A Forrester Total Economic Impact™ Study Commissioned by Qlik®, January 2024
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Modern organizations run on information. The efficacy of marketing campaigns, sales campaigns, product manufacturing, product distribution, internal and external communication, and the ability to adjust these aspects according to changing circumstances, all hinge on the right people having the right information at the right time. Getting this information is more easily said than done; often, organizational data is siloed by region or business section. Employees have to spend valuable time finding, organizing, and analyzing this data, only for business leaders to find themselves operating on outdated information anyway.
Qlik provides dynamic, AI-enabled analytics and business intelligence with both on-premises solutions and its cloud platform. Qlik can collect, aggregate, and organize data from across an organization, enabling intuitive visualization of data. Its associative engine further enables insights and discovery by allowing users to quickly search and organize their data without being limited by pre-aggregation or predefined queries.
Qlik commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Qlik Cloud Analytics. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Qlik Cloud Analytics on their organizations.1
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives with experience using Qlik Cloud Analytics. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is a global organization with $5 billion in revenue and 5,000 total employees.
Interviewees said that prior to using Qlik Cloud Analytics, their organizations were limited by on-premises solutions. Some used on-premises Qlik, while others had siloed, legacy business intelligence (BI) solutions from other organizations. This frequently led to missed opportunities due to inadequate visualization and analysis of data, as well as costs from manual employee effort spent on trying to process data and ongoing costs to support legacy solutions through maintenance and subscription fees.
After the investment in Qlik Cloud Analytics, the interviewees were able to significantly streamline several manual processes concerned with and based on previously inaccessible data and improve their ability to quickly gather information to inform business decisions. Key results from the investment include improved revenue, saved employee time, and reduced total cost of ownership on legacy solutions.
Return on investment (ROI)
0%
Net present value (NPV)
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
For , this benefit could be worth over three years.
For , this benefit could be worth over three years.
For , this benefit could be worth over three years.
For , this benefit could be worth over three years.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
For , this cost could be over three years.
For , this cost could be over three years.
For , this cost could be over three years.
The representative interviews and financial analysis found that a composite organization experiences benefits of $6.4 million over three years versus costs of $2.1 million, adding up to a net present value (NPV) of $4.3 million and an ROI of 209%.
could experience benefits of over three years versus costs of , adding up to an NPV of and an ROI of 0%.
100%
Legacy BI costs eliminated by Year 3
“The thing I think Qlik does better than other tools is the association of data. In other tools, you have different data tables that are joined together to create a cohesive view, but they’re much more fragmented in their applications than Qlik is. ... With the associative engine, if you make a selection in the application, as long as you’ve done your data modeling in a way that makes sense, then everything else in the application filters along with it.”
— Data engineer, industrial supply
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Return on investment (ROI)
Benefits PV
Net present value (NPV)
Payback (in months)
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Qlik Cloud Analytics.
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 Qlik Cloud Analytics can have on an organization.
Interviewed Qlik stakeholders and Forrester analysts to gather data relative to Qlik Cloud Analytics.
Interviewed four representatives at organizations using Qlik Cloud Analytics to obtain data about costs, benefits, and risks.
Designed a composite organization based on characteristics of the interviewees’ organizations.
Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.
Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.
Readers should be aware of the following:
This study is commissioned by Qlik 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 Qlik Cloud Analytics. For the interactive functionality using Configure Data/Custom Data, the intent is for the questions to solicit inputs specific to a prospect's business. Forrester believes that this analysis is representative of what companies may achieve with Qlik Cloud Analytics based on the inputs provided and any assumptions made. Forrester does not endorse Qlik or its offerings. Although great care has been taken to ensure the accuracy and completeness of this model, Qlik and Forrester Research are unable to accept any legal responsibility for any actions taken on the basis of the information contained herein. The interactive tool is provided ‘AS IS,’ and Forrester and Qlik make no warranties of any kind.
Qlik 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.
Qlik provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Sam Sexton
Matt Dunham
Role | Industry | Region | Annual Revenue |
---|---|---|---|
Data engineer | Industrial supply | North America | $287M |
Global data and analytics manager | Consumer goods | Global | $1B |
Consultant | Jewelry | North America | $360M |
VP of customer solutions | Logistics | Global | $93B |
Before engaging with Qlik Cloud Analytics, the interviewees noted their organizations primarily conducted data aggregation and analysis with on-premises tools. This included legacy deployments of Qlik, home-grown solutions, a mixture of other BI solutions, or using spreadsheets manually.
