A Forrester Total Economic Impact™ Study Commissioned By Verizon, October 2023
Whether used for external communication with customers or internal communication between employees and departments, making sure calls run smoothly and easily is vital to organizations. High-quality, reliable calls backed by cellular data ensure information is passed along without being dropped, which in turn allows internal initiatives and customer communications to flourish. Without a reliable calling solution, organizations risk poor quality calls, bungled management of clients, and failing compliance.
Verizon’s calling solutions for Microsoft Teams provide an extended mobile-first Teams experience by joining the Teams experience with a single business-provided phone number and coverage network. Verizon offers three Microsoft Teams calling solutions that enable Teams users to make and receive calls outside the organization to virtually anyone anywhere, including customers, partners, and other employees on both wireline and wireless/cellular solutions. Companies can mix and match the three solutions to choose the right solution for each individual employee, whether they are onsite, remote, hybrid, or mobile. This centralizes the workforce communications experience, creates consistency of business policies, and provides an optimal calling experience for all employees, regardless of where they are physically located.
Verizon commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Verizon’s calling solutions for Microsoft Teams. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Verizon’s Teams calling solutions on their organizations.
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed the IT director of a healthcare management company with experience using both Verizon Calling with Microsoft Teams (VCMT) and Verizon Mobile for Microsoft Teams (VMMT). Forrester used the interviewee’s experiences to project a three-year financial analysis for their organization. To keep the interviewee and their company anonymous, Forrester refers to the organization as “Dermex.”
The IT director noted that prior to using two of Verizon’s three Teams calling solutions, Dermex struggled with call consistency issues and poor call quality, which hurt the organization’s operations, branding, and bottom line. It also lacked the ability to comply with regulation-based reporting requirements and had to frequently work with its call center to resolve technical issues.
After the investment in VCMT and VMMT, the IT director was able to finally centralize the organization’s calling and collaboration with Teams and support its hybrid employee base (e.g., mobile workers, desk workers, etc.) with both a landline and mobile calling solution that is best suited for each persona. The IT director shared that regardless of location, Verizon’s network improved call quality and said its technology helped Dermex employees consolidate voicemails, further centralizing communication channels and reducing management costs. This ultimately improved communications with patients and customers.
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for Dermex include:
Unquantified benefits. Benefits that provide value for Dermex but are not quantified for this study include:
Costs. Three-year, risk-adjusted PV costs for Dermex include:
The interview and financial analysis found that the representative’s organization experiences benefits of $5.01 million over three years versus costs of 1.64 million, adding up to a net present value (NPV) of $3.37 million and an ROI of 205%.
99%
Reduction in individual clinic landline spend
“With Microsoft Teams, you’re able to forward your calls to another employee or external number. …But with Verizon Calling with Microsoft Teams, you have control [of] where your incoming calls go. …That’s the benefit for us.”
IT director, healthcare management
Return on investment (ROI):
Benefits PV:
Net present value (NPV):
Payback:
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment Verizon’s calling solutions for Microsoft Teams.
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 Verizon’s calling solutions for Microsoft Teams can have on an organization.
Interviewed Verizon’s stakeholders and Forrester analysts to gather data relative to Verizon Calling with Microsoft Teams and Verizon Mobile for Microsoft Teams.
Interviewed the representative of an organization using Verizon Calling with Microsoft Teams and Verizon Mobile for Microsoft Teams to obtain data with respect to costs, benefits, and risks.
Constructed a financial model representative of the interview 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 Verizon’s 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 Verizon Calling with Microsoft Teams and Verizon Mobile for Microsoft Teams.
Verizon’s 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.
Verizon’s provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Stephanie Slate
Sarah Lervold
Before implementing VCMT and VMMT, Dermex managed calls through a legacy solution that required landlines and physical call centers to function.
