The Total Economic Impact Of Sitecore

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1 A Forrester Total Economic Impact Study Commissioned By Sitecore Project Director: Reggie Lau November 2016 The Total Economic Impact Of Sitecore User Productivity And Earnings Opportunities Enabled By The Sitecore Experience Platform

2 Table Of Contents Executive Summary... 3 Disclosures... 5 TEI Framework And Methodology... 6 Analysis... 7 Financial Summary Sitecore: Overview Appendix A: Composite Description Appendix B: Total Economic Impact Overview Appendix C: Glossary Appendix D: 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 In November 2016, Sitecore commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying the Sitecore Experience Platform. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Sitecore on their organizations. Sitecore is a customer experience management platform that includes functionality related to web content management (WCM), customer intelligence, optimization, and omnichannel delivery. The solution enables and enhances contextual marketing for organizations and provides personalized, relevant experiences for consumers. We built a homegrown web content management system. During a rebranding initiative, we realized our homegrown WCM couldn t meet future needs that included personas and scale. Without Sitecore, we would ve had to rebuild the entire WCM and still missed some functionality. To better understand the benefits, costs, risks, and long-term ~ Marketing operations director, large North American flexibility associated with Sitecore, Forrester interviewed four section of a global industrial goods company existing customers with at least six months of experience using the solution. Based on the interviews, a composite financial model and organization were created to represent the customer feedback. For the purposes of this case study, the composite organization is known as Laud Sportswear. Prior to adopting Sitecore, Laud Sportswear, a large US athletic sportswear company, used a partially homegrown and heavily modified commercial solution for WCM. The organization did not have the capabilities to tailor experiences based on the target audience and customer, track and respond to the customer journey, or scale the company s online and ecommerce experience along with the company s growing offline sales and brand value. Laud Sportswear also used two separate campaign agencies and an off-the-shelf mobile development software suite. As the company continued to grow and content update requests to IT became more frequent, Laud Sportswear investigated options and chose Sitecore for providing a similar breadth of modular solutions as well as vision, responsiveness, and accessibility to leadership that competitors did not have. SITECORE OFFERS OPPORTUNITIES TO CAPTURE SYSTEMS EFFICIENCY, USER PRODUCTIVITY, AND INCREMENTAL EARNINGS WHILE PROVIDING A MORE RELEVANT AND COHERENT CUSTOMER EXPERIENCE Our interview with four customers and subsequent financial analysis found that the composite organization, Laud Sportswear, experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. 1 Laud Sportswear experienced threeyear risk-adjusted benefits of $6,577,436 versus costs of $2,723,104, resulting in a net present value (NPV) of $3,854,332. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 142% NPV: $3,854,332 Payback: 13.4 months

4 4 Benefits. Laud Sportswear experienced the following three-year risk-adjusted benefits (present values): System consolidation cost reduction ($955,760). This benefit focuses on the reduction of costs through system consolidation and decommissioning by deploying Sitecore, which has a wide range of functionalities that can replace certain legacy point solutions. Laud Sportswear experienced cost reductions related to decommissioning its legacy WCM, mobile development software, and marketing agencies. While customers are not required to decommission legacy systems and applications that overlap with Sitecore, readers should consider all areas where efficiencies may be captured, including on-premises versus cloud hosting, commerce servers, and social platforms, in addition to WCM, mobile, and . To illustrate a conservative investment and deployment timeline, Laud Sportswear only decommissions some of its legacy systems, while leaving opportunities for further consolidation beyond Year 3. Improved user productivity ($218,658). This benefit centers on the reduction of time and effort for content updates to a website. Most customers highlighted that updates were submitted as a formal request in the past and involved three to four parties and took three to five business days to complete. After deploying Sitecore, the business resource is able to make updates more easily, intuitively, and without the assistance of technical resources, thus reducing handoffs and time-to-update. Incremental earnings ($5,403,018). 2 This benefit showcases the potential revenue opportunity by deploying a customer experience platform that enables contextual and tailored marketing. The composite model focuses on the ecommerce portion of Laud Sportswear s $500 million in annual revenue, and models incremental earnings opportunity based on customer feedback regarding improved sales conversion, increased site visits, and improved open rates and click-through rates. campaign improvements were primarily related to tailored messaging, and sales conversion improvements were primarily related to better contextual messaging through personalization and offer positioning as a result of AB and multivariate testing. Costs. Laud Sportswear experienced the following three-year risk-adjusted costs (present values): Sitecore solution cost ($235,836). This cost focuses on the upfront licensing and annual maintenance for the Sitecore platform. Implementation and development cost ($1,170,186). This cost centers on the initial and ongoing development of the Sitecore platform and ancillary components. Customers highlighted a crawl, walk, run approach that enabled the WCM and most base functionality to be deployed and available at initial implementation. Continuing projects may include building a template library to build new product sites or integrating Sitecore s Experience Manager (EXM). Additional software and hardware ($383,264). This cost highlights the software and hardware not directly related to Sitecore but needed to deliver the total solution that customers architected. For example, hardware may include hosting Sitecore on-premises, and software may include additional licensing for the Komfo Connector for social media marketing or MongoDB for customer data storage. Internal labor and implementation ($933,818). This cost estimates the time and effort contributed by internal staff, which is separate from the Sitecore solution partners that are used in the implementation and development cost category. We estimated five staff for six months for initial deployment and 2.5 full-time equivalents (FTEs) for ongoing operations.

