2018 FORRESTER. REPRODUCTION PROHIBITED.

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2 The Total Economic Impact Of Epicor ERP Michelle S. Bishop, Principal Consultant Forrester Research May 22, 2018

3 Agenda What is TEI? Executive summary Analysis Financial summary Question and answer Please note: This slide presentation is an abridged, graphical, and complementary representation of a case study. For a full explanation of methodology and details on model calculations, please refer to the full case study (The Total Economic Impact Of Epicor ERP, August 2017) 3

4 What is TEI? Background and methodology 4

5 Next-level business case justifications are increasingly important for technology investments Over 90% of IT decision makers find value in a business case Somewhat unimportant, 4% Not at all important, 3% What is an effective business case? TCO ROI TEI IT costs IT impact IT cost savings Business impact User efficiency Business effectiveness Somewhat important, 33% Very important, 60% Risk/ uncertainty Risk mitigation Risk versus reward Strategic impact Scalability Flexibility Base: 825 IT decision makers at North American enterprises 5

6 The objective of the TEI framework is to identify all of the factors that affect an investment decision Benefits Costs Flexibility Risks Total Economic Impact 6

7 Forrester took a multistep approach to evaluate the impact of Epicor ERP Start Due diligence Customer interviews Create composite Create financial model Write case study Review and finalize 7

8 Disclosures The audience should be aware of the following: This document is an abridged webinar version of a full case study (The Total Economic Impact of Epicor ERP, August 2017). The study is commissioned by Epicor and delivered by the Forrester Consulting group. Forrester makes no assumptions as to the potential return on investment that other organizations will receive. Forrester strongly advises that readers should use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Epicor ERP. Epicor 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. The customer name for the interviews was provided by Epicor. Forrester does not endorse Epicor. 8

9 Executive summary High-level findings 9

10 Forrester has determined the following three-year impact Based on an analysis of Epicor ERP customer feedback and quantified benefit, cost, risk, and flexibility factors. ROI NPV PAYBACK 264% $9.3 million 13 months 10

11 Analysis Customer journey and key results 11

12 Forrester interviewed 4 Epicor ERP customers COMPANY #1 Consumer goods manufacturing 2,000 employees COMPANY #3 Industrial goods manufacturing 850 employees COMPANY #2 Industrial parts manufacturing 50 employees COMPANY #4 Automotive manufacturing 1,200 employees 12

13 The customers shared experiences before and after using Epicor ERP The Customer Journey KEY DRIVERS Growth and expansion requirements not met by legacy systems Lack of visibility across enterprise (e.g. inventory accuracy) Significant manual effort to accommodate diverse, siloed software suites KEY RESULTS Productivity gains and cost savings Improved manufacturing processes Increased visibility Improved customer collaboration and customer relationship management Increased sales IT cost savings from consolidation and replacement of legacy systems Visibility of real-time data was a huge issue for us, and to get there, we had to [implement] Epicor ERP. We needed to streamline our shop floors. We needed a more unified system. - IT manager, automotive manufacturing 13

14 Forrester created a composite organization representative of customer interviewees $350 Million ANNUAL REVENUE Hosted deployment Epicor version 10 1,000 Employees 1,000 EMPLOYEES Consolidated legacy ERP systems Environment 6 manufacturing sites + 1 distribution Facilities 14

15 Interviewees shared the following key results from the Epicor ERP Information transparency has been the biggest benefit of deploying Epicor ERP. My team now sees things on the same platform. In the manufacturing business, the key thing is to control costs and know the absolute real costs. With Epicor ERP and our RFID system, we ve been able to look at the full picture at a more quantified level. ~Executive director, consumer goods manufacturing Epicor ERP allows us to address issues while they are happening. We can go back with this information to our customers and be more proactive. There s more teamwork. We can share efficiencies. We increase our responsiveness. It s viewing your business, suppliers, customers, and employees as partners. ~Operations manager, industrial goods manufacturing 15

16 Epicor ERP drove efficiency, customer focus, collaboration and cost savings Inventory Savings $4.4M Improved Supply Chain Management $65.7K Improved Planning and Scheduling $1M Improved Production Efficiency $1.7M 16

