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Total Economic Impact
Cost Savings And Business Benefits Enabled By A Forrester Total Economic Impact™ Study
Total Economic Impact
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Quantified benefits. Risk-adjusted present value (PV) quantified benefits for the composite organization include:
Increased leads by 60% and increased conversion rate from 1% to 2.5%, resulting in a boost to new profit. After publishing the TEI study, the composite organization sees improved quality and volume of marketing qualified leads (MQLs), which leads to an increase in sales qualified leads (SQLs) and conversions. Sales teams also successfully use the TEI in renewal conversations, helping to retain clients by giving them tangible data to share with their decision-makers. Moreover, the TEI study helps sales teams handle objections in buying conversations and reduces average sales cycle time.
Reduced time developing a business case by 33%. At the composite organization, many salespeople struggled to have clear and credible messaging that quickly helped build pipeline. With a detailed ROI analysis from Forrester’s TEI study, salespeople are more easily able to build custom business cases for customers. Moreover, backed by an objective analysis from Forrester, salespeople are able to have richer conversations with their decision-makers, both initially and during renewals.
| Role | Industry | Headquarters | Revenue |
|---|---|---|---|
| VP of marketing | Cybersecurity SaaS | United States | $300 million |
| Director of product marketing | SaaS | United States | $120 million |
| Director of product marketing | Telecommunications services | United States | $60 million |
| Global director of product marketing | Legal technology | United States | $110 million |
| Senior director of research and innovation | Software development | United States | $40 million |
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Click to see data by reigon
Click to see data by reigon
| Role | Industry | Headquarters | Revenue |
|---|---|---|---|
| VP of marketing | Cybersecurity SaaS | United States | $300 million |
| Director of product marketing | SaaS | United States | $120 million |
| Director of product marketing | Telecommunications services | United States | $60 million |
| Global director of product marketing | Legal technology | United States | $110 million |
| Senior director of research and innovation | Software development | United States | $40 million |
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| Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
|---|---|---|---|---|---|---|
| Total costs | ($229,724) | $0 | $0 | $0 | ($229,724) | ($229,724) |
| Total benefits | $0 | $261,984 | $184,271 | $142,156 | $588,411 | $497,262 |
| Net benefits | ($229,724) | $261,984 | $184,271 | $142,156 | $358,687 | $267,538 |
| ROI | 116% | |||||
| Payback | 11.0 |
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.
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in a Forrester TEI study.
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 the TEI study can have on an organization.
Interviewed Forrester stakeholders and Forrester analysts to gather data relative to the TEI study.
Interviewed eight decision-makers at organizations using the TEI study to obtain data with respect to costs, benefits, and risks.
Designed a composite organization based on characteristics of the interviewed 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 interviewed organizations.
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.
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.
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.
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.
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.
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.
1 Source: Forrester Consulting’s Q3 2019 Global Marketing Content Credibility Study, Forrester Research, Inc.
2 Ibid.
3 Source: “The Forrester Revenue Engine Strategy Compass Template,” Forrester Research, Inc., August 24, 2021.
4 Source: “Creating Journey Maps To Enable Buying Decisions,” Forrester Research, Inc., January 1, 2018.
5 Source: “Forrester’s 2021 B2B Buying Study Reveals Seismic Shifts That Amplify Long-Term Trends In Buying Behavior,” Forrester Research, Inc., May 13, 2021.
6 Ibid.
7 Source: Eric Zines, “Sales Enablement And The Great Resignation — Three Things You Need To Do NOW,” Forrester Blogs.
8 Source: Sam Sexton, “Be Early, Be Empathetic: How To Show Your Customers The Value Of Participating In A Forrester TEI,” Forrester Blogs
Readers should be aware of the following:
This study is commissioned by Microsoft and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential benefits 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 migrating to Azure for AI readiness.
Microsoft reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
Microsoft provided the customer names for the interviews but did not participate in the interviews.
Forrester fielded the double-blind survey using a third-party survey partner.
Forrester Consultants
1 January 2024
About Forrester Consulting
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.
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