The IT director noted how Dermex struggled with common challenges, including:
Dermex executives and internal stakeholders determined the organization needed a solution that could:
“With our prior setup, my CIO was asking me why the IT director had to be in the room when we had staff to troubleshoot the issues. It was that complex [that I had to be there].”
IT director, healthcare management
Dermex is a healthcare management organization that employs 2,500 people and hires 120 new employees each year. Dermex has two models: A portion of its employees work in one of eight healthcare clinics, and they previously used a legacy voice calling solution before switching to Microsoft Teams. However, the legacy phone system did not support easy caller ID branding or modification with Teams, which frequently resulted in patients ignoring clinic outreach calls including appointment reminders.
Dermex also has a group of home healthcare workers who require a fully mobile solution because they work remotely in the field. These home health workers often experienced dropped calls and other quality issues.
For its healthcare clinics, Dermex opts to augment Microsoft Teams with VCMT to ensure that calls are not marked as spam and patients answer outreach calls. The company invests in VMMT to allow its mobile staff to communicate with patients when they are in the field and to reach other staff members when they are out of the office via the call forwarding feature. VMMT also provides employees with a single business-provided phone number for mobile and desktop devices.
Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|
Atr | Retired legacy outbound voice calling solution savings | $985,536 | $985,536 | $985,536 | $2,956,608 | $2,450,882 |
Btr | Legacy wired phone solution savings | $536,400 | $534,600 | $534,600 | $1,605,600 | $1,331,107 |
Ctr | Profit increase from business instability mitigation | $243,000 | $510,300 | $729,000 | $1,482,300 | $1,190,353 |
Dtr | New-hire setup labor savings | $4,536 | $5,307 | $6,033 | $15,876 | $13,042 |
Etr | Staff training efficiencies | $8,070 | $8,564 | $8,564 | $25,199 | $20,849 |
Total benefits (risk-adjusted) | $1,777,542 | $2,044,308 | $2,263,733 | $6,085,583 | $5,006,233 |
Evidence and data. Implementing VCMT and VMMT allowed Dermex to realize significant savings on licensing and maintenance of its prior solution.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include the following:
Results. To account for these risks, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $2.5 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
A1 | Retired annual legacy solution cost | Interview | $1,200,000 | $1,200,000 | $1,200,000 | |
A2 | Time dedicated by IT director to troubleshoot legacy outbound calling solution (hours) | Interview | 280 | 280 | 280 | |
A3 | Average fully burdened hourly rate of an IT director | TEI standard | $114 | $114 | $114 | |
At | Retired legacy outbound voice calling solution savings | A1+(A2*A3) | $1,231,920 | $1,231,920 | $1,231,920 | |
Risk adjustment | ↓20% | |||||
Atr | Retired legacy outbound voice calling solution savings (risk-adjusted) | $985,536 | $985,536 | $985,536 | ||
Three-year total: $2,956,608 | Three-year present value: $2,450,882 |
Evidence and data. Verizon’s calling solutions for Microsoft Teams didn’t just replace Dermex’s prior calling solutions, they also allowed it to almost completely retire landlines for several clinics. Once Dermex made this change, it was also able to retire the existing desk phones since they were no longer needed.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include:
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 $1.3 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
B1 | Number of clinics | Interview | 8 | 8 | 8 | |
B2 | Average cost of landlines per clinic | Interview | $6,250 | $6,250 | $6,250 | |
B3 | Previous monthly spend on clinic landlines with legacy solution | B1*B2 | $50,000 | $50,000 | $50,000 | |
B4 | Percent savings with VCMT | Interview | 99.0% | 99.0% | 99.0% | |
B5 | Subtotal: Legacy clinic landline savings | B3*B4*12 | $594,000 | $594,000 | $594,000 | |
B6 | Desk phones per clinic that can be retired with VCMT in place | Interview | 25 | 0 | 0 | |
B7 | Total desk phones that can be retired with VCMT in place | B1*B6 | 200 | 0 | 0 | |
B8 | Cost per desk phone line | Interview | $10 | $0 | $0 | |
B9 | Subtotal: Retired desk phone savings | B7*B8 | $2,000 | $0 | $0 | |
Bt | Legacy wired phone solution savings | B5+B9 | $596,000 | $594,000 | $594,000 | |