5 5 Disclosures The reader should be aware of the following: The study is commissioned by Sitecore 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 report to determine the appropriateness of an investment in Sitecore. Sitecore 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. Sitecore provided the customer names for the interviews but did not participate in the interviews.

6 6 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 deploying Sitecore. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that Sitecore can have on an organization (see Figure 2). Specifically, we: Interviewed Sitecore marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to Sitecore s marketplace. Interviewed four organizations currently using Sitecore to obtain data with respect to costs, benefits, risks, and long-term flexibility. Constructed a financial model and composite organization representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews. Risk-adjusted the financial model based on issues and concerns the interviewed organizations highlighted in the interview. Risk adjustment is a key part of the TEI methodology. While the 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 Sitecore s value: 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 B for additional information on the TEI methodology. FIGURE 2 TEI Approach Perform due diligence Conduct customer interviews Construct composite financial model using TEI framework Write case study

7 7 Analysis COMPOSITE ORGANIZATION LAUD SPORTSWEAR For this study, Forrester conducted interviews with four existing customers that have adopted Sitecore and have the following characteristics: A midsize North American section of a global industrial goods company with over 800 staff and $400 million in annual revenue. This customer has a brand site to educate consumers and a partners site to engage and provide content for professionals like architects, engineers, and contractors. The customer worked with partners to gather requirements for the partners site and realized that its homegrown WCM system could not meet the requirements of scale and personas, and would take a significant investment to rebuild. The customer selected Sitecore for the platform s features, flexibility, vision, and, most notably, to showcase examples of what other large businesses have done to assist the customer in envisioning its future. Beyond material improvements in all key visitor metrics, a highlight of this customer s success is reducing the process to print an annual catalog from over 200 days to only 40 days. The process was simplified, resources were freed up, print catalogs could be updated and printed more often, and consumers had the option of visiting the online catalog. A midsize North American entertainment company with 3 million annual visitors and over $90 million in annual revenue. This customer acquired three companies in a short time span and was left with four disparate WCM systems none of which had a strong AB and multivariate testing capability. The customer selected unified WCM capabilities with Sitecore, introduced testing capabilities, and later deployed Sitecore's Federated Experience Manager (FXM) to break down system silos so that the company could track a consumer s digital footprint across systems from seeking information on the brand site to booking in the property management system. The customer was also able to rely on Sitecore for mobile web and could retire its third-party mobile web software. Most importantly, the customer was able to conduct AB and multivariate tests for its most vital seasonal products and experienced a material return by using creatives and promotional offers that received the highest conversion rates. This led to an 8% growth for just one product category. A midsize European consumer health product company with over 250 staff and $300 million in annual revenue. The customer merged three entities and needed to consolidate its three disparate WCM systems. It chose Sitecore over a primary We grew the main product line by 8.2% some of it due to new attractions and introduction of payment plans, but also due to the ability to test different messages on our site and tailor messaging based on visitors. ~ Interactive marketing director, midsize North American entertainment company We track a customer s journey and provide appropriate s throughout a lifestyle process that may last over 24 months. With tailored messaging, our unsubscribes have gone down by 3% to 5% and we were able to consolidate on one platform instead of using multiple agencies for different cycles of the 24-month process. ~ Customer experience manager, midsize European consumer health product company