The interviewees noted how their organizations struggled with common challenges, including:
Limited to nonexistent visibility into data. The interviewees noted their organizations’ prior solutions, regardless of the type, were insufficient to provide business users with an accurate, up-to-date view of the business.
The global data and analytics manager at a consumer goods organization stated, “There wasn’t a holistic view of the data from a central perspective. Everything was regionalized, so a lot of reporting was done in completely different formats, different variations, even different data sources.”
The jewelry company consultant explained to Forrester, “Folks tried to put some things together and bring other tools in, but it didn’t happen as they hoped.”
Inability to make timely, accurate decisions. The lack of visibility into organizational data meant it was extremely difficult, if not impossible, for the interviewees’ organizations to act quickly to changing business realities and make informed decisions.
The consultant at the jewelry company described, “Folks had their own version of truth based on what they were doing, and that was a challenge for the company to manage sales, revenue, and product performance — let alone workforce management.”
The data engineer for the industrial supply organization stated, “Our prior tools were narrowly focused and didn’t lend themselves well to modifying dashboards or creating real analytics applications that let you dig in and find associations and opportunities.”
The global data and analytics manager for the consumer goods organization explained: “From a bigger picture perspective, being able to actually react and make decisions in-market was always a challenge. You’re always weeks — and in some cases, months — behind what’s actually happening.”
Manual effort required to process and analyze data. What data processing and analysis did occur required heavy amounts of manual effort from administrative-level employees and data analysts, often yielding very little return for the high amount of effort required. Capabilities like alerts for important data and updates and automation of rote tasks were sorely needed.
The industrial supply data engineer elaborated on this point, noting, “There were requests for, say, an open orders report from sales reps and in a lot of cases, we would have to list all of the orders they had open for each one of those reports.”
The jewelry company consultant concurred, stating: “There was a lot of manual effort. You had many spreadsheets, many products and forms extracting and generating different things … the organization needed to make things easier, to simply report what they’re doing and how they’re doing it without having to move a mountain in order to do it.”
Legacy solutions required time, money, and effort to maintain. The aforementioned legacy infrastructure that the interviewees struggled to use to provide useful business insights required significant investments of time, effort, and spend on subscription costs in order to maintain.
The VP of customer solutions for the logistics company explained: “With our prior solution, we saw some limitations. … Pricing was limiting our capabilities.”
The data engineer for the industrial supply company gave an example of the maintenance and duplicative effort required with their prior solutions, stating, “Whether it was due to volume of queries or something else, there would be failures on older tools, and we’d have to resend reports.”
The interviewees’ organizations searched for a solution that could:
“A large part of the challenge was analysts having to actually go in to acquire the data, so there was a lot of manual downloading of data from different portals or electronic point-of-sale from retailers.”
— Global data and analytics manager, consumer goods
“The finance organization had so many folks trapped on older tools. They had to make spreadsheets.”
— Consultant, jewelry company
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 organization has $5 billion in revenue and a total of 5000 employees. As part of a larger shift towards the cloud, it moves away from its on-premises, legacy BI solutions in favor of Qlik Cloud Analytics with a significant initial deployment in Year 1 and increased adoption within the business year over year. A total of 150 employees are trained on Qlik Cloud Analytics.
Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|
Atr | Improved revenue via better decision-making | $213,750 $213,750 | $256,500 $256,500 | $285,000 $285,000 | $755,250 $755,250 | $620,426 $620,426 |
Btr | Time savings on data analysis | $382,500 $382,500 | $459,000 $459,000 | $535,500 $535,500 | $1,377,000 $1,377,000 | $1,129,395 $1,129,395 |
Ctr | Data preparation time savings | $912,000 $912,000 | $1,026,000 $1,026,000 | $1,140,000 $1,140,000 | $3,078,000 $3,078,000 | $2,533,524 $2,533,524 |
Dtr | Retired legacy costs | $760,000 $760,000 | $855,000 $855,000 | $950,000 $950,000 | $2,565,000 $2,565,000 | $2,111,270 $2,111,270 |
Total benefits (risk-adjusted) | $2,268,250 $2,268,250 | $2,596,500 $2,596,500 | $2,910,500 $2,910,500 | $7,775,250 $7,775,250 | $6,394,615 $6,394,615 |
Evidence and data. Interviewees reported that Qlik Cloud Analytics empowered their organizations to derive actionable insights from complex data sets, leading to informed, data-driven decisions. By using improved visibility, automations, and alerting to optimize decision-making, the interviewees’ organizations were able to identify new revenue opportunities and allocate resources more efficiently, resulting in top-line benefits.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The increase in revenue from improved decision-making will vary depending on the following factors:
Results. To account for these risks, Forrester adjusted this benefit downward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $620,426.
