In an increasingly unpredictable world, businesses need to be able to adapt and plan accordingly. Good planning tools and processes are now mission-critical for success across all functions within organizations — no longer just finance. Business leaders must be able to analyze and plan for an ever-increasing list of scenarios despite ever-decreasing time. This requires a single source of truth to ensure that data is accurate, reliable, and up to date. This study showcases the overall financial benefits experienced by four organizations after implementing Pigment.
Pigment is a cloud solution that supports organizations with their enterprise planning by offering an adaptable platform that enables organizations to make data-driven decisions. It provides a holistic view of the business, allowing users to align their strategic goals with operational execution.
Pigment commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying it. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Pigment on their organizations.1
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives with experience using Pigment. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization, which has a turnover of $1.3 billion per year and employs approximately 7,000 people across its retail operations.
Interviewees said that prior to using Pigment, their organizations relied on outdated legacy systems that suffered from several limitations including having very low engagement among users, needing time-consuming and inefficient data input, still requiring spreadsheets to process data, and hindering collaboration between different teams.
After the investment in Pigment, the interviewees shared with Forrester how they were able to improve their planning efficiency and accuracy, with higher productivity across multiple teams, optimized supply chains, savings from legacy solution replacement, and business ownership over their planning technology.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Productivity improvement in financial planning and analysis by reducing 130 hours per analyst yearly, 480 hours per full-time equivalent (FTE) within the payroll team, and 84 hours per executive. Pigment enables the composite organization to streamline financial planning and analysis processes to easily import and organize financial data from various sources, eliminating the need for manual data entry and reducing the chance of errors. Pigment users in the composite organization are now able to create accurate financial projections and scenarios, as well as collaborate in real time with other teams across the organization to support informed decisions based on up-to-date financial information.
- Productivity improvements across sales planning by reducing 619 hours of work per analyst and 201 hours of work per sales planner. These savings come from centralizing sales data, enabling accurate forecasting through advanced analytics and models, and promoting collaboration and communication across teams. With Pigment’s real-time monitoring to track sales performance, the composite organization can optimize and simplify sales planning processes, make informed decisions, and improve sales performance.
- Productivity improvement doing business forecasting by saving 20 hours per analyst and 16 hours per executive per forecasting cycle. With Pigment, the composite organization saves time doing quality assurance of their forecasting, as they often used to discover mistakes that resulted in valuable time being wasted for both analysts and executives.
- Productivity improvement from scenario planning by saving 12 hours per analyst and 6 hours per executive at each of the four scenario-planning reviews per year. Pigment’s scenario planning provides the composite quick results on different scenarios, allowing the organization to obtain desired outcomes within a short timeframe. This is particularly valuable during time-sensitive situations, enabling the composite to make fast, informed decisions regarding expenses or merit increases.
- Supply chain optimization savings of $859,000 on permanent stock. Using Pigment helps the composite achieve a reduction in permanent stock and improve supply chain operations by accurately forecasting demand and making informed decisions about inventory levels. By incorporating key data points, Pigment provides insights for analysts and supply chain professionals, enabling them to minimize excess inventory.
- Annual savings of $1.04 million from the elimination of legacy platforms avoided consulting fees. Pigment allows the composite to remove a costly and ineffective legacy solution with low adoption among their teams. By replacing the legacy solution with Pigment, the composite not only eliminates unnecessary costs but also implements a larger scope in different use cases and avoids high consulting fees that were needed to support the legacy solution.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
- Better collaboration across the organization. The implementation of Pigment greatly enhanced collaboration among teams at the interviewees’ organizations. With Pigment, information is easily shared, enabling managers to have a real-time view of their plans and performance. This improves transparency and accessibility and results in better collaboration and synergy among teams. Additionally, the cloud-based nature of the tool ensures that information is not confined to specific devices; users can be added as needed, and the solution can continually improve. This allows every team member to access the necessary information instantly, fostering stronger collaboration and facilitating efficient decision-making.
- Better decision-making. The ease and speed of gaining insights from data significantly contributed to better decision-making since it allowed for a deeper understanding of various possibilities and potential outcomes. Armed with this knowledge, business managers were able to make more informed decisions faster and more frequently. With scenario forecasting and budgeting, managers were able to quickly assess the impact of different decisions on their financials, supporting more efficient expense management while also enabling them to identify investment opportunities.
- Data security. From the interviewees’ perspective, the use of Pigment allows enhanced security measures against their legacy solutions and spreadsheets. One key advantage mentioned was increased security compared to traditional methods such as spreadsheets that increase vulnerability to breaches and accidental deletions. Additionally, there was a reduced risk of data leakage or unauthorized disclosure as the new data structure provided better protection against human errors. This improved security not only safeguards sensitive information but also mitigates potential financial risks associated with data loss.
- Labor market attractiveness. Pigment has a user interface that makes it easy for people to interact with it, according to one interviewee. This is particularly appealing for individuals entering the labor market. Although interviewees were unable to quantify this benefit, in their opinion, the sense of modernity created a positive impression among their teams. From the interviewee’s perspective, Pigment “not only equips young people with the necessary skills, it also showcases their willingness to embrace new technologies and stay updated in their chosen fields.”
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
Total external costs of $1.78 million. This includes implementation and training costs by Pigment and annual Pigment subscription fees.
Total internal costs of $224,000. This includes implementation costs by analysts and executives of the composite, as well as monthly internal maintenance costs.
The representative interviews and financial analysis found that a composite organization experiences benefits of $8.13 million over three years versus costs of $2.00 million, adding up to a net present value (NPV) of $6.13 million and an ROI of 306%.