8 8 competitor for Sitecore s responsiveness, presentation of more relevant use cases to the customer s industry, and accessibility to leadership and Sitecore road map. Implementing Sitecore was part of the customer s digital journey that tore down silos, created a CRM data hub, prioritized mobile responsiveness, and brought search engine optimization (SEO) activities and campaigns in-house. These initiatives allowed the customer to decommission and consolidate several expenses such as campaign agencies, purchasing data, database management fees, and hosting events to extract consumer data. Business resources and content managers can now make updates to sites in 30 minutes without long workflows involving several handoffs that could take five to seven days to process. The customer also saw a conversion uplift of 25% after conducting AB tests and a decrease in unsubscribe rates by deploying more contextually relevant campaigns. A partner relations section of a large North American software company that has over 10,000 staff and $10 billion in annual revenue. This customer had a WCM system that could not satisfy the organization s goal to evolve from traditional marketing to modern marketing, which centers on concepts like speed-to-market, component reuse, standard development, rich profiles, targeting, self-service publishing, world-class performance, agility, and extensibility. Due to this organization s size and scale, its investment was relatively bigger. Its deployment time was also relatively longer but also consisted of building extensive component libraries, complex integrations, and ongoing development for requests outside of the partner relations group. The customer has experienced early results of 2% conversion uplift, 50% increased throughput of requests, and 30% efficiency in production. Based on these interviews, a composite organization was created to represent the aggregated feedback and quantified experiences captured during the interviews. For the purposes of this case study, the composite organization is known as Laud Sportswear. Laud Sportswear is a large US athletic sportswear company, and it has the following high-level characteristics: Has 1,000 staff and $500 million in annual revenue. Has 10 staff in digital marketing and five engineers. Engages with customers in multiple channels but in a disparate fashion. Earns 20% of total revenue through ecommerce. We have over 1,000 content producers and owners. To make this work at scale, we developed an extensive component and layout library that had programmable zones, content query zones, and flexible components that can be configured like brand colors, call to action, and text treatments. ~ Digital marketing director, large North American software company Situation Prior to engaging Sitecore, Laud Sportswear had two WCM systems. One was homegrown and developed for the apparel and accessories department, and the other was purchased off the shelf for the footwear department. These two teams also used two different agencies for campaigns. The company also purchased an easy-to-use but feature-light mobile web and app solution. In recent years, Laud Sportswear has endorsed athletes that have become very successful and drawn both short-term sales boosts and long-term sustainable growth in certain product lines. This growth in popularity has shifted the organization s focus on distribution through channel partners and retailers to direct sales through its website. The organization quickly recognized that its current model of dual WCM systems and campaign agencies was inefficient, could not scale, and

9 9 did not provide modern marketing capabilities like tailoring experiences for target audiences, tracking the customer journey, and performing AB testing. The company s growing offline sales and increasing website traffic has led to increased content update requests to IT from content and product managers. The process could take three to five days and was sometimes deprioritized and forgotten. These requests became a distraction to IT staff who were trying to internally develop new features for the homegrown WCM system. Unable to effectively grow further and recognizing a material loss of revenue opportunities, Laud Sportswear decided to invest in a new WCM system and customer experience platform. Solution And Results As Laud Sportswear evaluated options, it was clear that the top technology providers and fits would provide not only a WCM system, but also modular solutions that could cover , mobile, social, database, CRM, and extensibility for integration with other systems as well. Laud Sportswear narrowed down technology options to two providers with suites that covered a breadth of functionalities. The organization ultimately selected Sitecore for: Providing functionality beyond WCM and covering features like mobile responsiveness, , and system federation. Offering case studies and customer use cases of successful organizations in the same industry. Being responsive and making leadership and executives accessible. Laud Sportswear engaged Sitecore with the following high-level goals: Consolidate and decommission excess WCM systems, campaign agencies, and mobile development solutions. Decrease time and handoffs for content updates and enable business resources with a self-service model and component libraries. Improve conversion rates and increase site traffic by engaging in effective AB and multivariate testing and personalization for tailored customer experiences.

