The Total Economic Impact™ Of Microsoft Windows IoT
Cost Savings And Business Benefits Enabled By Windows IoT
A Forrester Total Economic Impact™ Study Commissioned By Microsoft, April 2024
Microsoft Windows IoT enables developers to accelerate and facilitate the development of their organizations’ IoT products while their end customers benefit from long support life, simplified manageability across the cloud and edge, and Microsoft’s security expertise.
Microsoft Windows IoT is an operating system for use in embedded systems. Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by developing on Microsoft Windows IoT.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Windows IoT on their organizations.
Return on investment (ROI)
125%
Net present value (NPV)
$14.66M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed six representatives with experience using Windows IoT. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is a financial services organization with $4 billion revenue annually.
Interviewees from organizations with experience developing for embedded systems on both Windows IoT and other open-source solutions detailed several challenges working with the latter. Inconsistent support lifetimes, hardware compatibility issues, and developer skill shortages frequently hindered time to market for an organization’s IoT devices. To account for these, organizations often needed to invest significantly in DevOps, specialized developer hires, and external support, which drove additional costs.
Interviewees highlighted the benefits of developing for embedded systems in a Microsoft environment with Windows IoT. They said developer familiarity, long support lifetimes (up to 10 years on Windows IoT Enterprise LTSC), and consistent driver and hardware compatibility allows their organizations to accelerate time to market for their IoT products while reducing development costs. They also cited security posture and ease of manageability inherent to a Microsoft platform as benefits for both original equipment manufacturer (OEM) organizations and their end customers, many of which operate in very security-sensitive industries.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Avoided developer effort on image development of $1.4 million. With Windows IoT, the developer resources at the composite organization who are tasked with developing software and images that are shipped embedded into the organization’s products avoid 75% of the effort required to develop an image. With Microsoft Windows IoT, the composite organization’s developers are in the best position to deliver images and software as consistently as possible, improving overall time to market while reducing the need for significant redevelopment effort in subsequent years.
- Accelerated profit from faster time to market for IoT products. By enabling developers with a predictably supported IoT platform, the composite organization’s developers are in the best position to bring software (and, therefore, the organization’s products) to market as fast as possible. This increased speed to market for the composite’s products results in accelerated revenue and profits of nearly $10 million annually for the organization.
- Avoided developer reskilling. Microsoft Windows IoT provides the composite organization’s developer resources with a consistent and supported development environment, which reduces the need to constantly reskill on (or hire skill for) different operating systems, versions, or functionality that is not native to these platforms. This benefit is worth more than $750,000 annually to the composite organization.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
- Security posture. The consistency in which Microsoft can deliver key security updates is a benefit for the composite’s end customers, many of which operate in security-sensitive industries. Ease of manageability also benefits the composite’s end customers because they can deploy security updates remotely during off-hours over the long duration of support (up to 10 years).
- Reduced reliance on internal or external support for end customers. Due to longer support durations on Windows IoT (up to 10 years on Windows 10 IoT LTSC), the composite’s customers are less likely to require support either internally or from a third party to update software, upgrade or reconfigure hardware, or reimage their devices over the course of their deployments. This saves end customers on costs related to third-party or internal support hours.
- High end-customer uptime. The IoT devices of the composite organization’s end customers have very high availability resulting from a reduced need to deploy non-security updates as well as the ability to maintain hardware compatibility with software over a longer period of time on Windows IoT.
- Support from the Microsoft team. The composite organization benefits from near-dedicated support from the Microsoft team to address any support needs over the course of its Windows IoT deployments.
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
- License fees to Microsoft. The composite organization pays a per-device license fee to Microsoft for Windows IoT. In total, it pays Microsoft $4.73 million annually for all of its devices.
The representative interviews and financial analysis found that a composite organization experiences benefits of $26.41 million over three years versus costs of $11.75 million, adding up to a net present value (NPV) of $14.66 million and an ROI of 125%.