Key Statistics
-
Return on investment (ROI):
306%
-
Benefits PV:
$8.13M
-
Net present value (NPV):
$6.13M
-
Payback:
<6 months
Benefits (Three-Year)
Productivity improvement in financial planning and analysis Productivity improvements across sales planning Productivity savings from forecasting Productivity savings from scenario planning Supply Chain Optimization Savings from legacy solution replacementTEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment Pigment.
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 Pigment can have on an organization.
-
Due Diligence
Interviewed Pigment stakeholders and Forrester analysts to gather data relative to Pigment.
-
Interviews
Interviewed four representatives at organizations using Pigment to obtain data about costs, benefits, and risks.
-
Composite Organization
Designed a composite organization based on characteristics of the interviewees’ organizations.
-
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.
-
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 Pigment 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 Pigment.
Pigment 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.
Pigment provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Niels Kusters
Jaime Martins
Drivers leading to the Pigment investment
Interviews
| Role | Industry | Geography | Employees | Revenue | Pigment Use Case | ||
|---|---|---|---|---|---|---|---|
| Digital transformation expert | Business process outsourcing and consultancy | Multinational enterprise | 120,000 | $3 billion | Finance department and carbon footprint calculation | ||
| Financial controlling director | Children’s toys and apparel | Multinational enterprise | 6,000 | $827 million | Finance, sales, and procurement department | ||
| Director of performance management | Labor nonprofit organization | Washington, DC, United States | 7,800 | $1.6 billion | Finance and marketing department | ||
| Finance business partner | Digital experience technology | Multinational enterprise | 1,800 | $135 million | Finance department | ||
Key Challenges
Prior to implementing Pigment, the interviewees relied on an outdated legacy system that suffered from several limitations. First, the system had very low engagement among users, indicating a lack of usability or value. Additionally, the process of entering and processing data within the legacy system was time-consuming and inefficient. Manual data input required significant effort and time to complete. Due to these limitations, data processing was conducted through spreadsheets, which further added to the complexity and labor-intensive nature of the system.
Collaboration among team members was also hindered by the legacy system. Conversations and discussions were fragmented, occurring in silos rather than in a centralized and accessible platform. This fractured communication led to a lack of cohesion and coordination among team members. As a result of these limitations, interviewees’ organizations sought a solution that could provide a single source of information and high-quality data. The interviewees recognized the importance of having a more efficient and collaborative platform to streamline their processes and improve decision-making.
Considering these challenges, the interviewees decided to implement Pigment as a solution to address the shortcomings of their previous system.
The interviewees noted how their organizations struggled with common challenges, including:
- Time-consuming analysis and manual input. The manual data analysis process and maintenance of the legacy tools posed significant challenges to the interviewees’ companies. To drive efficiency and reduce labor costs, they needed a solution that automated data analysis and eliminated the need for manual input. Data analyses were not streamlined, and highly-skilled analysts and leaders were unable to focus on more strategic work.
- Legacy solution flexibility shortcomings. The legacy application, as implemented, could not accommodate the complexity of the interviewees’ organizations and their unique data requirements, hindering their ability to expand and progress. This made it difficult to obtain a consolidated view of their companies’ operations. The challenge was to find a solution that could integrate and aggregate data from the different subsidiaries, allowing for better analysis and decision-making at the corporate level. The interviewees and their organizations needed a scalable and flexible solution that could adapt to the diverse data sources and formats from each subsidiary.
- Collaboration issues and silos. The challenge of collaboration issues and fragmented information flow demanded a solution that promotes seamless communication and easy access to data. The interviewees lacked a centralized platform to serve as a single source of information, eliminating silos and empowering employees to quickly make informed decisions. They wished to increase productivity, reduce bureaucratic hurdles, and foster a culture of collaboration, ultimately driving efficient decision-making processes. The organizations wanted to work toward creating an environment where high-quality data was readily available, enabling them to achieve their goals with speed and precision.
Solution Requirements/Investment Objectives
The interviewees’ organizations searched for a solution that could:
- Aggregate large volumes of data and function as a spreadsheet. All interviewees said that their main goal was to efficiently handle and analyze the vast amount of data they were dealing with. They recognized the need for a tool that could easily gather data from various sources and consolidate it into a single platform for streamlined analysis.
- Improve the autonomy of users. The interviewees emphasized the importance of autonomy for all different types of users. They desired a solution that would allow different individuals to view, contribute, and edit data without constant oversight or dependence on a central authority. This autonomy would enable faster decision-making and enhance overall efficiency within their teams.
- Provide flexibility for the organization to create a tool uniquely suited to their needs. The interviewees stressed the significance of full control over their data. They sought a solution that would grant them complete control and authority over their data, enabling them to implement and customize it according to their specific requirements. They expressed a desire for the tool to start as a blank canvas that they could build and shape to suit their unique needs.
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 four 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 global retail composite organization has an annual revenue of $1.3 billion. Its growth rate of 10% year over year indicates a positive trajectory and potential for further expansion. The organization currently employs approximately 7,000 people.
The retail branch of the organization operates physical stores and has a strong global presence in e-commerce, allowing customers to shop both in person and online.