10 10 INTERVIEW HIGHLIGHTS The interviews revealed the following themes: Selecting a competent and fitting solution partner can make a material difference in the implementation experience, achieving target capabilities, and setting a foundation for future functionality. Of the four customer interviewees, one customer highlighted that it spent as much focus and effort in implementation partner selection as it did in technology vendor selection. Another Sitecore customer explained that it had a suboptimal implementation with an incumbent partner that did not have a lot of Sitecore implementation experience. This left the customer with a slightly extended implementation timeline and only the core WCM capabilities of Sitecore. The modern marketing suite functionalities that the customer sought were later deployed after engaging a preferred Sitecore partner for a system upgrade. Readers should note that Sitecore has over 400 certified solution partners that are searchable by certification level, geographical location, and name. Forrester notes that Sitecore is a leader in volume of technology partners and suggests several questions for end users to keep in mind when selecting a partner, as shown in Figure 3. 3 FIGURE 3 10 Key Questions To Assess Strategic And Technical Competencies Utilizing all of Sitecore s functionality and leveraging integrations will take thoughtful, upfront planning and road mapping. Two of the interviewed customers highlighted that careful planning is needed both at strategic and tactical levels. Beyond envisioning the future state of functionalities, organizations need to consider workflows and talent that may be affected and should be submitted for business process reengineering. From developing user-friendly component libraries to recording a comprehensive taxonomy, customers noted that thorough upfront planning could save many issues and rework in the future. In addition to people and process, organizations will need to assess their existing technologies that may overlap with Sitecore capabilities and when or whether to integrate, run simultaneously, or decommission. Readers may use Figure 4 as a high-level reference of a modular digital experience (DX) platform. 4 Readers should note that in addition to components in the DX platform, Sitecore offers the Sitecore Print Experience Manager (PXM).

11 11 FIGURE 4 DX Platform Technologies Demand A Modular, Systems-Thinking Approach Take advantage of AB and multivariate test results to drive sales and creative campaigns. One customer interviewee committed to running a series of four promotional images and accompanying text to test for click-through and conversion for a period of one month. Once the results were collected, the customer used the top-converting creative for the next four months for a specific product group. Optimizing sales volume and price, in the context of time, were particularly important for this product group, as the product has an expiration date and decreases in value as the expiration date draws closer. This customer ran similar tests and campaigns for two other focal product groups and used the results from each test to feed into the sets of creatives for the next test. For example, knowing that there is a nuance between promotional text of last chance versus prices go up tomorrow and that the nuance makes a 20% to 30% difference in click-through is knowledge that this customer can carry forward to future tests and campaigns.

12 12 BENEFITS The composite organization experienced three benefits in this case study: System consolidation cost reduction. Improved user productivity. Incremental earnings. System Consolidation Cost Reduction Laud Sportswear was able to reduce cost in three areas of overlapping functionality with Sitecore. The primary component is the retirement of the legacy WCM system and avoidance of related administrative and development resources. The second component is avoidance of software licensing and labor related to developing mobile web, as Sitecore enables Laud Sportswear to be mobile responsive. Lastly, the organization deployed EXM and avoided the need of two campaign agencies. The total three-year risk-adjusted benefit value of system consolidation cost reduction is $1,094,443, as shown in Table 1.

13 13 TABLE 1 System Consolidation Cost Reduction Ref. Metric Calculation Initial Year 1 Year 2 Year 3 A1 Technical resource salary Year 1: assumption Years 2 and 3: A1 py*103% $100,000 $100,000 $103,000 $106,090 A2 A3 A4 A5 A6 A7 Legacy system cost avoidance Legacy system administration and development resources Legacy system administration and development cost avoidance Mobile development platform cost avoidance Mobile development labor resources Mobile development labor cost avoidance Composite $100, Composite A3*A1 $200, Composite - $32,500 $32,500 $32,500 Composite A6*A1 - $50,000 $51,500 $53,045 A8 marketing agency cost Composite - $100,000 $100,000 $100,000 A9 marketing agencies Composite A10 At marketing agency cost avoidance System consolidation cost reduction A8*A9 - $200,000 $200,000 $200,000 A2+A4+A5+A7+A10 $300,000 $282,500 $284,000 $285,545 Atr Risk adjustment 5% System consolidation cost reduction (risk-adjusted) $285,000 $268,375 $269,800 $271,268 Improved User Productivity Sitecore s WCM capabilities enabled Laud Sportswear to simplify the workflow, handoffs, and time needed to update and publish content. A process that took three to five days and involved at least four people can now typically be completed by one person in minutes. The partially dedicated technical and administrative resources are now freed to be reallocated on more value-added tasks. The total three-year risk-adjusted benefit value of improved user productivity is $264,272, as shown in Table 2.

