The Total Economic Impact Of Zendesk

Transcription

1 A Forrester Total Economic Impact Study Commissioned By Zendesk Project Director: Dean Davison December 2016 The Total Economic Impact Of Zendesk

2 Table Of Contents Executive Summary... 3 Disclosures... 4 TEI Framework And Methodology... 5 Analysis... 6 Financial Summary Zendesk: Overview Appendix A: Total Economic Impact Overview Appendix B: Glossary Appendix C: Endnotes ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2016, 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, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to

3 3 Executive Summary Zendesk commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) that organizations may realize by utilizing Zendesk s customer support products to improve handling customer interactions. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Zendesk on their organizations. To better understand the benefits, costs, and risks associated with a Zendesk implementation, Forrester interviewed five organizations with experience using Zendesk s customer support products. Prior to Zendesk, the organizations used a variety of cloudbased software tools. The director of customer care at one company told Forrester: Our previous tool lacked the ability to make changes and adapt on the fly. That particular tool was very cumbersome to make fields and system changes. Something as simple as that oftentimes required developer knowledge to get that accomplished. Another director said: What we didn t have with our previous tool was a way to streamline telephony delivery. We had three different call centers and each had their own phone numbers and phone setups. Zendesk offers a family of products that helps organizations understand their customers, improve communication, and offer support where and when it s needed most. The benefits and costs for the organizations that Forrester interviewed are: Increased agent productivity: $1.1 million. Deflected interactions: $490,671. Improved agent experience: $351,120. Avoided maintenance costs: $855,000. Avoided license costs: $1 million. Cost of Zendesk license: $646,464. Cost of implementation: $24,570. Cost of improvements: $157,500. After implementing Zendesk, another executive said: Using Zendesk made it a lot of easier for us to grow and add on locations, diversify for a little disaster recovery, and to make it seamless to the customer. We very carefully track customer satisfaction from customer calls, and within the first nine months of implementing Zendesk, we realized an 8-point increase on a 100-point scale. USING ZENDESK ENABLED AUTOMATED RESPONSES FOR 20% OF INTERACTIONS Forrester s interviews with five customers and subsequent financial analysis found that a composite organization based on these interviewed organizations experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. The analysis points to benefits of more than $3.1 million versus costs of $684,861, adding up to a net present value (NPV) of more than $2.5 million and an ROI of 365% over three years. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 365% Benefits PV: $3,187,222 Costs PV: $684,861 Payback: 2.8 months

4 4 Benefits. The composite organization experienced the following risk-adjusted benefits that represent those experienced by the interviewed companies: Increased efficiency of agents. Using Zendesk, the organization streamlined interactions with customers through automated responses to 20% of s and a reduced length for the average customer phone call from an initial improvement of 3% in the first year to a cumulative total of 13% over three years. This affected tens of thousands of interactions and avoided the need to hire headcount, resulting in a cumulative savings of more than $1.1 million. Deflected customer interactions. The organization used Zendesk to deflect interactions to self-service and to lower cost channels such as chat. By the end of three years, the organization deflected 15% of interactions to chat and 20% to self-service, for a total savings of $490,671. Improved agent experience and retention. Zendesk was a more user-friendly tool that allowed agents to focus on solving customer problems rather than managing multiple, nonintuitive screens and older call tracking systems. The organizations experienced an improvement in both retention and recruiting of agents, avoiding costs of $351,120 over three years. Avoided cost of maintaining previous platform. The previous platforms used by the organizations required more system administration and ongoing maintenance than Zendesk. On average, the organizations saved the equivalent of paying two employees to work on the systems and another $80,000 per year for other support. By moving to Zendesk, the organization avoided these costs and saved $855,000 over three years. Avoided license cost of previous software. By not renewing the license for the previous software platform, the organization no longer incurred this cost. The savings totaled more than $250,000 each year and more than $1 million over three years. Costs. The composite organization experienced the following risk-adjusted costs: Cost of Zendesk license. The fees paid to Zendesk assumed 100 agents in Year 1, followed by 120 and 144 in years 2 and 3, respectively. The license fees include a weighted average that combines Zendesk Support (Enterprise edition), plus phone and chat capabilities for different types of customer interactions. The total license fees paid to Zendesk totaled $646,464 over three years. Cost of implementation. Implementing Zendesk required an internal team of four employees, applying half of their effort to the project, for a total of six weeks. The cost of this setup was $24,570. Cost of incremental (optional) projects. Some of the organizations also funded special projects to enhance the functionality and improve the agent usability and experience. On average, the cost for these improvements was $50,000 per year, or a risk-adjusted $157,500 over three years. Disclosures The reader should be aware of the following: The study is commissioned by Zendesk and delivered by Forrester Consulting. It is not intended 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 report to determine the appropriateness of an investment in Zendesk. Zendesk 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. Zendesk provided the customer names for the interviews but did not participate in the interviews.