17 Epicor ERP drove efficiency, customer focus, collaboration and cost savings Front-office Labor Savings $411.5K Increased agility and growth Incremental Profit from Increased Revenue $2.7M Improved Analytics Efficiency $72.4K Improved Financial Management Processes $156.4K 17

18 Epicor ERP drove efficiency, customer focus, collaboration and cost savings Improved Governance, Risk and Compliance $54.9K Consolidation and Replacement of Legacy Systems $2.3M IT cost savings 18

19 Epicor ERP had a significant positive effect With Epicor ERP, we have access to data so we can make better-informed decisions. We know the standard costs of our parts. We can know how many seconds it takes to do this operation and how many people are on the line. All of that rolls into the actual cost of the product we built. That helps us know what our margin is. And if margins are too low, Epicor ERP gives you ways to look to improve processes, to make the job faster or save on material costs. ERP manager, industrial goods manufacturing 19

20 Epicor ERP increased visibility resulting in inventory savings Increased visibility across the enterprise improved supply chain management, production management, planning and scheduling processes Curb overproduction and excess inventory storage. Increased inventory accuracy by 10% Material efficiency 80% 90% $10M saved annually in inventory costs with more accurate forecasting Inventory savings year 2 Inventory reduction $3.5 million Risk adjustment 20% Three-year benefit PV $4.4M Forrester assumes only 50% of benefits are realized in the first year of the Epicor implementation 20

21 Epicor ERP improved supply chain management efficiency Complex inventory management functionality efficiency Supply chain management productivity year 2 Number of people 10 Eliminate manual tracking of orders and inventory, automatic purchase order suggestion based on demand forecast 5% productivity improvement + time saved for annual inventory count Annual compensation $50,000 Productivity improvement 5% Percent captured 50% Buyer productivity improvement $12,500 Inventory count savings $21,538 Risk adjustment 5% Three-year benefit PV $70.9K 21

22 Epicor ERP improved planning and scheduling processes 10% improved productivity for production schedulers 10% improved productivity for customer service staff Reduced number of delayed jobs and avoided substantial expedited shipping costs Between $10K to $30K cost per expedited shipment Reduction in expedited shipping year 2 Average cost to expedite shipping No. of incidents per year 26 $20,000 Shipping cost avoidance $520,000 Productivity improvement for planners, schedulers, customer inquiry handling $37,500 Risk adjustment 5% Three-year benefit PV $1M 22

23 Epicor ERP improved production efficiency $250K per year job rework savings Level production loads and reduce overtime by at least 5% for eight months and 20% for four months 10-15% improved accuracy 5 min per production unit 1 hour per day line efficiency improvement Eliminated 1 data entry position Improved production efficiency year 2 Cost savings from reduction in job rework Labor savings from data entry process automation Reduction in overtime hours through level loading of schedules of work centers and staff on production floor $250,000 $30,000 $624,000 Risk adjustment 10% Three-year benefit PV $1.65M 23

24 Epicor ERP supported increased agility for business growth 3 FTE s from front-office moved to more valuable production work Increased headcount by 20% when business grew by 50% Front-office savings year 2 Number of front-office staff moved to design and production with optimized processes Annual compensation $75,000 Risk adjustment 10% Three-year benefit PV 3 $411.5K Assume 1.5 FTE s moved in first year of Epicor ERP implementation 24

25 Epicor ERP enabled improved customer experience leading to increased revenue Improved forecasting, visibility, efficiency, and customer experience increased revenue 6x increase in quote hit rate 3x increase in close contracts per year $50K per year in referrals 10% increase in revenue vs 2% increase when using legacy systems Incremental profit from increased revenue year 2 Annual revenue $357,000,000 Percentage increase in revenue due to better customer experience with improved processes and increased collaboration with Epicor ERP 6% Profit margin 10% Risk adjustment 20% Three-year benefit PV $2.7M 25