For with $0 in annual revenue, this benefit may have a three-year, risk-adjusted total PV of .
“Day to day, we’re using Qlik to be able to identify opportunities that we wouldn’t have been able to with our old tools.”
— Data engineer, industrial supply
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
A1 | Company revenue impacted by Qlik | CompositeComposite | $1,000,000,000 $1,000,000,000 | $1,000,000,000 $1,000,000,000 | $1,000,000,000 $1,000,000,000 | |
A2 | Revenue uplift due to Qlik insights | Interviews | 0.15%0.15% | 0.18%0.18% | 0.20%0.20% | |
A3 | Operating margin | CompositeComposite | 15.0%15.0% | 15.0%15.0% | 15.0%15.0% | |
At | Improved revenue via better decision-making | A1*A2*A3 | $225,000 $225,000 | $270,000 $270,000 | $300,000 $300,000 | |
Risk adjustment | ↓5% | |||||
Atr | Improved revenue via better decision-making (risk-adjusted) | $213,750 $213,750 | $256,500 $256,500 | $285,000 $285,000 | ||
Three-year total: $755,250 $755,250 | Three-year present value: $620,426 $620,426 |
Evidence and data. Interviewees noted that Qlik Cloud Analytics’ robust automation, visualization, and aggregation capabilities streamlined data analysis processes and Qlik Cloud Analytics’ associative engine enabled more flexible and dynamic data exploration while reducing the amount of work required from employees.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The time savings on data analysis will vary depending on the following factors:
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 $1.1 million.
For , this benefit may have a three-year, risk-adjusted total PV of .
25% to 35%
Time savings on data analysis
“Qlik has revolutionized finding data for us. There was never any centralized point for anybody to go and get any kind of data prior to Qlik. Now if anybody needs anything, there’s an app in Qlik so they can go and analyze the data.”
— Global data and analytics manager, consumer goods
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
B1 | Analysts and manager data analysis FTEs | CompositeComposite | 1010 | 1010 | 1010 | |
B2 | Fully burdened blended annual salary for analysts and manager data analysis FTEs | CompositeComposite | $170,000 $170,000 | $170,000 $170,000 | $170,000 $170,000 | |
B3 | Percentage of time on data analysis saved by Qlik | Interviews | 25%25% | 30%30% | 35%35% | |
Bt | Time savings on data analysis | B1*B2*B3 | $425,000 $425,000 | $510,000 $510,000 | $595,000 $595,000 | |
Risk adjustment | ↓10% | |||||
Btr | Time savings on data analysis (risk-adjusted) | $382,500 $382,500 | $459,000 $459,000 | $535,500 $535,500 | ||
Three-year total: $1,377,000 $1,377,000 | Three-year present value: $1,129,395 $1,129,395 |
Evidence and data. Interviewees noted that Qlik Cloud Analytics automated and eliminated repetitive manual tasks related to data processing and streamlined other administrative tasks, such as preparing financial reports or sharing data internally. Interviewees specifically cited Qlik’s centralization of information, ability to enable automation around workflows, and alerting around specific points of interest.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The time savings on administrative tasks will vary depending on the following factors:
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 $2.5 million.
For , this benefit may have a three-year, risk-adjusted total PV of .