Deployment characteristics. The composite organization opted to implement Pigment, a software solution, for its finance, sales, and supply chain departments. It subscribes to a total of 110 Pigment users, including 10 editors, 80 contributors, and 20 explorers. The composite deploys the Pigment enterprise plan for additional support and more advanced controls on the platform. The analysts rely on Pigment daily, while executives find it particularly useful during quarterly forecasting and monthly budgeting activities.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Productivity improvement in financial planning and analysis | $653,179 | $730,852 | $845,640 | $2,229,671 | $1,833,151 |
| Btr | Productivity improvements across sales planning | $1,001,495 | $1,184,258 | $1,421,385 | $3,607,138 | $2,957,083 |
| Ctr | Productivity savings from forecasting | $325,450 | $341,318 | $373,056 | $1,039,824 | $858,227 |
| Dtr | Productivity savings from scenario planning | $201,144 | $236,640 | $272,136 | $709,920 | $582,888 |
| Etr | Supply chain optimization | $119,000 | $476,000 | $476,000 | $1,071,000 | $859,196 |
| Ftr | Savings from legacy solution replacement | $417,563 | $417,563 | $417,563 | $1,252,689 | $1,038,417 |
| Total benefits (risk-adjusted) | $2,717,831 | $3,386,631 | $3,805,780 | $9,910,242 | $8,128,962 |
Productivity Improvement In Financial Planning And Analysis
Evidence and data. Pigment enabled the interviewees by providing a centralized platform for data management and analysis. Analysts from the interviewees’ organizations could easily import and organize financial data from various sources, eliminating the need for manual data entry and reducing the chance of errors. Pigment users were able to create accurate financial projections and scenarios with real-time collaboration and visibility, enabling teams to work together and make informed decisions based on up-to-date financial information. Overall, these tools streamlined financial planning and analysis processes, saving time, improving accuracy, and providing valuable insights for effective decision-making.
- The finance business partner at the digital experience technology company said that stakeholders became more responsible for their budgets and increased the ownership of their figures. Prior to the implementation of Pigment, the executives were unable to recognize the numbers. However, after the implementation, everyone could see the same figures, and there were no last-minute surprises. Additionally, manual errors were reduced/eliminated as the partners were able to input the data themselves. This interviewee saw a significant reduction in the time spent on financial planning and analysis. The finance business partner said that using Pigment removed human errors, erasing the immense pressure to obtain results within the organization’s finance department.
- The financial controlling director at the children’s toys and apparel company experienced increased time savings within her department as a result of Pigment. They attributed this to the reduction of spreadsheet manipulations and the ease of automatically and systematically bringing in data. The consolidation process became easier, whereas previously, it was often impossible to achieve the same qualitative result on spreadsheets.
- With the implementation of Pigment, the consolidation time for payroll planning was reduced to zero. Previously, according to the finance business partner at the digital experience technology company, it took around one week per person, or 40 hours per month, to consolidate the data. However, with Pigment, the data is automatically generated in the tool, eliminating the need for manual consolidation and reducing the time required to complete the payroll-planning process.
- According to the interviewee at the business process outsourcing and consultancy company, Pigment enabled a significant reduction in the number of people involved in data crunching. Previously, the organization required three to four people to consolidate the general ledger (GL) data from 500,000 lines, taking two days. However, with Pigment, the customer now achieves higher granularity and directly extracts data from their ERP system using an API. Moreover, regional consolidation, which previously required at least 13 people spending one day per month per region, has been streamlined to involve only two to three people, reducing the consolidation time to just one week per year.
Modeling and assumptions. [Based on the interviews, Forrester assumes the following about the composite organization:]
- Within the finance department, 28 analysts use Pigment. Twenty executives use Pigment as explorers.
- The average fully burdened hourly cost of an analyst is $87; the average fully burdened hourly cost of an executive is $145.
- The payroll team of 12 members has six analysts responsible for payroll planning using Pigment.
- Analysts save a total of 130 hours per FTE and the payroll team saves 480 hours per FTE annually since implementing Pigment.
- Executives no longer spend time feeding the system with their data, saving 84 hours per FTE.
- Analysts can replace their saved time with new tasks by 85%, 90% and 100%, respectively, in the first, second and third years. Executives are assumed to replace the time they save by 100%.
Risks. This benefit can vary by organization based on different factors, including the following:
- Organizations have different business processes and practices, the time saved can vary per organization.
- The total benefit will change as per the number of analysts and executives that have Pigment access.
- Employees’ resistance to change to a new solution.
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 more than $1.83 million.
Productivity Improvement In Financial Planning And Analysis
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| A1 | Time saved with integration of accounting data, aggregation/reforecast and analysis (hours) | Interviews | 130 | 130 | 130 | |
| A2 | Number of analysts | Composite | 28 | 30 | 32 | |
| A3 | Average fully burdened hourly cost of an analyst | TEI standard | $87 | $87 | $87 | |
| A4 | Percentage of time recovered for work tasks | Composite | 85% | 90% | 100% | |
| A5 | Subtotal: Productivity improvement across analysts | A1*A2*A3*A4 | $269,178 | $305,370 | $361,920 | |
| A6 | Time saved for payroll planning | Interviews | 480 | 480 | 480 | |
| A7 | Number of analysts | Interviews | 6 | 7 | 8 | |
| A8 | Percentage of time recovered for work tasks | Composite | 85% | 90% | 100% | |
| A9 | Subtotal: Productivity improvement across payroll planning | A6*A7*A3*A8 | $212,976 | $263,088 | $334,080 | |
| A10 | Time saved by executives feeding the system with information/data (hours) | Interviews | 84 | 84 | 84 | |
| A11 | Number of business executives | Interviews | 20 | 20 | 20 | |
| A12 | Average fully burdened hourly cost of an executive | TEI standard | $145 | $145 | $145 | |
| A13 | Percentage of time recovered for work tasks | Composite | 100% | 100% | 100% | |
| A14 | Subtotal: Productivity improvement across executives | A10*A11*A12*A13 | $243,600 | $243,600 | $243,600 | |
| At | Productivity improvement in financial planning and analysis | B5+B9+B14 | $725,754 | $812,058 | $939,600 | |
| Risk adjustment | ↓10% | |||||
| Atr | Productivity improvement in financial planning and analysis (risk-adjusted) | $653,179 | $730,852 | $845,640 | ||
| Three-year total: $2,229,671 | Three-year present value: $1,833,151 | |||||
Productivity Improvements Across Sales Planning
Evidence and data. Pigment helped the interviewees by centralizing their organizations’ sales data, enabling accurate forecasting through advanced analytics and algorithms, and promoting collaboration and communication across teams for better alignment and coordination. The interviewees said their organizations gained access to real-time monitoring for tracking sales performance and making proactive adjustments. With these capabilities, they could optimize and simplify their sales planning processes, make informed decisions, and achieve improved sales performance.