5 5 TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing Zendesk. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision, to help organizations understand how to take advantage of specific benefits, reduce costs, and improve the overall business goals of winning, serving, and retaining customers. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that Zendesk can have on an organization (see Figure 2). Specifically, Forrester: Interviewed Zendesk marketing, sales, and consulting personnel, along with Forrester analysts, to gather data relative to Zendesk and the marketplace for customer support tools. Interviewed five organizations currently using Zendesk 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. The financial model is populated with the cost and benefit data obtained from the interviews as applied to the composite organization. Risk-adjusted the financial model based on issues and concerns the interviewed organizations highlighted in interviews. Risk adjustment is a key part of the TEI methodology. While interviewed organizations provided cost and benefit estimates, some categories included a broad range of responses or had a number of outside forces that might have affected the results. For that reason, some cost and benefit totals have been risk-adjusted and are detailed in each relevant section. Forrester employed four fundamental elements of TEI in modeling Zendesk: benefits, costs, flexibility, and risks. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology. FIGURE 2 TEI Approach Perform due diligence Conduct customer interviews Design composite organization Construct financial model using TEI framework Write case study

6 6 Analysis COMPOSITE ORGANIZATION For this study, Forrester conducted five interviews with representatives from the following companies, which are Zendesk customers: Apparel manufacturer. The company has a call center with 70 agents who handle incoming calls that include product orders directly from consumers, support for buyers making online purchases, and customer support for buyers who purchase products in thousands of traditional retail stores. Prior to using Zendesk, the organization used another cloudbased software platform for call centers. Transportation specialty firm. Located in Europe, this company specializes in last-mile delivery services within major cities. The organization employs 250 call center agents who manage incoming product orders and support customers facing delivery problems. As a startup, the organization began using Zendesk at inception and had no prior tools. Financial services provider. At this firm that specializes in providing loan services to consumers, the call center employs 240 call center agents who use Zendesk. Agents handle incoming calls from consumers who are applying for loans and managing financial transactions, but the organization also has specialty teams focused on areas such as collections and account management. Using Zendesk made it a lot of easier for us to grow and add on locations, diversify for a little disaster recovery, and to make it seamless to the customer. ~ Customer engagement director, financial services provider Internet publishing platform. The company helps small- to medium-size businesses publish and manage websites. It employs 350 call center agents. Incoming inquiries and calls include business issues such as signing up new customers and technical issues such as support and troubleshooting problems for existing sites already launched by customers. Relocation services provider. The company faces intense challenges in managing customer support agents because the relocation industry is highly seasonal, which requires the company to ramp up and ramp down call center personnel every year. Because the organization had a complex array of systems for taking and managing customer orders, the firm faced high levels of agent turnover due to complicated training requirements. After implementing Zendesk and consolidating disparate systems, agent turnover declined significantly. Based on the interviews, Forrester constructed a composite organization with the following characteristics: Manages a support center for both purchases and customer questions. Employs 100 support agents. Currently focuses on phone and interactions but is increasingly using chat. Provides support in four languages. Seeks to deflect the maximum number of customer inquiries to self-service.

