The Total Economic Impact Of OpenText

Transcription

1 A Forrester Total Economic Impact Study Commissioned By OpenText Project Director: Anish Shah December 2014 The Total Economic Impact Of OpenText Cost Savings And Business Benefits Enabled By OpenText Process Suite

2 Table Of Contents Executive Summary... 3 Disclosures... 4 TEI Framework And Methodology... 5 Analysis... 6 Financial Summary OpenText Process Suite: Overview Appendix A: Interviewed Organization Description Appendix B: Total Economic Impact Overview Appendix C: Forrester And The Age Of The Customer Appendix D: Glossary Appendix E: 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. 2015, 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 OpenText commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and to examine the potential return on investment (ROI) enterprises may realize by deploying OpenText Process Suite. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of implementing Process Suite on their organizations, to leverage the technology and related process improvements to win, serve, and retain customers. OpenText Process Suite can help save costs and improve both business and IT alignment and productivity. The costs and benefits for the interviewed global financial services organization of 10,000 employees, based on our customer interview, are: To better understand the benefits, costs, and risks associated with an OpenText Process Suite implementation, Forrester interviewed an existing customer with multiple years of experience using the software platform to provide an increase Annual costs: $480,000. Total three-year benefits: $4.4 million. in transparency, automation of complex business processes, and a more consistent and efficient way to manage processes across its various business lines. Prior to using OpenText Process Suite, the financial services organization was using a third-party vendor that was providing business process management services for its workflow needs. However, the company, which conducts over 125,000 separate transactions, needed a platform that could manage end-to-end processes across systems and applications with integration across all their work-flows. The customer also wanted to gain more process alignment across its business and IT groups and automate key processes to take the strain off internal resources. With OpenText s Process Suite, the customer was able to streamline and automate processes across key functions and lines of business, enabling it to meet its objectives, increase productivity, and keep costs in check. Said the senior IT Procurement Manager, OpenText Process Suite plays an important part in helping us evaluate opportunities, and it helps our business become more productive, allowing them to make faster decisions. Investment costs: $1.2 million. OPENTEXT PROCESS SUITE REDUCES OPERATIONAL COSTS AND INCREASES INFORMATION MANAGEMENT AND BUSINESS PRODUCTIVITY Our interview with an existing customer and subsequent financial analysis found that the organization experienced the riskadjusted ROI, benefits, and costs shown in Figure 1. 1 (See Appendix A for a description of the interviewed organization.) The analysis points to three-year benefits of about $4.4 million versus implementation costs of $1.2 million and ongoing costs of $480,000, adding up to a three-year net present value (NPV) of about $2 million. The three-year net benefits over the threeyear costs results in an ROI of 90% for the financial services organization. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 90% Payback: 12 to 13 months Three-year benefits: $4.4 million Three-year NPV: $2.1 million

4 4 Benefits. The interviewed organization experienced the following risk-adjusted benefits: An increase in business productivity through faster decision-making by 10% to 15%. The interviewed organization s knowledge workers gained productivity after implementing OpenText s Process Suite by having the ability to evaluate investment decisions faster. In Year 1, they experienced 10% productivity, which increased to 15% by Year 3. A 30% increase in IT productivity. The interviewed organization increased its IT productivity by 30% for the staff who support workflow management and business process tasks. An example of the increase in productivity is in the faster execution of changes that can be implemented through Open Text s virtual configuration functionality. Compliance and auditing cost savings of $270,000 per year. The interviewed organization experienced a reduction in compliance- and auditing-related costs due to better recordkeeping and archiving of workflow tasks after its implementation of OpenText Process Suite in its environment. Costs. The interviewed organization experienced the following risk-adjusted costs: Initial implementation costs totaling about $2.4 million over three years. The interviewed organization experienced $2.4 million in implementation costs. This includes enterprise-wide software license, system integration, training, and outside professional service costs. In addition, this includes costs over the first three years that the organization incurred for customizing the platform to its specifications and business needs. Annual maintenance fees of $80,000. This is a recurring fee paid to OpenText for continued ongoing maintenance and support of the business process management (BPM) software tools. Disclosures The reader should be aware of the following: The study is commissioned by OpenText 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 OpenText Process Suite. OpenText 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. OpenText provided the customer name for the interview but did not participate in the interview.