- Pigment had a significant impact on sales planning for the financial controlling director’s children’s toys and apparel organization. It unified data and processes across all teams involved. Adopting Pigment and integrating it into all of the organization’s teams proved to be a major advantage, particularly when onboarding new brands. According to the director, Pigment allowed the company to easily duplicate processes and tools for other brands, which was not previously possible. In the past, the company had to manually duplicate everything, especially purchasing data in spreadsheets. This resulted in complexities and inaccuracies.
- Pigment facilitated team integration for interviewees’ organizations as it provided established tools and guidelines. New team members could simply leverage what had already been done in terms of reporting and other tasks, regardless of their specific area of responsibility. Overall, Pigment streamlined sales planning and improved efficiency throughout the company.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- Thirty sales planners and 22 analysts in the composite organization are using Pigment.
- The average fully burdened hourly cost of an analyst is $87 and the average fully burdened hourly cost of a sales planner is $58.
- Analysts save a total of 619 hours per FTE annually since implementing Pigment, which includes 364 hours from the automatic generation of period balances and 255 hours from tasks like weekly budgeting, consolidating plans, and avoiding spreadsheet maintenance. They can replace this time with new tasks by 85%, 90% and 100%, respectively, in Year 1, Year 2, and Year 3.
- Sales planners save a total of 201 hours per FTE annually since implementing Pigment thanks to features like sales planning, purchasing tools, and order processing. They can replace this time with new tasks by 70%, 85% and 95%, respectively, in Year 1, Year 2, and Year 3.
Risks. This benefit can vary by organization based on different factors, including the following:
- The different existing business processes and practices an organization brings to its Pigment rollout.
- The total benefit will change depending on the number of analysts and sales planners that have Pigment access.
- Employees’ resistance to change to a new solution.
Results. To account for these risks and considering that only one interviewee had implemented a sales use case, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $2.96 million.
Productivity Improvements Across Sales Planning
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| B1 | Hours saved by weekly budgeting, avoiding spreadsheet maintenance, and consolidating plans with Pigment | Interviews | 255 | 255 | 255 | |
| B2 | Hours saved through automatic generation of period balances | Interviews | 364 | 364 | 364 | |
| B3 | Number of analysts involved in sales planning | Composite | 22 | 24 | 26 | |
| B4 | Average fully burdened hourly cost of an analyst | InterviewsTEI standard | $87 | $87 | $87 | |
| B5 | Percentage of time recovered for work tasks | Interviews | 85% | 90% | 100% | |
| B6 | Subtotal: Productivity improvements across analysts in procurement | (B1*B2)*B3*B4*B 5 | $1,007,051 | $1,163,225 | $1,400,178 | |
| B7 | Time saved with reforecasting and sales planning through Pigment | Interviews | 25 | 25 | 25 | |
| B8 | Hours saved with the Pigment purchasing tool | Interviews | 88 | 88 | 88 | |
| B9 | Hours saved with the Pigment-generated order processing | Interviews | 88 | 88 | 88 | |
| B10 | Number of sales planners | Composite | 30 | 32 | 34 | |
| B11 | Average fully burdened hourly cost of a sales planner | TEI standard | $58 | $58 | $58 | |
| B12 | Percentage of time recovered for work tasks | Composite | 70% | 85% | 95% | |
| B13 | Subtotal: Productivity improvements across sales planners in procurement | (B7+B8+B9)*B10* B11*B12 | $244,818 | $317,098 | $376,553 | |
| Bt | Productivity improvements across sales planning | B6+B13 | $1,251,869 | $1,480,322 | $1,776,731 | |
| Risk adjustment | ↓20% | |||||
| Btr | Productivity improvements across sales planning (risk-adjusted) | $1,001,495 | $1,184,258 | $1,421,385 | ||
| Three-year total: $3,607,138 | Three-year present value: $2,957,083 | |||||
Productivity Savings From Forecasting
Evidence and data. The interviewees expressed concerns about the quality of their organizations’ forecasting before Pigment, as they often discovered mistakes that resulted in valuable time being wasted for both analysts and executives. One interviewee said their organization spent a significant amount of time on inefficiencies in their forecasting process before Pigment. With more than 1,000 hours spent on data inputs, staff wasted time passing data back and forth. By implementing Pigment, the time spent on forecasting was reduced to 60%.
- Before Pigment, interviewees often discovered mistakes during forecasting, which resulted in valuable time being wasted for both the analysts and the executives. These errors not only affected the accuracy of predictions but also undermined the organizations’ confidence in their forecasting processes. The finance business partner at the digital experience technology organization encountered a mistake every month at each forecasting exercise. It then took their analysts up to two days to find and correct the mistake and then a second meeting with executives to review the new data.
- The director of performance management at the labor nonprofit said their organization spent a significant amount of time on inefficiencies in its forecasting process. During each of its four forecast cycles, 50 people spent a total of 1,000 hours on data input. Additionally, 450 hours were wasted passing data back and forth through copying and pasting, 180 hours were spent on formatting issues, and 48 hours were lost due to version control problems. This amounted to a total of 678 hours wasted every year — a significant financial loss. However, after implementing Pigment, the organization reduced time spent on forecasting by 50% to 60%. With Pigment, the organization only involved 20 people in the process and the organization spent a total of 400 hours. The director of performance management said the company’s goal was to be more efficient with its spending. Pigment provided the organization with more real-time observations for business decisions, which allowed them to plan monthly instead of waiting three months for each forecast cycle.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- The composite organization has 12 forecast cycles per year and 10 analysts work on the forecast planning. Twenty executives review the forecasts, and they spend two hours in each forecasting quality assurance review meeting.
