (hours) | Interviews | 12 | 12 | 12 | 12 | |
D8 | Average fully burdened hourly rate for a professional developer involved in Power Platform setup | TEI standard | $84 | $84 | $84 | $84 | |
D9 | Subtotal: Initial professional developer training costs | D6*D7*D8 | $50,625 | $151,875 | $0 | $0 | |
D10 | Citizen developers trained to build Power Apps | Composite | 600 | 600 | 600 | 0 | |
D11 | Power Apps training | Composite | 12 | 12 | 12 | 12 | |
D12 | Average fully burdened hourly rate for a business end user | TEI standard | $40 | $40 | $40 | $40 | |
D13 | Subtotal: Citizen developer training costs | D10*D11*D12 | $288,000 | $288,000 | $288,000 | $0 | |
Dt | Power Apps implementation and training costs | D5+D9+D13 | $1,058,625 | $439,875 | $288,000 | $0 | |
Risk adjustment | ↑10% | ||||||
Dtr | Power Apps implementation and training costs (risk-adjusted) | $1,164,488 | $483,863 | $316,800 | $0 | ||
Three-year total: $1,965,150 | Three-year present value: $1,866,181 |
Evidence and data. Interviewees said their organizations incur ongoing management costs that include those for monitoring and maintaining the health and performance of the Power Apps environment, ensuring data security and compliance, managing user access and permissions, and implementing updates and enhancements to keep the applications up to date. Additionally, ongoing management involves providing user support, troubleshooting issues, and gathering feedback for continuous improvement.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The ongoing management costs will vary depending on the fully burdened salaries of professional developers involved in ongoing management of Power Apps.
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 $1.9 million.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
E1 | Professional developers involved in ongoing management of Power Apps | Composite | 0 | 4 | 4 | 4 | |
E2 | Fully burdened salary for a professional developer | TEI standard | $175,500 | $175,500 | $175,500 | ||
Et | Power Apps ongoing management | E1*E2 | $702,000 | $702,000 | $702,000 | ||
Risk adjustment | ↑10% | ||||||
Etr | Power Apps ongoing management (risk-adjusted) | $0 | $772,200 | $772,200 | $772,200 | ||
Three-year total: $2,316,600 | Three-year present value: $1,920,347 |
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 | ($1,164,488) | ($5,792,063) | ($5,625,000) | ($5,308,200) | ($17,889,750) | ($15,066,889) |
Total benefits | $0 | $12,430,725 | $18,938,325 | $25,445,925 | $56,814,975 | $46,070,067 |
Net benefits | ($1,164,488) | $6,638,663 | $13,313,325 | $20,137,725 | $38,925,225 | $31,003,178 |
ROI | 206% | |||||
Payback | <6 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 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.
1 Source: The Low-Code And Digital Process Automation Market, 2023 To 2028, Forrester Research Inc., January 10, 2024.
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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