Key Statistics
-
Return on investment (ROI)
125%
-
Benefits PV
$26.41M
-
Net present value (NPV)
$14.66M
Benefits (Three-Year)
Avoided development effort Accelerated profit from faster time to market Avoided developer re-skillingTEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment Microsoft Windows IoT.
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 Windows IoT can have on an organization’s developer resources and IoT offerings.
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Due Diligence
Interviewed Microsoft stakeholders and Forrester analysts to gather data relative to Windows IoT.
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Interviews
Interviewed six representatives at organizations using Windows IoT 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 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 Microsoft Windows IoT.
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:
Richard Cavallaro
Zahra Azzaoui
Drivers leading to development on the Windows IoT Platform
Interviews
| Role | Industry | Region (HQ) | Revenue |
|---|---|---|---|
| Supplier manager | Electronics | Global (North America) | $30 billion+ |
| Software product manager | Financial services | Global (North America) | $4 billion+ |
| Head of common software infrastructure | Healthcare | Global (Europe) | $20 billion+ |
| VP, OEM business unit | IT services | Global (North America) | $35 million+ |
| General manager | Technology | Global (APJ) | $70 billion+ |
| Software licensing specialist | Technology manufacturing | Global (APJ) | $2 billion+ |
Key Challenges
The interviewees noted how their organizations dealt with common considerations related to ongoing IoT development, including:
- Constant development and redevelopment for IoT operating systems. Interviewees told Forrester that their organizations’ development efforts for the current IoT operating system or platform of choice was always ongoing because the IoT operating system updates, version changes, or support life mandated a pipeline of ongoing redevelopment in order to maintain functionality, security, and uptime for IoT end customers. Interviewees noted that in the past, significant development work was lost due to an operating system moving out of support, which posed challenges for the end customers deploying security updates and maintaining hardware compatibility without significant redevelopment.
- Developer expertise. Developing IoT applications and products requires the developer personnel working on these initiatives to have some familiarity and/or proficiency working with the operating systems for which they are developing in order to optimize project timelines and, ultimately, time to market for these products. Interviewees from organizations developing products within several ecosystems noted the requirement to retain and/or hire developers with expertise across several IoT operating systems or platforms.
- Time to market. Interviewees noted that the operating system or platform of choice for their organization’s IoT products must support a fast time to market, especially given the frequency of development iterations required across various IoT operating systems.
- Downstream impact to the end customers. Ultimately, each interviewee said the downstream implications that the OS choice had to end customers was a concern. Several of their organizations dealt in products that have customers who require very high availability while also maintaining security postures and minimizing hardware and software updates once deployed. The software product manager at a financial services organization noted: “Making our customers change software version and OS is bad enough, but what’s even worse is when we need to tell them they also need to replace the chipset or other hardware. That costs them a lot of money. That’s where some pain comes from.”
Solution Requirements
The interviewees’ organizations searched for a solution that:
- Can be supported for as long as possible while minimizing the need for ongoing developer support.
- Maintains a superior security posture while supporting regular updates.
- Is compatible with a variety of hardware configurations, devices, management tools, and applications.
- Has custom image sizes with removable packages.
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 six 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 financial services organization that generates $4 billion in annual revenue and has 10,000 employees. It is an OEM that creates a variety of devices used in banking (e.g., a line of ATM offerings), and this represents nearly $500 million in annual revenue.
The composite organization’s developer resources are under consistent demand to develop software that is embedded and shipped in its ATM offerings in order to stay ahead of changes to images that may be required due to changes with the OS version. Historically, new images were in constant development because OS version updates and/or changes mandated a constant pipeline of development to maintain compatibility. As a result, developers were tasked with reskilling frequently as operating systems or device compatibility was consistently changing with each image.