- Pigment saves each analyst 20 hours per forecast cycle.
- Before Pigment, the composite spent 16 hours finding mistakes in forecasts.
- The fully burdened cost of an analyst is $87 per hour and an executive is $145 per hour.
- Time analysts recovered with Pigment is 85% in the first year, and it improves over time. Executives are assumed to recover 100% of their time and apply it to productive tasks.
Risks. This benefit can vary by organization based on different factors, including the following:
- The number of times that a company has a forecasting exercise can strongly vary.
- The level of adoption and employees’ resistance to change to a new solution.
- Data complexity differs across organizations, so the volume of faults may not be consistent with these findings.
Results. To account for these risks and considering that only one interviewee could quantify the benefits from forecasting, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $858,000.
Productivity Savings From Forecasting
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| C1 | Number of forecasting exercises with executives per year | Interviews | 12 | 12 | 12 | |
| C2 | Number of analysts involved in forecasting exercises | Interviews | 10 | 10 | 10 | |
| C3 | Hours saved by analyst per forecast cycle | Interviews | 20 | 20 | 20 | |
| C4 | Average fully burdened hourly cost of an analyst | Interviews | $87 | $87 | $87 | |
| C5 | Percentage of time recovered for work tasks for analysts | Composite | 85% | 90% | 100% | |
| C6 | Subtotal: Productivity savings from forecasting exercise | C1*C2*C3*C4*C5 | 177,480 | 187,920 | 208,800 | |
| C7 | Hours in each forecasting quality assurance review meeting | Interviews | 2 | 2 | 2 | |
| C8 | Hours spent on finding mistakes in forecasts | Interviews | 16 | 16 | 16 | |
| C9 | Number of executives reviewing the forecasts | Composite | 20 | 20 | 20 | |
| C10 | Average fully burdened hourly cost of an executive | Interviews | $145 | $145 | $145 | |
| C11 | Subtotal: Productivity savings analysts from avoided forecast mistakes with Pigment | C1*C8*C2*C4*C5 | $141,984 | $150,336 | $167,040 | |
| C12 | Subtotal: Productivity savings from avoiding quality assurance review meetings | (C1*C7)*(C2*C4* C5+C9*C10) | $87,348 | $88,392 | $90,480 | |
| Ct | Productivity savings from forecasting | C6+C11+C12 | $406,812 | $426,648 | $466,320 | |
| Risk adjustment | ↓20% | |||||
| Ctr | Productivity savings from forecasting (risk-adjusted) | $325,450 | $341,318 | $373,056 | ||
| Three-year total: $1,039,824 | Three-year present value: $858,227 | |||||
Productivity Savings From Scenario Planning
Evidence and data. For the interviewees’ organizations, one of the most valuable benefits from Pigment’s scenario planning feature was in its ability to provide quick results. Pigment’s scenario planning enabled the organizations to obtain their desired outcomes more efficiently and within a shorter period of time. This was particularly valuable at the end of the budget or forecasting process when time is of the essence. The interviewees were able to quickly make informed decisions, such as determining merit increases or evaluating expenses.
- All interviewees implemented Pigment scenario planning within their organizations. Scenario planning enabled their businesses to establish hypotheses and scenarios more easily, which allowed them to have better information available. This information was easier to manipulate and analyze and ultimately led to better decision-making and planning. The digital transformation expert at the business process outsourcing and consultancy organization said, “Pigment allows for quick simulations and analysis of different scenarios, saving time and effort compared to traditional BI tools.”
- Pigment’s scenario feature transformed the decision-making process for the digital experience technology organization, according to its finance business partner, by allowing it to make critical decisions, such as merit increases, at the end of the budget or forecasting process. Unlike its previous legacy solution, which was not completely live, Pigment enabled the organization to compare different scenarios on the same table and provided a comprehensive and real-time view of the financial landscape. This newfound capability empowered the interviewee and their organization to make more informed decisions on the expense side and greatly enhanced the ability to manage budgets and forecasts effectively. Overall, Pigment’s scenario feature proved to be an invaluable tool for the organization and enabled it to make better-informed decisions and drive better business outcomes.
- The director of performance management of the nonprofit organization discussed the challenges it faced before utilizing the scenario planning feature in Pigment. They mentioned the lost opportunity cost and the amount of time spent on decision-making. However, with Pigment’s scenario planning feature, it was able to drive the business more efficiently and effectively allocate its marketing budget. Without Pigment, the organization struggled to open a scenario and analyze the information. The director of performance management said, “Pigment has really enabled us to spin out multiple scenarios and understand opportunity costs.”
- Prior to Pigment, two interviewees did not utilize the scenario planning feature with their legacy solution due to its limited functionality. However, with the introduction of Pigment as a new solution, the interviewees’ organizations could fully leverage the benefits of scenario planning. One notable improvement was the ability to compare different scenarios side by side on a single table. This feature enabled the interviewees’ organizations to easily analyze and assess the potential outcomes of various scenarios and provided them with a comprehensive view of the different possibilities.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- The composite organization has four official scenario plannings per year with 10 scenarios per session. Four analysts use Pigment for scenario planning and 20 executives use Pigment as explorers.
- The average fully burdened hourly cost of an analyst is $87, the average fully burdened hourly cost of an executive is $145.
- Analysts save a total of 120 hours per FTE four times per year since implementing Pigment.
- Executives save 6 hours per cycle through decision-making via scenario planning.
- Analysts can replace their saved time with new tasks with an 85% productivity recapture in the first year. Executives are assumed to recapture the time they save by 100%.