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 OpenText Process Suite solution. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision in order 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 Process Suite can have on an organization (see Figure 2). Specifically, we: Interviewed OpenText marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to the marketplace for Process Suite. Interviewed one organization currently using OpenText to obtain data with respect to costs, benefits, and risks. Constructed a financial model representative of the interview using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interview. Risk-adjusted the financial model based on issues and concerns the interviewed organization highlighted in interviews. Risk adjustment is a key part of the TEI methodology. While the interviewed organization 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 OpenText Process Suite: 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 interview Construct financial model using TEI framework Write case study

6 6 Analysis INTERVIEWED ORGANIZATION For this study, Forrester conducted an in-depth interview with the senior contract manager of IT procurement from a financial services company, which is an OpenText customer located in the U.S. Based on the in-depth interview, Forrester constructed a TEI framework and an associated ROI analysis that illustrates the areas financially affected. The OpenText customer that Forrester interviewed is an organization with the following characteristics: OpenText Process Suite s workflow tool is the foundation for how we interact between the businesses and evaluate opportunities. ~ Senior IT procurement manager, global financial services organization Is a large financial institution that provides loans to over 180 countries for capital programs. Is headquartered in the US with over 10,000 employees across 120 offices worldwide. Deploys capital of over $4 billion a year through approximately 135,000 separate transactions ranging from $50,000 to $200 million. Makes investments in various verticals including education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. We customized OpenText s Process Suite platform per our needs and policies, and now we take advantage of the automation of the tool that makes us all more efficient. ~ Senior IT procurement manager, global financial services organization INTERVIEW HIGHLIGHTS Situation Forrester interviewed a senior IT procurement manager who is responsible for the procurement side of IT needs for the organization. The IT procurement team is responsible for initiating, assessing, and making purchase decisions on IT needs including software, telecommunications, or staff augmentation. The team is responsible for evaluating OpenText Process Suite and managing the contract with OpenText. The key decision to evaluate a more robust workflow and business process software tool was made because of the organization s need to more efficiently manage an in-house bidding tool it built for evaluating projects and evaluating additional operational and technical resources and consultants to augment its current staff as projects came in. The interviewed organization not only deploys capital for various projects but also hires technical and operational consultants to help manage the projects. To accomplish this, the organization prequalifies resources and projects and then evaluates the merits based on technical, pricing, and operational parameters. The organization needed an online tool to record all documents, work with its technical and business counterparts to score projects and resources, and communicate via to vendors and resources, as well as provide clearances and approvals in a consistent manner for approximately 125,000

7 7 different projects. The interviewed organization needed a software tool to consistently manage this workflow as well as customize features based on its operational needs. Additionally, the interviewed organization, which has over 10,000 full-time employees and outside consultants, needed a repository to keep all of the transactions and procurement processes in one place. Solution The interviewed organization selected OpenText Process Suite BPM solution for its ability to provide a configurable solution that can be easily customized based on the organization s requirements and for its breadth of functionalities and features to manage its end-to-end workflow needs. Results The interview revealed that: Automating workflow tasks such as documentation, communication, and evaluation of projects and consultants improves business productivity. The most significant benefit that the organization experienced was the faster decisionmaking that OpenText Process Suite offers, as the large financial institution has approximately 135,000 yearly transactions. An increase in IT productivity is realized through the decreasing support cost of managing disparate systems and automation. The interviewed organization was able to increase its IT support productivity by decreasing the percentage of time supporting business processes and tasks to ensure each project was documented and evaluated in a consistent format. Quality of document management and archiving reduces compliance and auditing costs for the interviewed organization. The interviewed organization described OpenText Process Suite as an important part of its compliance strategy. With over 10,000 full-time employees and 135,000 separate transactions, the organization found it very important that archiving of documentation is readily available for its auditing- and compliancerelated efforts. For us, we had to have a tool in place that we could actually [use to] gather information and then audit the information that we were gathering. So that s why we really needed a workflow tool, and we went with OpenText Process Suite. ~ Senior IT procurement manager, global financial services organization

8 8 BENEFITS The interviewed organization experienced a number of quantified benefits in this case study: Increase in business productivity through faster decision-making. Increase in IT productivity. Reduction in the organization s compliance and auditing costs. Another important benefit the interviewed organization mentioned was that OpenText Process Suite made its evaluation process of projects and the deployment of capital more fair through transparency. Increase in Business Productivity Faster Decision-Making The interviewed organization indicated that a key benefit from implementing OpenText Process Suite was the increase in productivity from the knowledge workers who are responsible for deploying the financial institutions capital, identifying and assessing suitable projects, and hiring outside consultants for project execution. The interviewed organization has 500 knowledge workers, and 35% of their time is directly dedicated to decisionmaking for deploying capital and making project decisions. Following the implementation of OpenText Process Suite tools to manage the organization s workflow needs, the knowledge workers increased their productivity through increased automation, transparency, and documentation management across the evaluation process. Productivity was increased 10% in Year 1, 12% in Year 2, and 15% in Year 3. The organization was able to realize benefits of 40% of this increase in productivity from its knowledge workers, which results in a risk-adjusted three-year net benefit of $2.9 million (see Table 1).