7 7 THE CUSTOMER EXPERIENCE The experiences of the five companies interviewed line up with the statements in Forrester s published research: To provide friction-free customer service experiences, [companies] must tap into technologies that enable communications with customers over voice, digital, and social channels. Ideally, those technologies also deliver contextual content to employees so they can answer customer questions, deliver proactive and personalized service using analytics-derived insights, and listen and react to the voice of the customer. [Companies] increasingly must look at these technologies as part of a business technology (BT) agenda that focuses on technologies that organizations design to win, serve, and retain customers. These technologies fall into five functional areas: Omnichannel communication. These applications support the business processes for interacting with customers over voice, electronic, and social communication channels. Knowledge management. These applications help you identify, create, review, publish, and maintain multimedia content, including video, which allows customer service agents to answer customers' questions and enables customers to find answers to their questions via web self-service portals. Agent desktop solutions. This category comprises applications that agents use to create and manage incidents (cases) in response to customer inquiries. Customer service analytics. This category comprises analytics that organizations use to deliver an optimal service interaction that targets the persona of the customer and the issue at hand. Technologies include next-best-action and interaction analytics. Voice of the customer. This category comprises applications that organizations use to gather structured and unstructured feedback from social media sites. 1 FIGURE 3 TEI Approach

8 8 BENEFITS The composite organization experienced the following quantified benefits in this case study: 1) increased productivity of agents; 2) deflected customer interactions; 3) improved agent experience and retention; 4) avoided cost of maintaining the previous platform; and 5) avoided license cost of previous software. Increased Productivity Of Agents Each of the organizations reported improvements in agent productivity when migrating from another tool to Zendesk (except for the startup, which had no previous tool). With an average call length of 500 seconds before using Zendesk, the composite organization reported a 15-second improvement in the first year and a 25-second improvement in the second and third year. The organization also reported the ability to use autoresponders to handle 20% of the incoming . The resulting impact was a reduced need for dozens of agents and a cost savings over three years of more than $1.3 million. Forrester risk-adjusted the benefit downward by 15%, resulting in a total three-year benefit of more than $1.1 million. TABLE 1 Increased Productivity Of Agents Ref. Metric Calculation Year 1 Year 2 Year 3 A1 Number of phone interactions 150, , ,000 A2 Average call duration (seconds) Initially 500 seconds A3 Year-over-year reduction (seconds) A1PY-A1CY A4 A5 Number of additional calls per year that could be handled without staff increases Full-time equivalents (FTEs) saved A4/15 calls per agent per day 4,500 9,278 11, A6 Number of interactions 156, , ,620 A7 A8 s avoided using automated responses FTEs saved A6*20% 31,200 37,440 44,924 A7/25 s per agent per day A9 Average burdened salary $57,000 $57,000 $57,000 At Increased productivity of agents (A5+A8)*A9 $342,000 $467,400 $564,300 Risk adjustment 15% Atr Increased productivity of agents (risk-adjusted) $290,700 $397,290 $479,655

9 9 Deflected Customer Interactions The interviewed organizations were able to increase deflection of interactions to self-service and also shift interactions to lower-cost channels, especially chat. For the financial model, Forrester assumed that over three years, self-service interactions reached 20% of the total and chat rose to 15% of total interactions. We also determined that a deflected interaction to chat saves an average of $6 and an interaction that is deflected to selfservice saves $15. The degree of deflection and the savings for each deflection will vary widely, and we encourage readers to adapt this section using their own data. The savings in the first year carried over into future years and resulted in a savings of $577,260 over three years. Forrester risk-adjusted the benefit downward by 15%, resulting in a total three-year benefit of $490,671. TABLE 2 Deflected Customer Interactions Ref. Metric Calculation Year 1 Year 2 Year 3 B1 Number of customer interactions 150, , ,000 B2 Percent of interactions deflected to chat 4% 9% 15% B3 Savings from deflections to chat $6 each $36,000 $54,000 $77,760 B4 Percent of interactions deflected to self-service 10% 15% 20% B5 Savings from deflections to self-service $15 each $112,500 $135,000 $162,000 Bt Deflected customer interactions B3+B5 $148,500 $189,000 $239,760 Risk adjustment 15% Btr Deflected customer interactions (risk-adjusted) $126,225 $160,650 $203,796