Risk adjustment | ↓10% | |||||
Btr | Legacy wired phone solution savings (risk-adjusted) | $536,400 | $534,600 | $534,600 | ||
Three-year total: $1,605,600 | Three-year present value: $1,331,107 |
Evidence and data. One of the larger issues Dermex struggled with was calls to patients appearing as spam, which limited its ability to conduct business. With Verizon Calling with Microsoft Teams, Dermex mitigated this by making sure its caller ID was properly displayed.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include:
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 $1.2 million.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
C1 | Number of patients | Interview | 25,000 | 35,000 | 50,000 | |
C2 | Percentage of patient appointments completed in the prior environment | Assumption | 45% | 45% | 45% | |
C3 | Patients seen in the prior environment | C1*C2 | 11,250 | 15,750 | 22,500 | |
C4 | Improvement in patient appointment completed rate | Interview | 20% | 30% | 30% | |
C5 | Percentage of patient appointments completed | C2*C4+C2 | 54.00% | 58.50% | 58.50% | |
C6 | Patients seen | C1*C5 | 13,500 | 20,475 | 29,250 | |
C7 | Average value of a patient appointment | Interview | $800 | $800 | $800 | |
C8 | Revenue growth from increased patient completion rate | (C6*C7)-(C3*C7) | $1,800,000 | $3,780,000 | $5,400,000 | |
C9 | Profit margin | Assumption | 15% | 15% | 15% | |
Ct | Profit increase from business instability mitigation | C8*C9 | $270,000 | $567,000 | $810,000 | |
Risk adjustment | ↓10% | |||||
Ctr | Profit increase from business instability mitigation (risk-adjusted) | $243,000 | $510,300 | $729,000 | ||
Three-year total: $1,482,300 | Three-year present value: $1,910,353 |
Evidence and data. Streamlining calling with VMMT enabled Dermex to realize time savings on rolling out new mobile lines for new hires.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include:
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 $13,000.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
D1 | Number of new mobile lines required per month | Interview | 10 | 10 | 10 | |
D2 | Subtotal: Number of new mobile lines required for new hires | D1*12 | 120 | 120 | 120 | |
D3 | Time previously spent by system administrators setting up equipment and assigning Microsoft Teams numbers per new hire in the prior environment (hours) | Interview | 1.5 | 1.5 | 1.5 | |
D4 | Time spent by system administrators setting up equipment and assigning Microsoft Teams numbers per new hire with VMMT (hours) | Interview | 0.50 | 0.33 | 0.17 | |
D5 | Average fully burdened hourly rate of a system administrator | TEI standard | $42 | $42 | $42 | |
Dt | New-hire setup labor savings | (D3-D4)*D2*D5 | $5,040 | $5,897 | $6,703 | |
Risk adjustment | ↓10% | |||||
Dtr | New-hire setup labor savings (risk-adjusted) | $4,536 | $5,307 | $6,033 | ||
Three-year total: $15,876 | Three-year present value: $13,042 |
Evidence and data. The IT director stated that due to preexisting knowledge of Teams and mobile phone usage among Dermex employees, training for VMMT was simpler than for prior solutions.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include:
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 $21,000.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
E1 | Time per week dedicated to Microsoft training in prior environment (hours) | Interview | 1 | 1 | 1 | |
E2 | Time per week dedicated to Microsoft training with VMMT (hours) | Interview | 0.25 | 0.25 | 0.25 | |
E3 | Directors of training | Interview | 2 | 2 | 2 | |
E4 | Average fully burdened hourly rate of a director of training | TEI standard | $65 | $65 | $65 | |
E5 | Subtotal: Savings for improved efficiencies for directors of training | (E1-E2)*E3*E4*49 | $4,778 | $5,070 | $5,070 | |
E6 | IT directors who support training | Interview | 1 | 1 | 1 | |
E7 | Average fully burdened hourly rate of an IT director | A3 | $114 | $114 | $114 | |
E8 | Subtotal: Savings for improved efficiencies for IT director | (E1-E2)*E6*E7*49 | $4,190 | $4,446 | $4,446 | |
Et | Staff training efficiencies | E5+E8 | $8,968 | $9,516 | $9,516 | |
Risk adjustment | ↓10% | |||||
Etr | Staff training efficiencies (risk-adjusted) | $8,070 | $8,564 | $8,564 | ||
Three-year total: $25,199 | Three-year present value: $20,849 |
Evidence and data. The IT director said Dermex’s executives and internal stakeholders opted to have Verizon employees set up much of the initial deployment for VCMT. This means the IT director saved time on tasks they normally would have to handle.