Deployment characteristics. The composite adopts Windows IoT to reduce its requirement for DevOps and to provide a product to its customers that requires minimal support (beyond security updates) once deployed. Historically, up to 12 full-time developer resources were tasked with software/image development.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Avoided development effort | $567,000 | $567,000 | $567,000 | $1,701,000 | $1,410,045 |
| Btr | Accelerated profit from faster time to market | $9,750,000 | $9,750,000 | $9,750,000 | $29,250,000 | $24,246,807 |
| Ctr | Avoided developer re-skilling | $302,400 | $302,400 | $302,400 | $907,200 | $752,024 |
| Total benefits (risk-adjusted) | $10,619,400 | $10,619,400 | $10,619,400 | $31,858,200 | $26,408,876 | |
Avoided Development Effort
Evidence and data. Interviewees said developer resources are tasked with developing software and images that are shipped embedded into the organization’s products. Inherent to this responsibility is the ability to anticipate changes that would impact this workflow (e.g., changes to operating systems or compatibility between the OS and the hardware/devices used to make the product). Some interviewees noted that some open-source operating systems pose a challenge in this respect because the level of long-term support can be inconsistent while device compatibility and security updates may lag behind. Interviewees noted that with Microsoft Windows IoT, developers are in the best position to deliver images and software as consistently as possible, which improves overall time to market while reducing the need for significant redevelopment effort in subsequent years.
- The software product manager in financial services noted that their organization’s developers moved from operating system to operating system on a fairly regular basis as the OS would go out of support or compatibility with their devices. Moving to Windows 10 IoT LTSC significantly reduced the burden on developer resources to continuously redevelop their images for their devices, which saved months of what would be required development time per image. The interviewee detailed their experience developing an image on a non-Microsoft IoT OS: “The support life was so short that by the time we’d create an image, it was out of support. Then, security updates got so big that we couldn’t even deploy them.”
- The same interviewee further detailed the difficulties of working on non-Microsoft images for their organization’s devices related to OS complexity and shorter support timeframes: “We have to spend quite a lot of time developing our image that’s suitable for a banking environment since there’s a big security risk in this space. That normally takes us about 12 months with a Windows IoT operating system. When we worked with [another OS,] we were pretty much reaching the end of the [24- to 36-month] support date by the time we were finished.”
- Interviewees also noted that native driver support is a time saver for developers when working with Windows IoT on their organization’s products. The general manager at a technology organization explained: “One of the biggest differentiators for Windows IoT is driver support and firmware. If you really break it down, with Windows IoT, you have a lot of native functionality that we’d need to build on an open-source solution.”
- Several interviewees explained that their organizations are running applications that were developed on prior versions of Windows on a Windows IoT device, saving on re-development over the years for these applications. The financial services stated that some of their applications have been carried forward over four versions of Windows, now running on Windows 10 IoT Enterprise LTSC.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- The composite organization develops an average of one image annually for its core product.
- Six of the organization’s 12 full-time developer resources work on each image annually.
- The composite avoids 75% of this development effort when normalized over the three-year analysis period.
- The average annual salary for a developer resource is $140,000.
Risks. This benefit will vary among organizations based on:
- The number of images or applications that require development.
- The amount of development time avoided based on the organization’s average release frequency for applications.
- The skill and capacity of the organization’s developer resources.
- The complexity and frequency of the organization’s required IoT application development.
- The IoT operating system the organization developed on prior to using Windows IoT as it relates to the potential for new developer efficiencies on Windows IoT.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.4 million.
Avoided Development Effort
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| A1 | Images created per product development cycle annually, pre-Windows 10 IoT LTSC | Composite | 1 | 1 | 1 |
| A2 | Full-time developers | Composite | 12 | 12 | 12 |
| A3 | Percentage of developers who work on image development | Composite | 50% | 50% | 50% |
| A4 | Burdened annual salary for a full-time developer | TEI standard | $140,000 | $140,000 | $140,000 |
| A5 | Avoidable internal image development on Windows 10 IoT LTSC | Interviews | 75% | 75% | 75% |
| At | Avoided development effort | A1*A2*A3*A4* A5 | $630,000 | $630,000 | $630,000 |
| Risk adjustment | ↓10% | ||||
| Atr | Avoided development effort (risk-adjusted) | $567,000 | $567,000 | $567,000 | |
| Three-year total: $1,701,000 | Three-year present value: $1,410,045 | ||||
Accelerated Profit From Faster Time To Market
Evidence and data. Interviewees noted that by enabling developers with a predictably supported IoT platform, developers were in the best position to bring software (and their products) to market as fast as possible. They said native driver support on Windows IoT across many types of hardware reduced the burden on developers to create compatibilities or for their organizations to pay to have it done. In addition, the reduced need for subsequent redevelopment effort over the course of a product’s time in the field also resulted in less delay bringing product updates to market. The increased speed to market for products resulted in accelerated revenue and profit.