10 10 Improved Agent Experience And Retention Some of the companies experienced a reduction in turnover of agents by using Zendesk as a consolidated tool set for managing interactions with customers. One customer reported a decrease in agent turnover of more than 20%, but Forrester uses a more conservative value of 15%. The reduction in agent turnover was part of a broader program to improve the retention of agents, so Forrester attributes only 40% of the improvement to Zendesk. As a result, the organization avoided the need to hire a total of 55 agents over three years. The cost to hire and train an agent averages 35% of an agent s annual salary of $57,000. The resulting savings over three years of reducing the need to hire and train agents was $438,900. Because not all the companies that Forrester interviewed reported an improvement in the agent experience, Forrester reduced the value of this benefit by 20%. The risk-adjusted savings over three years totaled $351,120. TABLE 3 Improved Agent Experience And Retention Ref. Metric Calculation Year 1 Year 2 Year 3 C1 Total number of agents C2 Reduced turnover number of agents leaving 15% C3 Reduced number of agents leaving that is attributed to using Zendesk 40% C4 Averaged burdened salary $57,000 $57,000 $57,000 C5 Average cost to recruit and train a new agent C4*35% $19,950 $19,950 $19,950 Ct Improved agent experience and retention C3*C5 $119,700 $139,650 $179,550 Ctr Risk adjustment 20% Improved agent experience and retention (risk-adjusted) $95,760 $111,720 $143,640

11 11 Avoided Cost Of Maintaining Previous Platform To support the previous agent platform, each organization employed staff or maintained a retinue of consultants. In addition, the organizations paid an average of $150,000 per year for additional requests, features, upgrades, and related charges paid to the vendor. By moving to Zendesk, the burden typically required less than one person, and in several of the interviews, the directors themselves performed the work. The cost for two system administrators at $110,000 each per year and the additional fees totaled $900,000 over three years. Forrester risk-adjusted and reduced the benefit by 5%, resulting in a benefit of $855,000. TABLE 4 Avoided Cost Of Maintaining Previous Platform Ref. Metric Calculation Year 1 Year 2 Year 3 D1 Two system administrators $110,000/year each $220,000 $220,000 $220,000 D2 Additional fees and services $80,000 $80,000 $80,000 Dt Dtr Avoided cost of maintaining previous platform Risk adjustment 5% Avoided cost of maintaining previous platform (risk-adjusted) D1+D2 $300,000 $300,000 $300,000 $285,000 $285,000 $285,000 Avoided License Cost Of Previous Software By avoiding a renewal of the previous software platform, which averages two to three times the cost of Zendesk, the organization saved more than $1.1 million. Forrester risk-adjusted and reduced the benefit by 10%. The riskadjusted benefit was more than $1 million over three years. TABLE 5 Avoided License Cost Of Previous Software Ref. Metric Calculation Year 1 Year 2 Year 3 E1 Number of agents E2 License cost of previous solutions $260/agent/month $312,000 $374,400 $449,280 Et Avoided license cost of previous software $312,000 $374,400 $449,280 Etr Risk adjustment 10% Avoided license cost of previous software (risk-adjusted) $280,800 $336,960 $404,352

12 12 Unquantified Benefit The composite organized realized additional benefits that Forrester did not include in the financial analysis. In many cases, the organizations lack accurate ways to measure these benefits, but the impact is still recognized. Flexibility with the APIs. One executive told Forrester: We definitely needed the ability to leverage the APIs. With our previous tool, we were paying for a lot of excess API use, and some of the early questions for Zendesk were, What are our limits? and How can we configure our tools to communicate? The same executive continued: We have a lot of sensitive documents and other things that were being stored in our previous tool that we wanted to move out into our own document service platform and then fall into Zendesk at will, more or less. Total Benefits Table 6 shows the total of all benefits across the four areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the composite organization expects risk-adjusted total benefits to be a PV of $3,187,222. TABLE 6 Total Benefits (Risk-Adjusted) Ref. Benefit Year 1 Year 2 Year 3 Total Present Value Atr Increased efficiency of agents $290,700 $397,290 $479,655 $1,167,645 $952,983 Btr Deflected customer interactions $126,225 $160,650 $203,796 $490,671 $400,634 Ctr Improved agent experience and retention $95,760 $111,720 $143,640 $351,120 $287,304 Dtr Avoided cost of maintaining previous platform $285,000 $285,000 $285,000 $855,000 $708,753 Etr Avoided license cost of previous software $280,800 $336,960 $404,352 $1,022,112 $837,548 Total benefits $1,078,485 $1,291,620 $1,516,443 $3,886,548 $3,187,222