However, Forrester did not incorporate this benefit into the financial model because while Dermex opted to have Verizon do the work, other organizations may be reluctant to share password and security information and may desire to keep that work with internal employees. Because this is considered an avoided cost, Forrester modeled an example that readers can use to estimate potential further positive impact and ROI.
The IT director said: “Verizon gave us the walkthrough. We got everything licensed to make sure Verizon and Teams were talking to each other on the wireless side. I followed the steps, simplified things for my team, and automated things into Microsoft Office 365. It gives them the license [and] the policy, and we’re done.”
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this benefit for organizations include:
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 $45,000.
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
XX1 | Regions | Interview | 20 | 0 | 0 | |
XX2 | Time an IT director needs for setup per region (hours) | Interview | 24 | 0 | 0 | |
XX3 | Average fully burdened hourly rate of an IT director | A3 | $114 | |||
XXt | VCMT setup efficiencies | XX1*XX2*XX3 | $54,720 | $0 | $0 | |
Risk adjustment | ↓10% | |||||
Atr | VCMT setup efficiencies (risk-adjusted) | $49,248 | $0 | $0 | ||
Three-year total: $49,248 | Three-year present value: $44,771 |
The IT director mentioned the following additional benefits that Dermex experienced but was not able to quantify:
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement one of Verizon’s calling solutions for Microsoft Teams and later realize additional uses and business opportunities, including:
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|---|
Ftr | VCMT and VMMT licensing costs | $25,286 | $314,820 | $318,533 | $322,245 | $980,884 | $816,844 |
Gtr | Internal preparation and implementation labor for VCMT | $166,320 | $176,550 | $0 | $0 | $342,870 | $326,820 |
Htr | Internal preparation and implementation labor for VMMT | $271 | $51,955 | $2,590 | $1,564 | $56,380 | $50,818 |
Itr | Ongoing management and training of VMMT and VCMT by internal staff | $0 | $205,025 | $166,525 | $161,575 | $533,124 | $445,403 |
Total costs (risk adjusted) |
$191,877 | $748,350 | $487,647 | $485,384 | $1,913,257 | $1,639,885 |
Evidence and data. The IT director explained to Forrester that Dermex pays annual licensing costs for its use of Verizon Mobile for Microsoft Teams, Verizon Calling with Microsoft Teams, and E3 phone licenses.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this cost for organizations include:
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 $817,000.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|---|
F1 | Existing VMMT users | Interview | 10 | 1,800 | 1,825 | 1,850 |
F2 | Net new hires on VMMT | D2 | 0 | 120 | 120 | 120 |
F3 | Microsoft E3 Teams Phone Standard license per user | Assumption | $96 | $96 | $96 | $96 |
F4 | Cost per VMMT line | Interview | $4 | $4 | $4 | $4 |
F5 | Cost per Verizon phone plan | Interview | $35 | $35 | $35 | $35 |
F6 | Subtotal: VMMT cost | (F1+F2)*(F3+F4+ F5) | $1,350 | $259,200 | $262,575 | $265,950 |
F7 | Fees for VCMT users | Interview | $2,437.50 | $7,800.00 | $7,800.00 | $7,800.00 |
F8 | Microsoft E3 Teams Phone Standard license per user | Assumption | $19,200 | $19,200 | $19,200 | $19,200 |
F9 | Subtotal: VCMT cost | F7+F8 | $21,637.50 | $27,000.00 | $27,000.00 | $27,000.00 |
Ft | VCMT and VMMT licensing costs | F6+F9 | $22,988 | $286,200 | $289,575 | $292,950 |
Risk adjustment | ↑10% | |||||