50%
Time savings on administrative tasks impacted by Qlik Cloud Analytics
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
C1 | FTEs performing work on manual data processing, reporting, and finance impacted by Qlik | CompositeComposite | 2020 | 2020 | 2020 | |
C2 | Fully burdened blended annual salary for administrative FTEs | CompositeComposite | $120,000 $120,000 | $120,000 $120,000 | $120,000 $120,000 | |
C3 | Time savings on manual data processing through Qlik | Interviews | 40%40% | 45%45% | 50%50% | |
Ct | Data preparation time savings | C1*C2*C3 | $960,000 $960,000 | $1,080,000 $1,080,000 | $1,200,000 $1,200,000 | |
Risk adjustment | ↓5% | |||||
Ctr | Data preparation time savings (risk-adjusted) | $912,000 $912,000 | $1,026,000 $1,026,000 | $1,140,000 $1,140,000 | ||
Three-year total: $3,078,000 $3,078,000 | Three-year present value: $2,533,524 $2,533,524 |
Evidence and data. Interviewees noted that Qlik Cloud Analytics empowered their organizations to transition their data analysis and processing to the cloud, facilitating the retirement of legacy systems. Interviewees also reduced costs associated with managing legacy platforms, yielding additional savings.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The legacy cost savings will vary depending on the following factors:
Results. To account for these risks, Forrester adjusted this benefit downward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $2.1 million.
For with an annual spend on business intelligence and data analytics tools of $0, this benefit may have a three-year, risk-adjusted total PV of .
80% to 100%
Legacy system savings
“We were able to retire our main legacy product within 12 months.”
— Global data and analytics manager, consumer goods
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
D1 | Total legacy subscription costs | CompositeComposite | $800,000 $800,000 | $800,000 $800,000 | $800,000 $800,000 | |
D2 | Total legacy platform management costs | CompositeComposite | $200,000 $200,000 | $200,000 $200,000 | $200,000 $200,000 | |
D3 | Percentage of costs avoided per year | Interviews | 80%80% | 90%90% | 100%100% | |
Dt | Retired legacy costs | (D1+D2)*D3 | $800,000 $800,000 | $900,000 $900,000 | $1,000,000 $1,000,000 | |
Risk adjustment | ↓5% | |||||
Dtr | Retired legacy costs (risk-adjusted) | $760,000 $760,000 | $855,000 $855,000 | $950,000 $950,000 | ||
Three-year total: $2,565,000 $2,565,000 | Three-year present value: $2,111,270 $2,111,270 |
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
“Folks saw in Qlik a lot of capabilities that they weren’t getting with what they already had. The technology itself had a more modern and friendly UI, and that’s huge for their industry. Moving fast and being intuitive is crucial.”
— Consultant, jewelry company
Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|---|
Etr | Ongoing subscription and professional services costs | $0 $0 | $388,500 $388,500 | $388,500 $388,500 | $388,500 $388,500 | $1,165,500 $1,165,500 | $966,142 $966,142 |
Ftr | Implementation effort and training costs | $185,535 $185,535 | $0 $0 | $0 $0 | $0 $0 | $185,535 $185,535 | $185,535 $185,535 |
Gtr | Ongoing data flow management costs | $0 $0 | $368,550 $368,550 | $368,550 $368,550 | $368,550 $368,550 | $1,105,650 $1,105,650 | $916,529 $916,529 |
Total costs (risk-adjusted) | $185,535 $185,535 | $757,050 $757,050 | $757,050 $757,050 | $757,050 $757,050 | $2,456,685 $2,456,685 | $2,068,206 $2,068,206 |
Evidence and data. Interviewees described the ongoing costs their organization incurred with Qlik Cloud Analytics.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. Ongoing costs will vary depending on the following factors:
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 $966,000.
For , ongoing subscription and professional services costs may have a three-year, risk-adjusted total PV of . Please note that this is based on a high-level estimation and does not represent a quote. For more details, please contact Qlik.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
E1 | Consumption and user-based subscription fees | CompositeComposite | 0 | $250,000 $250,000 | $250,000 $250,000 | $250,000 $250,000 | |
E2 | Annual professional services fees required to run Qlik | CompositeComposite | 0 | $120,000 $120,000 | $120,000 $120,000 | $120,000 $120,000 | |
Et | Ongoing subscription and professional services costs | E1+E2 | $0 | $370,000 $370,000 | $370,000 $370,000 | $370,000 $370,000 | |
Risk adjustment | ↑5% | ||||||
Etr | Ongoing subscription and professional services costs (risk-adjusted) | $0 $0 | $388,500 $388,500 | $388,500 $388,500 | $388,500 $388,500 | ||
Three-year total: $1,165,500 $1,165,500 | Three-year present value: $966,142 $966,142 |
Evidence and data. The interviewees provided descriptions of the process of implementing Qlik Cloud Analytics and training new users at their organizations.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks.The legacy cost savings will vary depending on the following factors:
Results. To account for these risks, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV of $185,487.