- Interviewees said improved software development timeframes on Windows IoT of up to six months allow for faster product development and, therefore, faster revenue recognition than other operating systems. The software product manager at the financial services organization noted that developers had worked on both Windows IoT and non-Windows IoT versions of its image, and the former completed and shipped significantly faster than the latter, which saved developer resources in the process.
- Interviewees said product iteration and the development effort behind these iterations are improved on Windows IoT through a streamlined development experience that also brings subsequent versions of their organizations’ products to market faster.
- Native driver compatibility across different hardware configurations on Windows IoT accelerated product development and release timelines at several of the interviewees’ organizations because they no longer needed to wait for driver availability, develop compatibility, or pay externally for this development. The general manager at a technology organization summarized: “[When working with another open-source solution,] we ultimately ended up paying for certain drivers to be developed, and we eventually got them. But the difference is that we got it sometimes three, six, [or] nine months after a particular silicon release cycle.”
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- Each year, the composite sells an average of 75,000 of its core products at the price of $6,500 each.
- The composite’s image development on Windows IoT is 25% faster (three months faster) than it was on its previous open-source operating systems due to native hardware compatibilities, ease of development, and less frequent redevelopment.
- The composite organization has a 10% gross margin.
Risks. This benefit will vary among organizations based on:
- The organization’s industry, as it relates to the volume, price, and margin at which a product is sold.
- The IoT operating system on which the organization develops prior to using Windows IoT, as it relates to the potential for accelerating product release timelines.
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 $24.2 million.
Accelerated Profit From Faster Time To Market
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| B1 | Devices sold | Composite | 75,000 | 75,000 | 75,000 | |
| B2 | Price per device | Composite | $6,500 | $6,500 | $6,500 | |
| B3 | Total revenue from Windows IoT devices | B1*B2 | $487,500,000 | $487,500,000 | $487,500,000 | |
| B4 | Accelerated delivery timeline | Interviews | 25% | 25% | 25% | |
| B5 | Accelerated revenue | B3*B4 | 121,875,000 | 121,875,000 | 121,875,000 | |
| B6 | Gross margin | Assumption | 10% | 10% | 10% | |
| Bt | Accelerated profit from faster time to market | B5*B6 | $12,187,500 | $12,187,500 | $12,187,500 | |
| Risk adjustment | ↓20% | |||||
| Btr | Accelerated profit from faster time to market (risk-adjusted) | $9,750,000 | $9,750,000 | $9,750,000 | ||
| Three-year total: $29,250,000 | Three-year present value: $24,246,807 | |||||
Avoided Developer Re-Skilling
Evidence and data. Interviewees explained that the Microsoft Windows IoT operating system provides a consistent, supported development environment for their organizations’ developer resources, which reduces the need to constantly re-skill on different versions, operating systems, or functionality that is not native to these platforms. They said that over time, this results in more developer capacity and reduces the likelihood of expensive external hires to bring in this expertise.
- The software product manager in financial services told Forrester that once their organization’s developers were on the Windows IoT platform, moving to another OS as mandated by support life was significantly easier than it had been in the past and required less net-new expertise from developers: “We have Windows 10 LTSC 2016. When it eventually goes out of support, it [will be] easy for [my organization’s developers to] move from one to the other, and [it will also be] easy for our customers to pick that up.”