26 Better analytics and BI capabilities through Epicor ERP Ease of creating and using dashboards within Epicor ERP to access valuable information and analysis Sophisticated analysis with realtime information from all areas within the organization close monitoring of key performance indicators Reduce need to work with IT to mine data from back-end systems Improved analytics efficiency year 2 Number of FTE s saved for analytics team Annual compensation per person 0.50 $75,000 Risk adjustment 5% Three-year benefit PV $72.4K 26

27 Epicor ERP improved financial management processes Consolidated and restructured to avoid 25% financial staff increase Reduced end-of-the-month reporting effort 12 hours per FTE Improved financial management processes year 2 Number of financial management/accounting staff Number of hours saved each year Hourly compensation $37.50 Risk adjustment 10% Annual savings of 144 hours per FTE Three-year benefit PV $156.4K 27

28 Epicor ERP improved governance, risk and compliance Help orgs automatically adhere to all the regional regulations correctly, reducing the risk of mistakes and forgotten actions Reports and logs on schedule and in the correct format, improving employee productivity and reducing risks of fines or other costly regulatory issues Streamlined compliance activities reduced by 1 headcount Improved governance, risk and compliance year 2 Number of compliance personnel saved Annual compensation per person 1 $30,000 Risk adjustment 5% Three-year benefit PV $54.9K 28

29 Consolidation and replacement of legacy IT solutions with Epicor ERP Consolidate software to reduce their associated licensing, hosting, and administration costs Multiple ERP systems for facilities and subsidiaries due to M&A Eliminate legacy software: $800K vs $124K in licensing Bring all sites on one platform reduce fees, infrastructure, support, back-up and recover costs IT cost savings year 1 Cost of legacy solutions maintenance fees and infrastructure costs $800,000 IT resource costs $190,000 Backup and recovery savings $50,000 Risk adjustment 10% Three-year benefit PV $2.3M 29

30 Additionally, there are qualitative benefits to using Epicor ERP Faster access to data and improved real-time visibility better decision making. Improved multicompany operational efficiency with multibook capabilities. Increased versatility with the Epicor ERP cloud offering 30

31 Additionally, there are qualitative benefits to using Epicor ERP Access to deep expertise in manufacturing best practices. Increased competitiveness - faster pricing and improved accuracy with cost transparency. 31

32 Customers incurred five types of cost for Epicor ERP deployment Administrative costs, $853,861 Implementation cost, $378,350 Professional fees, $294,144 $3.5 million three-year total costs PV Epicor Fees, $1,381,330 Infrastructure costs, $626,687 Epicor fees: $1M + 20% maintenance Year 2 onwards Infrastructure costs: External hosting at $240K/year Professional services: Implementation and ongoing support Internal implementation costs: 6 months Ongoing administrative costs: 2 FTE 32

33 Organizations gain flexibility options with Epicor ERP Epicor ERP provides an organization with the ability to engage in future initiatives for additional benefit Additional cost savings and incremental revenue from faster time-to-market launch of new products/geographic expansion Benefits from additional modules and capabilities (social, mobile, BI) SaaS deployment gives automatic upgrades Leverage additional manufacturing tech (3D printing) w/ Epicor s serviceoriented architecture 33

34 Costs and benefits are adjusted for risk factors IMPACT RISK Business/technology needs may not be met by investment in Epicor ERP, resulting in lower benefits. Variability in pre-epicor ERP environment. Variability in implementation (locations, departments, modules) Number of employees affected and variability in compensation Variability in revenue and industry IMPLEMENTATION RISK Proposed investment in Epicor ERP may deviate from expected requirements, resulting in higher costs. Actual costs will vary based on level of complexity of deployment Number of regions/facilities/product lines/departments Number of modules implemented Existing infrastructure and legacy systems 34

35 Financial summary Three-year model 35

36 Three-year model summary results Total costs Total benefits Cumulative net benefits Cash flows $14.0 M $12.0 M $10.0 M $8.0 M $6.0 M $4.0 M $2.0 M ROI 264% NPV $9.3 million -$2.0 M -$4.0 M Initial Year 1 Year 2 Year 3 Payback 13 months 36

37 Question and answer 37

38 Michelle S. Bishop, Principal Consultant Forrester Research Thank you FORRESTER.COM