14 14 TABLE 2 Improved User Productivity Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Years 1: assumption B1 Business resource salary Year 2 and 3: B1 py*103% $80,000 $82,400 $84,872 B2 Technical resource salary A1 $100,000 $103,000 $106,090 B3 Technical resources involved in managing and updating content Composite B4 Estimated time and effort Composite 10% 10% 10% B5 B6 Technical resource cost avoidance Business resources involved in administering process B2*B3*B4 $50,000 $51,500 $53,045 Composite B7 Estimated time and effort Composite 25% 25% 25% B8 Business resource cost avoidance B1*B6*B7 $40,000 $41,200 $42,436 Bt Improved user productivity B5+B8 $90,000 $92,700 $95,481 Risk adjustment 5% Btr Improved user productivity (risk-adjusted) $0 $85,500 $88,065 $90,707 Incremental Earnings Laud Sportswear recognized that there was a conversion uplift after deploying Sitecore but also understood that tracking and attributing the uplift to Sitecore may be challenging. Table 3 reflects a model focused on impacts to the main components of conversion rate, visitor volume, and campaign volume. Based on a $500 million annual revenue, a 20% ecommerce share, a 2.5% conversion rate, and an $80 average order value, the visitor volume to achieve $100 million of ecommerce revenue initially is 50 million annual visits. From there, Laud Sportswear was able to track a 15% improvement in conversion rate in Year 1, 20% in Year 2, and 15% in Year 3, which coincides with the amount of impactful initiatives taken each year. These conversion rate uplifts, along with the 10% organic growth to offline revenue and average order value, 5% organic growth to site visitors, and minor but notable improvements to campaigns, resulted in incremental ecommerce revenue of $15.1 million in Year 1 versus the initial state without Sitecore. With a 50% attribution ratio and a 15% EBITDA margin factored in, the incremental earnings in Year 1 are $1.1 million. From the initial state through Year 3, the ecommerce share of total revenue evolved from 20% to 29%. Readers should note that this portion of the model can be calculated in several methods with different inputs. How one calculates the total economic impact may depend on the available data, but the general guidance is to

15 15 take into account volume of visits (from all sources, organic to site, , mobile, etc.), average order value, and conversion rate. The total three-year risk-adjusted benefit value of incremental earnings is $6,733,716, as shown in Table 3. TABLE 3 Incremental Earnings Ref. Metric Calculation Initial Year 1 Year 2 Year 3 C1 Annual revenue Initial: composite Years 1 to 3: ((C1 py- C4 py)*(1+c2))+c4 $500,000,000 $555,116,058 $643,655,835 $744,628,605 C2 C3 Offline revenue and average order value growth ecommerce ratio Assumption 10% 10% 10% Initial: composite Years 1 to 3: C4/C1 20% 21% 25% 29% C4 ecommerce revenue Initial: C3*C1 Years 1 to 3: C8*C5*C7 $100,000,000 $115,116,058 $159,655,835 $212,228,605 C5 Conversion rate Initial: composite Years 1 to 3: C5 py*(1+c6) 2.5% 2.9% 3.5% 4.0% C6 C7 Conversion rate improvement Average order value Composite 15.0% 20.0% 15.0% Initial and Year 1: assumption Years 2 and 3: C7 py*(1+c2) $80 $80 $88 $97 C8 Site visits Initial: C4/(C7*C5) Years 1 to 3: (C8 py*(1+c9))+c14 50,024,000 50,050,460 52,587,561 55,260,095 C9 Site visit growth Composite 0% 5% 5% C10 subscribers Initial and Year 1: composite Years 2 and 3: C10 py*(1+c11) 100, , , ,640 C11 Net subscription growth Composite 0% 0% 8% 8% C12 s per year C10*4*12 4,800,000 4,800,000 5,184,000 5,598,720 C13 Open rate Initial: composite Years 1 to 3: C13 py*(1+c15) 10.00% 10.50% 11.55% 12.42%