Ftr | VCMT and VMMT licensing costs (risk-adjusted) | $25,286 | $314,820 | $318,533 | $322,245 | |
Three-year total: $980,884 | Three-year present value: $816,844 |
Evidence and data. To use VCMT, Dermex’s employees needed to spend time on several implementation tasks and other tasks in Year 1.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this cost for organizations include:
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 $327,000.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|---|
G1 | Time dedicated to preparing account information (hours) | Interview | 180 | 576 | ||
G2 | Time dedicated to troubleshooting (hours) | Interview | 20 | 20 | ||
G3 | Average fully burdened hourly rate of an IT director | A3 | $114 | $114 | ||
G4 | Subtotal: Internal labor needed to prepare account information for porting | (G1+G2)*G3 | $22,800 | $67,944 | ||
G5 | Time dedicated to implementation (hours) | Interview | 1,200 | 1,500 | ||
G6 | Percentage of time dedicated to implementation of VCMT by IT director | Interview | 70% | 70% | ||
G7 | Average fully burdened hourly rate of an IT director | A3 | $114 | $114 | ||
G8 | Percentage of time dedicated to implementation of VCMT by a CIO | Interview | 10% | 10% | ||
G9 | Average fully burdened hourly rate of a CIO | Interview | $146 | $146 | ||
G10 | System administrators | Interview | 2 | 2 | ||
G11 | Percentage of time dedicated by system administrators | Interview | 15% | 15% | ||
G12 | Average full burdened hourly rate of a system administrator | D5 | $42 | $42 | ||
G13 | Subtotal: Internal implementation labor for VCMT | (G5*G6*G7)+(G5*G8*G9)+(G5*G10* G11*G12) | $128,400 | $160,500 | ||
Gt | Internal preparation and implementation labor for VCMT | G4+G13 | $151,200 | $160,500 | $0 | $0 |
Risk adjustment | ↑10% | |||||
Gtr | Internal preparation and implementation labor for VCMT (risk-adjusted) | $166,320 | $176,550 | $0 | $0 | |
Three-year total: $342,870 | Three-year present value: $326,820 |
Evidence and data. Dermex needed to implement Verizon Mobile for Microsoft Teams to support a specific persona of workers (e.g., its mobile workforce) as they operated in the field.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risk. Factors that could affect the impact of this cost for organizations include:
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 $51,000.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|---|
H1 | Existing VMMT users | F1 | 10 | 1,800 | 1,825 | 1,850 |
H2 | Incremental VMMT users | Interview | 10 | 1,800 | 25 | 50 |
H3 | New hires on VMMT | F2 | 0 | 120 | 120 | 120 |
H4 | Subtotal: Cumulative VMMT users | H2+H3 | 10 | 1,920 | 145 | 170 |
H5 | Time needed for VMMT setup (hours) | D4 | 0.50 | 0.50 | 0.33 | 0.17 |
H6 | Percentage of time dedicated to VMMT implementation by a system administrator | Interview | 90% | 90% | 90% | 90% |
H7 | Average full burdened hourly rate of a system administrator | D5 | $42 | $42 | $42 | $42 |
H8 | Percentage of time dedicated to implementation of VMMT implementation by an IT director | Interview | 10% | 10% | 10% | 10% |
H9 | Average fully burdened hourly rate of an IT director | A3 | $114 | $114 | $114 | $114 |
Ht | Internal preparation and implementation labor for VMMT | (H4*H5*H6*H7)+(H4*H5*H8*H9) | $246 | $47,232 | $2,354 | $1,422 |
Risk adjustment | ↑10% | |||||
Htr | Internal preparation and implementation labor for VMMT (risk-adjusted) | $271 | $51,955 | $2,590 | $1,564 | |
Three-year total: $56,380 | Three-year present value: $50,818 |
Evidence and data. Following implementation, Dermex requires employees to spend time performing ongoing management and training tasks for both VMMT and VCMT.