Risks. This benefit can vary by organization based on different factors, including the following:
- Inaccurate assumptions: Scenario planning relies on making assumptions about future events and their potential impact on the business. If these assumptions are based on inaccurate or incomplete information put into Pigment, it can lead to flawed scenarios and ineffective decision-making.
- The number of scenarios collected per planning cycle can vary greatly depending on the organization, which will have a significant impact on the benefit derived from it.
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 $583,000.
Productivity Savings From Scenario Planning
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| D1 | Number of scenario planning per year | Interviews | 4 | 4 | 4 | |
| D2 | Number analysts involved in scenario planning | Composite | 4 | 5 | 6 | |
| D3 | Number of scenarios | Interviews | 10 | 10 | 10 | |
| D4 | Time Hours saved per scenario creation and version control between scenarios (hours) | Interviews | 12 | 12 | 12 | |
| D5 | Average fully burdened hourly cost of an analyst | InterviewsTEI standard | $87 | $87 | $87 | |
| D6 | Number of executives | Composite | 20 | 20 | 20 | |
| D7 | Hours saved through one time scenario decision making. | Interviews | 6 | 6 | 6 | |
| D8 | Average fully burdened hourly cost of an executive | TEI standard | $145 | $145 | $145 | |
| Dt | Productivity savings from scenario planning | D1*(D2*D3*D4*D5 +D6*D7*D8) | $236,640 | $278,400 | $320,160 | |
| Risk adjustment | ↓15% | |||||
| Dtr | Productivity savings from scenario planning (risk-adjusted) | $201,144 | $236,640 | $272,136 | ||
| Three-year total: $709,920 | Three-year present value: $582,888 | |||||
Supply Chain Optimization
Evidence and data. The use of Pigment at the interviewees’ organizations reduced permanent stock and optimized supply chain operations. By leveraging Pigment, the organizations were able to accurately forecast demand and make well-informed decisions pertaining to inventory levels. According to the interviewees, Pigment’s incorporation of diverse data points — including historical sales data, market trends, and customer preferences — offered valuable insights for analysts and supply chain professionals. By adapting inventory levels in response to projected future demand patterns, interviewees effectively minimized the requirement for excessive permanent stock.
- Since the children’s toys and apparel company started using Pigment, the financial controlling director observed a reduction in its rolling stock of permanent products of approximately 10%. This reduction amounted to approximately two million pieces. With an average valuation of $4.25 per piece, this reduction in inventory resulted in a cash gain of $8.5 million.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- The composite is able to reduce its permanent inventory stock by 10%, valued as $8.5 million, with the implementation of Pigment.
- With this level reduction, the composite organization can save the equivalent cost of money from that stock saved. Forrester assumes a cost of money of 5%.
- The composite also saves the equivalent inventory carrying costs (transportation, storage, insurance, salaries, handling, depreciation, etc.), assumed at 15% of its value.
- The composite contributes 35% of its stock levels savings to Pigment.
Risks. This benefit can vary by organization based on different factors, including the following:
- The accuracy and reliability of Pigment’s insights heavily depend on the quality and completeness of the data used. Inaccurate or incomplete data can lead to flawed forecasting and decision-making, potentially resulting in inventory imbalances or missed opportunities.
- Cost of capital and carrying costs for the organization.
- The initial level of inventory level optimization.
- Weight of inventory costs to the organization.
Results. To account for these risks and considering only one interview could quantify this benefit, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $859,000.
Supply Chain Optimization
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| E1 | Cost of annual permanent stock apparel & accessories | Interviews | $85,000,000 | $0 | $0 | |
| E2 | Reduction rate of permanent stock managed by Pigment | Interviews | 10% | 0 | 0 | |
| E3 | Cost of inventory saved | Interviews | $8,500,000 | $0 | $0 | |
| E4 | Cost of money | Interviews | 5% | 5% | 5% | |
| E5 | Cost of money related to inventory savings | C3(Year1)*C4 | $425,000 | $425,000 | $425,000 | |
| E6 | Rolling stock saved from Year 1 | D3 | $0 | $8,500,000 | $8,500,000 | |
| E7 | Carrying cost of inventory | Composite | 0 | 15% | 15% | |
| E8 | Percent of inventory cost savings due to Pigment | Composite | 35% | 35% | 35% | |
| Et | Supply chain optimization | (E5+E6*E7)*E8 | $148,750 | $595,000 | $595,000 | |
| Risk adjustment | ↓20% | |||||
| Etr | Supply chain optimization (risk-adjusted) | $119,000 | $476,000 | $476,000 | ||
| Three-year total: $1,071,000 | Three-year present value: $859,196 | |||||
Savings From Legacy Solution Replacement
Evidence and data. Legacy solutions were a significant cost for the interviewees’ organizations. A reduction of those costs from the implementation of Pigment marked a positive development. Interviewees observed very low adoption of the legacy solution among their organizations’ teams. The lack of utilization explained its inefficiency and ineffectiveness. Additionally, there were high unavoidable external consulting costs associated with the organizations’ legacy solutions. However, with Pigment replacing the legacy solution, organizations eliminated these costs and allocated resources more efficiently towards development.
- Interviewees reported that their organizations' legacy solutions were about 25% less expensive than Pigment. However, the number of users utilizing the legacy solution was around half of the number of Pigment users in all four organizations. As a result, the cost per user for the legacy solution was higher than Pigment, since Pigment had a higher adoption rate and, consequently, number of users.
- The finance business partner at the digital experience technology company explained that its legacy solution had poor user experience and complicated processes that were hard for users to grasp. The company incurred unforeseen forecasting outcomes and technical problems that resulted in needing extra consulting services, which were equivalent to 55% of the legacy solution’s annual subscription fees.