16 16 Ref. Metric Calculation Initial Year 1 Year 2 Year 3 C14 Click-through rate Initial: composite Years 1 to 3: C14 py*(1+c15) 5.00% 5.25% 5.78% 6.21% C15 C16 open and clickthrough improvement Visits from campaign Composite 0.0% 5.0% 10.0% 7.5% C12*C13*C14 24,000 26,460 34,578 43,156 C17 Incremental revenue C4 cy-c4 py $15,116,058 $44,539,777 $52,572,770 C18 Attribution ratio Assumption 50% 50% 50% C19 EBITDA ratio Composite 15% 15% 15% Ct Incremental earnings C17*C18*C19 $1,133,704 $3,340,483 $3,942,958 Risk adjustment 20% Ctr Incremental earnings (risk-adjusted) $0 $906,963 $2,672,387 $3,154,366 Total Benefits Table 4 shows the total of all benefits across the two quantified areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the interviewed customer expects risk-adjusted total benefits to be a PV of $7,953,929. TABLE 4 Total Benefits (Risk-Adjusted) Ref. Benefit Category Initial Year 1 Year 2 Year 3 Total Atr System consolidation cost reduction Present Value $285,000 $268,375 $269,800 $271,268 $1,094,443 $955,760 Btr Improved user productivity $0 $85,500 $88,065 $90,707 $264,272 $218,658 Ctr Incremental earnings $0 $906,963 $2,672,387 $3,154,366 $6,733,716 $5,403,018 Total benefits (riskadjusted) $285,000 $1,260,838 $3,030,252 $3,516,341 $8,092,431 $6,577,436

17 17 COSTS The composite organization experienced four costs associated with the solution: Sitecore solution cost. Implementation and development cost. Additional software and hardware. Internal labor and implementation. Sitecore Solution Cost The Sitecore solution cost includes the upfront licensing cost and annual maintenance cost. Pricing may vary, but Laud Sportswear s deployment is similar to that of some of the interviewed customers that invested in a perpetual license with a 20% annual maintenance fee. The total three-year risk-adjusted solution cost is $252,000, as shown in Table 5. TABLE 5 Sitecore Solution Cost Ref. Metric Calculation Initial Year 1 Year 2 Year 3 D1 Upfront licensing cost Composite $150,000 $0 $0 $0 D2 Annual maintenance cost D1 initial*20% $0 $30,000 $30,000 $30,000 Dt Sitecore solution cost D1+D2 $150,000 $30,000 $30,000 $30,000 Risk adjustment 5% Dtr Sitecore solution cost (riskadjusted) $157,500 $31,500 $31,500 $31,500 Implementation And Development Cost Implementation cost with a solution partner has been estimated at three to four times the price of the upfront license. The model uses a 3.5 multiplier for the upfront implementation cost and a 20% cost for each follow-on project. Follow-on projects can differ based on organization needs and may include items such as installing EXM and FXM and developing new experiences or websites. Laud Sportswear takes a frontloaded approach by taking on more follow-on project toward the beginning and fewer projects toward Year 3. The total three-year risk-adjusted cost of implementation and development is $1,270,500, as shown in Table 6.

18 18 TABLE 6 Implementation And Development Cost Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Composite: E1 Upfront implementation cost D1*3.5 $525,000 E2 Ongoing development cost per project E1*20% $105,000 $105,000 $105,000 E3 Development projects Composite E4 Development cost E2*E3 $315,000 $210,000 $105,000 Et Implementation and development cost E1+E4 $525,000 $315,000 $210,000 $105,000 Etr Risk adjustment 10% Implementation and development cost (riskadjusted) $577,500 $346,500 $231,000 $115,500 Additional Software And Hardware Additional hardware includes on-premises infrastructure to support the Sitecore solution. Additional software includes monthly or annual subscriptions to vendors that are beyond Sitecore but contribute to the total customer experience. Examples include Komfo for social media marketing and MongoDB for customer data storage. The total three-year risk-adjusted cost of additional software and hardware is $451,000, as shown in Table 7. TABLE 7 Additional Software And Hardware Ref. Metric Calculation Initial Year 1 Year 2 Year 3 F1 Additional software licenses Composite $120,000 $120,000 $120,000 F2 Additional hardware Composite $50,000 Ft Additional software and hardware Risk adjustment 10% F1+F2 $50,000 $120,000 $120,000 $120,000 Ftr Additional software and hardware (risk-adjusted) $55,000 $132,000 $132,000 $132,000 Internal Labor And Implementation Laud Sportswear dedicated five resources for six months to take part in implementation. After implementation, those five resources would spend 50% of their time on ongoing maintenance and development.