For , these costs may have a three-year, risk-adjusted total PV of .
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
F1 | One-time professional services costs | Assumption | $60,000 $60,000 | $0 | $0 | $0 | |
F2 | Size of implementation team | Assumption | 44 | 0 | 0 | 0 | |
F3 | Fully burdened blended weekly salary for implementation team | TEI standard | $2,700 $2,700 | $0 | $0 | $0 | |
F4 | Weeks required for implementation | Interviews | 1010 | 0 | 0 | 0 | |
F5 | Total number of employees using Qlik | 150150 | 0 | 0 | 0 | ||
F6 | Hours of training required for Qlik | Interviews | 11 | 0 | 0 | 0 | |
F7 | Fully burdened blended hourly salary for FTEs | TEI standard | $58 $58 | $0 | $0 | $0 | |
Ft | Implementation effort and training costs | F1+(F2*F3*F4) + (F5*F6*F7) | $176,700 $176,700 | $0 $0 | $0 $0 | $0 $0 | |
Risk adjustment | ↑5% | ||||||
Ftr | Implementation effort and training costs (risk-adjusted) | $185,535 $185,535 | $0 $0 | $0 $0 | $0 $0 | ||
Three-year total: $185,535 $185,535 | Three-year present value: $185,535 $185,535 |
Evidence and data. Interviewees reported that their organizations devoted a small team of internal employees to manage the flows of data into and out of Qlik Cloud Analytics.
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Risks. The legacy cost savings will vary depending on the following factors:
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 $917,000.
For , these costs may have a three-year, risk-adjusted total PV of .
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
G1 | FTEs on ongoing operations and analytics management team managing data flows | InterviewsInterviews | 0 | 2.52.5 | 2.52.5 | 2.52.5 | |
G2 | Blended fully-loaded operations and analytics management team salary | TEI standard | 0 | $140,400 $140,400 | $140,400 $140,400 | $140,400 $140,400 | |
Gt | Ongoing data flow management costs | G1*G2 | $0 $0 | $351,000 $351,000 | $351,000 $351,000 | $351,000 $351,000 | |
Risk adjustment | ↑5% | ||||||
Gtr | Ongoing data flow management costs (risk-adjusted) | $0 $0 | $368,550 $368,550 | $368,550 $368,550 | $368,550 $368,550 | ||
Three-year total: $1,105,650 $1,105,650 | Three-year present value: $916,529 $916,529 |
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.
Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
---|---|---|---|---|---|---|
Total costs | ($185,535)($185,535) | ($757,050)($757,050) | ($757,050)($757,050) | ($757,050)($757,050) | ($2,456,685)($2,456,685) | ($2,068,206)($2,068,206) |
Total benefits | $0 $0 | $2,268,250 $2,268,250 | $2,596,500 $2,596,500 | $2,910,500 $2,910,500 | $7,775,250 $7,775,250 | $6,394,615 $6,394,615 |
Net benefits | ($185,535)($185,535) | $1,511,200 $1,511,200 | $1,839,450 $1,839,450 | $2,153,450 $2,153,450 | $5,318,565 $5,318,565 | $4,326,409 $4,326,409 |
ROI | 209%209% | |||||
Payback period (months) | <6<6 |
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.
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows.
The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made unless other projects have higher NPVs.
A project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs.
The interest rate used in cash flow analysis to take into account the time value of money. Organizations typically use discount rates between 8% and 16%.
The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost.
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
1 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.
Forrester provides independent and objective research-based consulting to help leaders deliver key transformation outcomes. Fueled by our customer-obsessed research, Forrester’s seasoned consultants partner with leaders to execute on their priorities using a unique engagement model that tailors to diverse needs and ensures lasting impact. For more information, visit forrester.com/consulting.
© Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies.
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