Modeling and assumptions. For Dermex, Forrester assumes the following:
Risks. Factors that could affect the impact of this cost for organizations include:
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 $445,000.
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|---|
I1 | Percentage of time dedicated by IT director to maintaining VCMT and VMMT environments | Interview | 40% | 20% | 10% | |
I2 | Average fully burdened annual salary of an IT director | TEI standard | $175,000 | $175,000 | $175,000 | |
I3 | System administrators | Interview | 5 | 5 | 6 | |
I4 | Percentage of time dedicated by system administrators to maintaining VCMT and VMMT environments | Interview | 20% | 20% | 20% | |
I5 | Average fully burdened annual salary of a system administrator | TEI standard | $65,000 | $65,000 | $65,000 | |
I6 | Percentage of time dedicated by a CIO to maintaining VCMT and VMMT environments | Interview | 10% | 10% | 10% | |
I7 | Average fully burdened annual salary of a CIO | Assumption | $225,000 | $225,000 | $225,000 | |
I8 | Subtotal: Ongoing personnel costs for VCMT and VMMT environments | (I1*I2)+(I3*I4* I5)+(I6*I7) | $157,500 | $122,500 | $118,000 | |
I9 | Time IT director dedicates to create VCMT training guides for case managers (hours) | Interview | 1 | 1 | 1 | |
I10 | Case managers | Interview | 400 | 400 | 400 | |
I11 | Time case managers dedicate to reading VCMT training guides (hours) | Interview | 2 | 2 | 2 | |
I12 | Average fully burdened hourly rate of a case manager | TEI standard | $32 | $32 | $32 | |
I13 | Time dedicated to VMMT training (hours) | D2*52 | 13 | 13 | 13 | |
I14 | Average fully burdened hourly rate of an IT director | A3 | $114 | $114 | $114 | |
I15 | Directors of training | E3 | 2 | 2 | 2 | |
I16 | Average fully burdened hourly rate of a director of training | E4 | $65 | $65 | $65 | |
I17 | Subtotal: Training costs for VCMT and VMMT environments | (I9*I14)+(I10*I11*I12)+(I13*I14)+(I13*I15*I16) | $28,886 | $28,886 | $28,886 | |
It | Ongoing management and training of VMMT and VCMT by internal staff | I8+I17 | $0 | $186,386 | $151,386 | $146,886 |
Risk adjustment | ↑10% | |||||
Itr | Ongoing management and training of VMMT and VCMT by internal staff (risk-adjusted) | $0 | $205,025 | $166,525 | $161,575 | |
Three-year total: $533,124 | Three-year present value: $445,403 |
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
---|---|---|---|---|---|---|
Total costs | ($191,877) | ($748,350) | ($487,647) | ($485,384) | ($1,913,257) | ($1,639,885) |
Total benefits | $0 | $1,777,542 | $2,044,308 | $2,263,733 | $6,085,583 | $5,006,233 |
Net benefits | ($191,877) | $1,029,193 | $1,556,661 | $1,778,350 | $4,172,326 | $3,366,348 |
ROI | 205% | |||||
Payback | <6 months |
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The 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.
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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