- The financial controlling director from the children’s apparel organization explained that its legacy solutions, as well as the spreadsheets it used, had limitations and risks associated with its manual data processing, lack of real-time data, and potential security vulnerabilities. The interviewee also mentioned the challenges of duplicating processes and tools for new brands or franchises. Overall, they expressed that the implementation of Pigment has provided a more modern and flexible solution compared to the legacy systems.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- The composite has a legacy solution with a smaller scope than Pigment with an annual subscription fee of $416,250.
- Before Pigment, the composite organization spends an estimated $75,000 a year on consulting services for ongoing support of the legacy solution.
Risks. This benefit can vary by organization based on different factors, including the following:
- Other organizations could be bound by legal contracts that prohibit them from terminating their existing contracts with legacy technology providers right after implementing Pigment, delaying savings.
- The total cost of ownership of the legacy solution.
Results. To account for these risks and considering only one interview could quantify this benefit, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.04 million.
Savings From Legacy Solution Replacement
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| F1 | Annual subscription fee legacy solution | Interviews | $416,250 | $416,250 | $416,250 | |
| F2 | Annual consulting fee needed for legacy solution | Interviews | $75,000 | $75,000 | $75,000 | |
| Ft | Savings from legacy solution replacement | F1+F2 | $491,250 | $491,250 | $491,250 | |
| Risk adjustment | ↓15% | |||||
| Ftr | Savings from legacy solution replacement (risk-adjusted) | $417,563 | $417,563 | $417,563 | ||
| Three-year total: $1,252,689 | Three-year present value: $1,038,417 | |||||
Unquantified Benefits
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
- Better collaboration. The financial controlling director mentioned that Pigment enhanced collaboration among teams at its children’s toys and apparel organization. They said, “With Pigment, information is easily shared, enabling managers to have a real-time view of employees’ plans and performance.” Within their organization, the improved transparency and accessibility have resulted in better fluidity, collaboration, and synergy between teams, they said. Additionally, the cloud-based nature of the tool ensured that there were no files confined to a single computer. This allowed the organization’s team members to access the necessary information instantly.
-
Better decision-making. According to the interviewees, the ease of manipulating data significantly contributed to better decision-making at their organizations. They explained that the ability to manipulate data more easily made it simpler to establish hypotheses and scenarios. This, in turn, allowed for a deeper understanding of various possibilities and potential outcomes. Armed with this knowledge, business managers were able to make more informed decisions. More real-time observations provided by Pigment also allowed the businesses to increase the frequency of their planning.
Additionally, the interviewees noted that Pigment’s scenario forecasting and budgeting features enabled managers to quickly assess the impact of different decisions on their financials. This not only supported more efficient expense management but also aided in identifying investment opportunities. Ultimately, the interviewees emphasized that the improved information available to organizations through data manipulation led to more accurate and effective decision-making. This helped the organizations navigate challenges and seize opportunities with confidence.
- Data security. Different interviewees said that the use of Pigment enhanced security measures at their organizations. It reduced the risk of data loss compared to traditional methods like spreadsheets. When it used spreadsheets, one of the interviewees’ organizations relied on a single password for the whole organization. This increased the vulnerability to breaches and accidental deletions. Pigment minimized the risk of such incidents by human error. Additionally, the organizations experienced a reduced risk of data leakage or unauthorized disclosure. This improved security by safeguarding sensitive information and mitigating potential financial risks associated with data loss. The director of performance management at the nonprofit estimated that the time and cost to rebuild lost data can amount to as much as $70,000. For their organization, the implementation of Pigment offered a solution to enhance data security and mitigate potential risks of data loss.
- Better data confidence and management. Different interviewees said the transparency and understanding of Pigment’s architecture provided significant benefits to both their analysts and users. Unlike legacy solutions, which often operated as black boxes, organizations built Pigment collaboratively. This allowed their analysts to have a clear understanding of the platform’s functioning. The finance business partner at the digital experience technology organization said that analysts now have a comprehensive view of the information being put into the system and how it is being processed. In contrast, the interviewees stressed that legacy solutions often lacked this transparency, requiring additional consulting services to identify and address errors in the solutions’ underlying processes.
- Labor market attractiveness. The financial controlling director at the children’s toys and apparel organization said that using Pigment held appeal for young individuals entering the labor market at their organization, signifying young graduates’ readiness to utilize it in their future professional endeavors or internships. The interviewee said: “Although it may be challenging to quantify the exact level of attractiveness, it undoubtedly creates an impression of digital modernity. The Pigment tool not only equips young people with the necessary skills but also showcases their willingness to embrace new technologies and stay updated in their chosen fields.” For the interviewee, it made young workers more desirable candidates for potential employers and opened exciting opportunities in their career paths.
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Pigment and later realize additional uses and business opportunities, including:
- Workforce planning. The digital experience technology organization now uses Pigment for payroll planning within its finance department. In the future, the organization can extend this use case further into its human resource department for a larger workforce planning use case. Pigment will then offer the company a unified view of its workforce in a single platform that integrates directly with its existing systems. It will bring together data from various HR systems and create a centralized database of employee information. This will eliminate the need for manual data entry and ensure accurate and up-to-date information.
- Carbon footprint calculations. The digital transformation expert at the business process outsourcing and consultancy company mentioned the integration of a carbon footprint use case within Pigment that will enable it to proactively manage its environmental impact. By utilizing Pigment’s functionalities, the organization will be able to track and monitor its carbon emissions in real time and gain valuable insights for improvements to reduce its environmental footprint. It will optimize the supply chain and production processes, implementing strategies to minimize waste and energy consumption.
- Other use cases. Pigment can serve more use cases that are not mentioned in this TEI.