- Interviewees said developers’ familiarity with Windows and Windows IoT was a noted driver of productivity at their organizations. The general manager at a global technology organization explained: “The biggest differentiating point for Windows is the familiar native development environment for our [developers]. Windows IoT also has a lot of the same native security features, and functions are also familiar to developers.”
- Several interviewees cited the locked feature set on Windows IoT LTSC as a significant productivity saver for developers because static feature sets result in fewer areas in which they would need to re-skill during the course of the deployment.
- Interviewees noted that developing for alternative operating systems may also mandate additional hires for their organizations. One interviewee explained: “Developing on [other operating systems] would be more labor-intensive for us due to the extensive expertise they would require. Our developers would be required to get more familiar with these tools, and we would need to hire specifically for that skill set, as well.”
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
- The composite dedicates 12 full-time developer resources to working on IoT application development.
- Each developer saves 20% of their time annually by avoided re-skilling effort due to ease of development on Windows IoT.
- The average annual salary for a developer resource is $140,000.
Risks. This benefit will vary among organizations based on:
- The skill and capacity of the organization’s developer resources.
- The IoT operating system on which the organization develops prior to using Windows IoT as it relates to the potential for avoided re-skilling and/or external hires.
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 $752,000.
Avoided Developer Re-Skilling
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| C1 | Developers who work on IoT development | Composite | 12 | 12 | 12 |
| C2 | Percent of time spent re-skilling to develop for alternate operating systems | Interviews | 20% | 20% | 20% |
| C3 | Burdened annual salary for a full-time developer | TEI standard | $140,000 | $140,000 | $140,000 |
| Ct | Avoided developer re-skilling | C1*C2*C3 | $336,000 | $336,000 | $336,000 |
| Risk adjustment | ↓10% | ||||
| Ctr | Avoided developer re-skilling (risk-adjusted) | $302,400 | $302,400 | $302,400 | |
| Three-year total: $907,200 | Three-year present value: $752,024 | ||||
Unquantified Benefits
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
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Security posture.
Interviewees cited the consistency in which Microsoft
can deliver key security updates as a benefit for their
organizations’ end customers, especially given the
security-sensitive industries (e.g., healthcare,
financial services, etc.) in which many of their
companies operate. They also cited ease of manageability
as a benefit because end customers can deploy security
updates remotely during off-hours over the long duration
of support (up to 10 years).
The software product manager in the financial services sector noted the ease of management from the perspective of their organization’s customers: “[Customers] can deploy their security updates remotely over their networks. We don’t need to send an engineer to do this like we had to in the past. Sometimes a customer would want to power down [their device] while that happened so that it didn’t potentially interrupt a transaction, but they don’t have to [do that now].” - Reduced reliance on internal or external support for end customers. Interviewees noted that because of the longer support durations on Windows IoT, their organizations’ customers are less likely to require support either internally or from a third party to update software, upgrade or reconfigure hardware, or reimage their devices during the course of their deployments. This saves end customers on costs related to third-party or internal support hours.
- High end-customer uptime. Interviewees noted that the IoT devices of their organizations’ end customers have a very high availability resulting from a reduced need to deploy non-security updates as well as the ability to maintain hardware compatibility with software over a longer period of time on Windows IoT.
- Support from the Microsoft team. Interviewees collectively detailed the confidence that working with Microsoft gives their organizations to continue to support their own customers. One interviewee said: “We get great support and responsiveness from Microsoft. If we have an issue, we have a dedicated support person who really helps us. With a customer install base as massive as ours, we have questions or issues come up frequently. So, having someone dedicated almost solely to us is great.”
-
Additional avoided development benefit from long-term
support structures. While this report models the benefit for the composite
organization over a three-year period, it can be noted
that embedded devices using Windows 10 Enterprise LTSC
will not require any additional application development
or iteration over these longer-term support lifecycles,
avoiding additional development or re-development
effort.