19 19 TABLE 8 The total three-year risk-adjusted cost of labor is $1,073,861, as shown in Table 8. Internal Labor And Implementation Ref. Metric Calculation Initial Year 1 Year 2 Year 3 G1 Implementation resources Composite 5 G2 Technical resource salary A1 $100,000 $100,000 $103,000 $106,090 G3 Implementation months Composite 6 G4 Implementation cost (G3/12)*G2*G1 $250,000 G5 Ongoing resources Composite G6 Dedicated time Composite 50% 50% 50% G7 Ongoing cost G2*G5*G6 $250,000 $257,500 $265,225 Gt Gtr Internal labor and implementation Risk adjustment 5% Internal labor and implementation (riskadjusted) G4+G7 $250,000 $250,000 $257,500 $265,225 $262,500 $262,500 $270,375 $278,486 Total Costs Table 9 shows the total of all costs as well as associated PVs, discounted at 10%. Over three years, the composite organization expects total costs to be a PV of $2,723,104. TABLE 9 Total Costs (Risk-Adjusted) Ref. Cost Category Initial Year 1 Year 2 Year 3 Total Dtr Etr Ftr Gtr Sitecore solution cost Implementation and development cost Additional software and hardware Internal labor and implementation Total costs (riskadjusted) Present Value $157,500 $31,500 $31,500 $31,500 $252,000 $235,836 $577,500 $346,500 $231,000 $115,500 $1,270,500 $1,170,186 $55,000 $132,000 $132,000 $132,000 $451,000 $383,264 $262,500 $262,500 $270,375 $278,486 $1,073,861 $933,818 $1,052,500 $772,500 $664,875 $557,486 $3,047,361 $2,723,104

20 20 FLEXIBILITY Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix B). Laud Sportswear has three main priorities to test in the near future. As the organization s commerce application is getting antiquated, Laud Sportswear will be open to learning more and testing Sitecore Commerce. Laud Sportswear has also partially adopted a hybrid cloud strategy for certain internal applications and functions. Considering cloud-based solutions for its digital experience applications will also be a priority in the near future. Lastly, the current deployment of Sitecore was primarily focused on improving systems efficiency, user productivity, and revenue opportunities for direct sale on the brand site. As the company still achieves a majority of its business through instore sales and channel sales, Laud Sportswear will also work with Sitecore to investigate how to track and customize the experience for users who also visit the store or other retailers that feature Laud Sportswear products. 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 Sitecore 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 Sitecore, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. TABLE 10 Benefit And Cost Risk Adjustments Benefits Adjustment System consolidation cost reduction 5% Improved user productivity 5% Incremental earnings 20% Costs Adjustment Sitecore solution cost 5% Implementation and development cost 10% Additional software and hardware 10% Internal labor and implementation 5% 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

21 21 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. The following impact risks that affect benefits are identified as part of the analysis: Minimal amounts of system consolidation or license retirement. Deploying technology without first reengineering related workflows and reallocating talent. Low adoption of AB and multivariate testing. Low adoption or no clear plan to tailor experiences for consumers and target audiences. Suboptimal implementation resulting in the availability of certain Sitecore features but not the entire suite. The following implementation risks that affect costs are identified as part of this analysis: Engaging in more follow-on project for new functionalities and capabilities. Deployment through cloud. Scaling on-premises infrastructure. Table 10 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.

22 Cash flows 22 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 Sitecore. Table 11 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 10 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 5 Cash Flow Chart (Risk-Adjusted) $6,000,000 $5,000,000 $4,000,000 Financial Analysis (risk-adjusted) $3,000,000 $2,000,000 $1,000,000 $0 ($1,000,000) ($2,000,000) Initial Year 1 Year 2 Year 3 Total costs Total benefits Cumulative total TABLE 11 Cash Flow (Risk-Adjusted) Summary Initial Year 1 Year 2 Year 3 Total Present Value Total costs ($1,052,500) ($772,500) ($664,875) ($557,486) ($3,047,361) ($2,723,104) Total benefits $285,000 $1,260,838 $3,030,252 $3,516,341 $8,092,431 $6,577,436 Total ($767,500) $488,338 $2,365,377 $2,958,855 $5,045,070 $3,854,332 ROI 142% Payback period (months) 13.4 months