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 |
|---|---|---|---|---|---|---|---|
| Gtr | Total external costs composite | $407,925 | $530,250 | $551,250 | $577,500 | $2,066,925 | $1,779,433 |
| Htr | Total internal costs composite | $125,048 | $39,600 | $39,600 | $39,600 | $243,848 | $223,527 |
| Total costs (risk-adjusted) | $532,973 | $569,850 | $590,850 | $617,100 | $2,310,773 | $2,002,960 |
Total External Costs Composite
Evidence and data. The interviewees identified Pigment solution costs as the most significant expenses associated with using Pigment for their organizations. Apart from the initial implementation, there were no additional consulting fees required for tool maintenance. The interviewees provided different Pigment solution fees that depended on the number of users each organization subscribed. They explained that the costs of Pigment contained a fixed fee plus an additional cost per user. These then varied according to the user type (i.e., editor, contributor and explorer).
- Implementation. The financial controlling director at the children’s toys and apparel company mentioned that they had two full-time consultants from Pigment working on the implementation for a period of six to eight months. The director of performance management of the nonprofit organization had a Pigment implementation of around four months. They stated, "The cost of implementing Pigment was 80% lower in comparison to the nearest alternative offer we received.”
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
The composite organization expands its Pigment scope, increasing the number of users through the forecast period to realize greater benefits. As a result, Pigment subscription fees start at $505,000 in Year one and increase in Year 2 and Year 3. The organization also incurs $388,500 in external implementation costs.
Risks. This cost can vary by organization based on different factors, including the following:
- The Pigment platform fee may vary depending on the size of the organization.
- The costs of the platform will fluctuate based on the number of users and their classification as editors, contributors or explorers.
- Different use cases can lead to changes in the price of the platform.
- The implementation process costs may vary due to the complexity of the organization.
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 $1.78 million.
Total External Costs Composite
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| G1 | Implementation external costs (includes Pigment consultants, training, program and change management, and all preparation) | Interviews | $388,500 | $0 | $0 | $0 | |
| G2 | Pigment subscription fee | Composite | $0 | $505,000 | $525,000 | $550,000 | |
| Gt | Total external costs composite | G1+G2 | $388,500 | $505,000 | $525,000 | $550,000 | |
| Risk adjustment | ↑5% | ||||||
| Gtr | Total external costs composite (risk-adjusted) | $407,925 | $530,250 | $551,250 | $577,500 | ||
| Three-year total: $2,066,925 | Three-year present value: $1,779,433 | ||||||
Total Internal Costs Composite
Evidence and data. All interviewees identified internal costs from both the implementation of Pigment and ongoing maintenance costs. For the interviewees, the implementation of Pigment depended on the size and complexity of their use cases. For example, one interviewee said their organization had one and a half FTE dedicated for one year, whereas another interviewee said their organization had three FTE working on Pigment implementation for two and half months.
-
Implementation. During the implementation of Pigment at the digital experience technology company, the finance business partner explained that it had a dedicated team assembled to ensure a successful rollout. Three full-time analysts were assigned for a period of two to two and a half months. They worked alongside a part-time Pigment solution architect who dedicated 50% of their time to the project. Additionally, two managers from the financial planning and analysis teams played an integral role in preparing the model, ensuring its accuracy and relevance during two-hour long check-in sessions.
The director of performance management within the nonprofit organization mentioned that they collaborated with a team of Pigment consultants for the implementation. Internally, they invested approximately 500 hours into the project, which involved a team of three to four individuals and included data analysts and their managers.
- Internal maintenance cost. The finance business partner explained that Pigment requires one analyst to spend 20% of their time on maintenance tasks at the Digital experience technology organization. This means that 20% of their total working hours are dedicated to ensuring the proper functioning and upkeep of Pigment.
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following about the composite organization:
- For the implementation, the composite organization has five analysts working full time for about two months. They receive support from their executives, who dedicate four check-ins of two hours to the project.
- Pigment requires one analyst to spend 20% of their annual time on maintenance tasks.
Risks. This cost can vary by organization based on different factors, including the following:
- The use cases implemented in Pigment, which might need more or less resources from different areas.
- Fully burdened staff costs vary according to the geographic area where they are based.
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 $224,000.
Total Internal Costs Composite
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| H1 | Number of analysts involved during implementation | Interviews | 5 | 0 | 0 | 0 | |
| H2 | Number of executives involved during implementation | Interviews | 2 | 0 | 0 | 0 | |
| H3 | Hours spent on implementation by analysts | Interviews | 256 | 0 | 0 | 0 | |
| H4 | Hours spent on implementation by executives | Interviews | 8 | 0 | 0 | 0 | |
| H5 | Average fully burdened hourly cost of an analyst | TEI standard | $87 | $0 | $0 | $0 | |
| H6 | Average fully burdened hourly cost of an executive | TEI standard | $145 | $0 | $0 | $0 | |
| H7 | Implementation cost from the internal team | H1*H3*H5+H2*H4* H6 | $113,680 | ||||
| H8 | Internal maintenance cost | Interviews | 0 | $36,000 | $36,000 | $36,000 | |
| Ht | Total internal costs composite | H7+H8 | $113,680 | $36,000 | $36,000 | $36,000 | |
| Risk adjustment | ↑10% | ||||||
| Htr | Total internal costs composite (risk-adjusted) | $125,048 | $39,600 | $39,600 | $39,600 | ||
| Three-year total: $243,848 | Three-year present value: $223,527 | ||||||
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 | ($532,973) | ($569,850) | ($590,850) | ($617,100) | ($2,310,773) | ($2,002,960) |
| Total benefits | $0 | $2,717,831 | $3,386,631 | $3,805,780 | $9,910,242 | $8,128,962 |
| Net benefits | ($532,973) | $2,147,981 | $2,795,781 | $3,188,680 | $7,599,469 | $6,126,002 |
| ROI | 306% | |||||
| Payback | <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
-
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
-
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
-
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
-
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
Appendix B: 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.
PDF