13 13 COSTS The composite organization experienced a number of costs associated with Zendesk: Cost of Zendesk license. Cost of implementation. Cost of incremental (optional) projects. These represent the mix of internal and external costs experienced by the composite organization for initial planning, implementation, and ongoing maintenance associated with the solution. Cost Of Zendesk License Zendesk offers a number of pricing tiers for its support product, including the Enterprise license evaluated in this study. Additional fees provide access to functionality such as chat and phone capabilities. Among the companies that Forrester interviewed, the firms adopted different pricing for different teams of support agents. For example, a collections group did not need chat capabilities. The pricing information used in the study uses Zendesk list price for its Support, Chat, and Talk products and is not risk-adjusted, resulting in a total of more than $646,464 over three years. TABLE 7 Cost Of Zendesk License Ref. Metric Calculation Initial Year 1 Year 2 Year 3 F1 Number of agents F2 Cost per agent per year $148/month $1,776 $1,776 $1,776 Ft Cost of Zendesk license F1*F2 $177,600 $213,120 $255,744 Ftr Risk adjustment 0% Cost of Zendesk license (risk-adjusted) $177,600 $213,120 $255,744

14 14 Cost Of Implementation The organizations spent six weeks implementing Zendesk. The composite organization converted its history of support tickets into the Zendesk environment. One organization avoided converting old tickets and was able to go live with Zendesk in just three days, but this did not seem typical. On average, companies assigned four employees to the project for six weeks for about 50% of their time. The resulting cost was $23,400. Forrester risk-adjusted the cost upward by 10%, resulting in a total cost of $24,570. TABLE 8 Cost Of Implementation Ref. Metric Calculation Initial Year 1 Year 2 Year 3 G1 Four employees at 50% of time FTEs 2.0 G2 Six weeks (years) 0.13 G3 Average burdened salary $90,000 Gt Cost of implementation G1*G2*G3 $23,400 $0 $0 $0 Gtr Risk adjustment 10% Cost of implementation (risk-adjusted) $24,570 $0 $0 $0

15 15 Cost Of Incremental (Optional) Projects The organizations told Forrester that they funded additional capabilities, some of which improved the agent experience, provided additional functionality, or even expanded the core language modules. Executives considered most of these projects as optional but each improved the results realized from using Zendesk. The cost was $50,000, and Forrester risk-adjusted the cost upward by 5%, resulting in a total cost of $157,500 over three years. TABLE 9 Cost Of Incremental (Optional) Projects Ref. Metric Calculation Initial Year 1 Year 2 Year 3 H1 Consulting for specialty functionality $50,000 $50,000 $50,000 Ht Cost of incremental (optional) projects = H1 $50,000 $50,000 $50,000 Htr Risk adjustment 5% Cost of incremental (optional) projects (risk-adjusted) $52,500 $52,500 $52,500 Total Costs Table 10 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the composite organization expects total costs to be a net present value of $684,861. TABLE 10 Total Costs (Risk-Adjusted) Ref. Cost Initial Year 1 Year 2 Year 3 Total Present Value Ftr Cost of Zendesk license $0 $177,600 $213,120 $255,744 $646,464 $529,731 Gtr Cost of implementation $24,570 $0 $0 $0 $24,570 $24,570 Ht Cost of incremental (optional) projects $0 $52,500 $52,500 $52,500 $157,500 $130,560 Total costs $24,570 $230,100 $265,620 $308,244 $828,534 $684,861