23 23 Sitecore: Overview The following information is provided by Sitecore. Forrester has not validated any claims and does not endorse Sitecore or its offerings. The Sitecore Experience Platform empowers customers to market in the context of current and past customer interactions with brands, across any channel or device, and in real time. Customers end up managing a more relevant, meaningful experience, from initial visit to post-purchase engagement and nurturing. The technology delivers three key capabilities: Web content management. Manage digital content at scale, in multiple languages and across multiple sites. Because the web content management system decouples content from its presentation, you can focus on compelling web experiences instead of worrying about how content will display. Sitecore offers: In-session personalization. Multilingual, multisite management. Optimization for mobile and display-agnostic. Templates for accelerated page builds. Customer intelligence. Sitecore s backend database lets you gather, combine, and analyze information about how each individual customer has interacted with your brand both in real time and historically. You gain a single marketing repository of prospect and customer interaction data, all from one platform. Sitecore offers: A 360-degree customer view. Data down to the individual level. AB and multivariate testing, goal tracking, and visitor journey analysis. Rules-based and behavioral targeting. Customer engagement measurement. Cross-channel delivery. Sitecore s platform gives you the ability to automatically deliver your content to any device and channel, right when your customer data indicates readiness. When web content and customer intelligence are combined with omnichannel delivery, you can manage a completely contextual, entirely relevant customer experience. Sitecore offers: management. Mobile marketing. Social experience. Commerce and retail. Dynamic print. Non-Sitecore sites.

24 24 Appendix A: Composite Description Based on these interviews, a composite organization was created to represent the aggregated feedback and quantified experiences captured during the interviews. For the purposes of this case study, the composite organization is known as Laud Sportswear. Laud Sportswear is a large US athletic sportswear company, and it has the following high-level characteristics: Has 1,000 staff and $500 million in annual revenue. Has 10 staff in digital marketing and five engineers. Engages with customers in multiple channels but in a disparate fashion. Earns 20% of total revenue through ecommerce. Situation Prior to engaging Sitecore, Laud Sportswear had two WCM systems. One was homegrown and developed for the apparel and accessories department, and the other was purchased off the shelf for the footwear department. These two teams also used two different agencies for campaigns. The company also purchased an easy-to-use but feature-light mobile web and app solution. In recent years, Laud Sportswear has endorsed athletes who have become very successful and drawn both short-term sales boosts and long-term sustainable growth in certain product lines. This growth in popularity has shifted the organization s focus on distribution through channel partners and retailers to direct sales through its website. The organization quickly recognized that its current model of dual WCM systems and campaign agencies was inefficient, could not scale, and did not provide modern marketing capabilities like tailoring experiences for target audiences, tracking the customer journey, and performing AB testing. The company s growing offline sales and increasing website traffic have led to increased content update requests to IT from content and product managers. The process could take three to five days and became a distraction to IT staff who were trying to internally develop new features for the homegrown WCM. Unable to effectively grow further and recognizing a material loss of revenue opportunities, Laud Sportswear decided to invest in a new WCM system and customer experience platform. Solution And Results As Laud Sportswear evaluated options, it was clear that the top technology providers and fits would provide not only a WCM system, but also modular solutions that could cover , mobile, social, database, CRM, and extensibility for integration with other systems. Laud Sportswear narrowed down technology options to two providers with suites that covered a breadth of functionalities. The organization ultimately selected Sitecore for: Providing functionality beyond WCM and covering features like mobile responsiveness, , and system federation. Offering case studies and customer use cases of successful organizations in the same industry. Being responsive and making leadership and executives accessible. Laud Sportswear engaged Sitecore with the following high-level goals: Consolidate and decommission excess WCM systems, campaign agencies, and mobile development solutions. Decrease time and handoffs for content updates and enable business resources with a self-service model and component libraries.

25 25 Improve conversion rates and increase site traffic by engaging in effective AB and multivariate testing and tailored customer experiences. FRAMEWORK ASSUMPTIONS Table 12 provides the model assumptions that Forrester used in this analysis. The discount rate used in the PV and NPV calculations is 10%, and the time horizon used for the financial modeling is three years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company s finance department to determine the most appropriate discount rate to use within their own organizations. TABLE 12 Model Assumptions Ref. Metric Value X1 Hours per week 40 X2 Weeks per year 52 X3 Hours per year (M-F, 9-5) 2,080 X4 Hours per year (24x7) 8,760 X5 Annual salary (IT FTE) $100,000 X6 Annual salary (business FTE) $80,000 X7 Salary growth 3% X8 Company/infrastructure growth 10% CY/PY Current/previous year

26 26 Appendix B: 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. 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.

27 27 Appendix C: 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 (shown in the Framework Assumptions section) 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