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might develop on Microsoft Windows IoT and later realize additional uses and business opportunities, including:
- Ability to operate on ARM) or lower-cost hardware. While the interviewees noted that their organizations’ IoT products are still primarily using x86 chips, some noted that Microsoft Windows IoT’s compatibility with ARM and other lower-cost hardware will allow their organizations to deliver the same quality products using cheaper hardware while maintaining the same level of functionality and security for their customer bases.
- Support for cloud-native applications at the edge. Azure Kubernetes Service and Windows IoT allows organizations to support containerized applications on most types of embedded devices, supporting the deployment and management of cloud native applications at the edge. Several interviewees also noted that containerization on Windows IoT also enables the usage of non-Windows applications. The general manager at the technology organization summarized: “If you’re in retail and you’re wanting to deploy computer vision on your Kubernetes cluster or your native Windows environment, you’ll can add [open-source applications] to it. You can now create a Kubernetes cluster on top of your Windows IoT environment to enable this, which really takes that element of [embedded operating system] preference off the table.”
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 |
|---|---|---|---|---|---|---|---|
| Dtr | License fee to Microsoft for Windows IoT | $0 | $4,725,000 | $4,725,000 | $4,725,000 | $14,175,000 | $11,750,376 |
| Total costs (risk-adjusted) | $0 | $4,725,000 | $4,725,000 | $4,725,000 | $14,175,000 | $11,750,376 | |
License Fee To Microsoft For Windows IoT
Evidence and data. The interviewees’ organizations pay a license fee to Microsoft for the Windows IoT license in their IoT products. Interviewees explained the following:
- Microsoft partners for the OEM determine license pricing.
- The license fee cost to the OEM is usually included in the total purchase price of the product or system in which it is used. Interviewees noted that the cost is often negligible given the total price of these systems. The head of common software infrastructure at a healthcare organization summarized: “The total price of our [products] is $1 million to $3 million each. A $100 license fee doesn’t concern us at all. We appreciate the high quality of Windows, the support we get, and the frequency of the security updates. We are very happy with the Microsoft ecosystem.”
- Interviewees collectively noted that using a professional open-source alternative would cost nearly the same or more than the cost of the Windows IoT license.
- Windows IoT license pricing varies depending on the version (e.g., Windows 10 IoT Enterprise, Windows 11 IoT Enterprise) and the support life (e.g., 10-year LTSC, 3-year general availability).
Modeling and assumptions. Based on the interviews, Forrester assumes the composite organization pays a $60 per-device license fee annually across the organization’s 75,000 devices.
Risks. This cost will vary among organizations based on:
- The specific Microsoft Windows IoT version and support structure selected by the organization.
- Contractual details between an OEM organization and a Microsoft partner as it affects the per-device license fee.
Results. To account for these factors of variance, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $11.8 million.
License Fee To Microsoft For Windows IoT
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| D1 | Devices shipped annually | Composite | 0 | 75,000 | 75,000 | 75,000 | |
| D2 | License cost to Microsoft for Windows IoT | Assumption | $0 | $60 | $60 | $60 | |
| Dt | License fee to Microsoft for Windows IoT | D1*D2 | $0 | $4,500,000 | $4,500,000 | $4,500,000 | |
| Risk adjustment | ↑5% | ||||||
| Dtr | License fee to Microsoft for Windows IoT (risk-adjusted) | $0 | $4,725,000 | $4,725,000 | $4,725,000 | ||
| Three-year total: $14,175,000 | Three-year present value: $11,750,376 | ||||||
Consolidated Three-Year Risk-Adjusted Metrics
Cash Flow Chart (Risk-Adjusted)
Total costs Total benefits Cumulative net benefits-
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 | $0 | ($4,725,000) | ($4,725,000) | ($4,725,000) | ($14,175,000) | ($11,750,376) |
| Total benefits | $0 | $10,619,400 | $10,619,400 | $10,619,400 | $31,858,200 | $26,408,876 |
| Net benefits | $0 | $5,894,400 | $5,894,400 | $5,894,400 | $17,683,200 | $14,658,500 |
| ROI | 125% | |||||
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: Endnotes
1 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
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