16 16 RISKS Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. Implementation risk is the risk that a proposed investment in Zendesk may deviate from the original or expected requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not be met by the investment in Zendesk, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. Quantitatively capturing implementation risk and impact risk by directly adjusting the financial estimates results provides more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as realistic expectations since they represent the expected values considering risk. Table 11 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates for the composite organization. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates. TABLE 11 Benefit And Cost Risk Adjustments Benefits Adjustment Increased efficiency of agents 15% Deflected customer interactions 15% Improved agent experience and retention 20% Avoided cost of maintaining previous platform 5% Avoided license cost of previous software 10% Costs Adjustment Cost of Zendesk license 0% Cost of implementation 10% Cost of incremental (optional) projects 5%

17 17 Financial Summary 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 in Zendesk. Table 12 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 11 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 4 Cash Flow Chart (Risk-Adjusted) $3,500,000 $3,000,000 $2,500,000 Financial Analysis (risk-adjusted) Cash flows $2,000,000 $1,500,000 $1,000,000 $500,000 $0 ($500,000) Initial Year 1 Year 2 Year 3 Total costs Total benefits Cumulative total TABLE 12 Cash Flow (Risk-Adjusted) Present Initial Year 1 Year 2 Year 3 Total Value Costs ($24,570) ($230,100) ($265,620) ($308,244) ($828,534) ($684,861) Benefits $0 $1,078,485 $1,291,620 $1,516,443 $3,886,548 $3,187,222 Net benefits ($24,570) $848,385 $1,026,000 $1,208,199 $3,058,014 $2,502,361 ROI 365% Payback period 2.8 months

18 18 Zendesk: Overview The following information is provided by Zendesk. Forrester has not validated any claims and does not endorse Zendesk or its offerings. Zendesk builds software for better customer relationships. It empowers organizations to improve customer engagement and better understand their customers. Zendesk products are easy to use and implement. They give organizations the flexibility to move quickly, focus on innovation, and scale with their growth. Zendesk was built upon a simple idea: Make customer service software that s easy to use and accessible to everyone. The company has expanded on that idea and now offers a growing family of products that work together to improve customer relationships. These products can be embedded and extended through an open development platform. THE ZENDESK FAMILY Zendesk provides a family of products that helps organizations understand their customers, improve communication, and offer support where and when it s needed most. Zendesk Support A beautifully simple system for tracking, prioritizing, and solving customer support tickets Zendesk Message Message software that helps companies engage customers on their favorite messaging apps Zendesk Help Center A self-service destination featuring knowledge base articles, community forums, and a customer portal Zendesk Connect Customer intelligence software built for targeted campaigns and proactive engagement Zendesk Talk Call center software that allows for more personal and productive phone support conversations Zendesk Explore Analytics to help measure and understand the entire customer experience Zendesk Chat Live chat software that provides a fast and responsive way to connect with customers in the moment More than 87,000 paid customer accounts in over 150 countries and territories use Zendesk products. Based in San Francisco, Zendesk has operations in the United States, Europe, Asia, Australia, and South America. Learn more at

19 19 Appendix A: Total Economic Impact Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company s technology decisionmaking 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. TEI assists technology vendors in winning, serving, and retaining customers. The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks. BENEFITS Benefits represent the value delivered to the user organization IT and/or business units by the proposed product or project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place 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. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line. COSTS Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created. FLEXIBILITY Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point. However, having the ability to capture that benefit has a PV that can be estimated. The flexibility component of TEI captures that value. RISKS Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the estimates will be measured and tracked over time. TEI risk factors are based on a probability density function known as triangular distribution to the values entered. At a minimum, three values are calculated to estimate the risk factor around each cost and benefit.

20 20 Appendix B: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set their own discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their own environment. Net present value (NPV): 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. Present value (PV): 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. Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost. Return on investment (ROI): A measure of a project s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs. A NOTE ON CASH FLOW TABLES The following is a note on the cash flow tables used in this study (see the example table below). The initial investment column contains costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in years 1 through 3 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 are not calculated until 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. TABLE [EXAMPLE] Example Table Ref. Metric Calculation Year 1 Year 2 Year 3 Appendix C: Endnotes 1 Source: Choose The Right Customer Service Solution For Your Business, Forrester Research, Inc., August 4, 2016.