9 9 TABLE 1 Increase In Business Productivity (Knowledge Workers) From Faster Decision-Making Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total Present Value Number of knowledge workers A making investment decisions A2 Number of hours per year 2,040 2,040 2,040 A3 Avg. time knowledge worker spends on evaluating projects 35% 35% 35% A4 Avg. hourly cost per FTE $ 75 $ 75 $ 75 Efficiency gained by having A5 comprehensive evaluation and 10% 12% 15% process management tool Actual productivity gained from A6 40% 40% 40% increased efficiency At Increase in productivity faster decision-making A1*A2*A3*A4*A5*A6 $0 $1,071,000 $1,285,200 $1,606,500 $3,962,700 $3,242,772 Risk adjustment 90% Increase in productivity Atr faster decision-making (riskadjusted) $0 $963,900 $1,156,680 $1,445,850 $3,566,430 $2,918,495 Increase In IT Productivity The interviewed organization indicated that a key benefit from the OpenText Process Suite implementation was a significant savings in IT support required to manage its workflow and business process management needs. Prior to its investment in OpenText Process Suite, there was a lot of strain on the internal IT team to support business processes and tasks related to evaluating projects, communicating with vendors, making investment decisions, and archiving documents for compliance purposes. As a result, the interviewed organization largely relied on multiple systems and processes to manage its workflow operations, requiring heavy IT support. Additionally, before implementing OpenText Process Suite, the interviewed organization had outsourced its business process management needs to an outside vendor but lacked end-to-end automated processes across all lines of business globally.

10 10 The interviewed organization has 400 IT employees and claimed that about 35% of their time was spent managing workflow and business process tasks. Since the implementation of OpenText Process Suite, the organization has seen an increase of 30% in productive time due to the automation of its business process needs across different divisions. The interviewed organization estimated that about 25% of this increased productive time is translated into efficiency gains for the company. This results in a risk-adjusted three-year NPV of approximately $900,000 (See Table 2). TABLE 2 Increase In IT Productivity Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total Present Value B1 Number of IT employees Average hourly burden rate for B2 $ 75 $ 75 $ 75 IT employee Number of working hours per B3 2,040 2,040 2,040 year Percentage of time supporting B4 business processes and tasks and processes to ensure each 35% 35% 35% project is in consistent format Percentage increase in B5 productive time from efficiency 30% 30% 30% gains Increase in IT productivity B6 25% 25% 25% OpenText Process Suite Bt $0 $401,625 $401,625 $401,625 $1,204,875 $998,782 Risk adjustment 90% Increase in IT productivity Btr OpenText Process Suite $0 $361,463 $361,463 $361,463 $1,084,388 $898,904 (risk-adjusted) Reduction In Auditing Costs The interviewed organization indicated that it gained significant value from its OpenText Process Suite implementation through savings in auditing and compliance costs.. One important objective in investing in the OpenText BPM solution was to have a tool in place that the organization could easily use to gather information and then audit the information that it had received across business lines and geographies. The interviewed

11 11 organization saved 200 hours a year across 10 auditors (internal and external), with an average cost of $150 per hour. This savings resulted in three-year risk-adjusted direct cost savings of about $670,000. TABLE 3 Reduction In Auditing Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total C1 Average time saved/year Present Value C2 Number of auditors C3 Hourly cost per auditor $ 150 $ 150 $ 150 Ct Direct cost avoidance auditors $0 $300,000 $300,000 $300,000 $900,000 $746,056 Risk adjustment 90% Ctr Direct cost avoidance auditors (risk-adjusted) $0 $270,000 $270,000 $270,000 $810,000 $671,450 Total Benefits Table 4 shows the total of all benefits across the three 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 more than $4.4 million. TABLE 4 Total Benefits (Risk-Adjusted) Ref. Benefit Category Initial Year 1 Year 2 Year 3 Total Present Value Atr Increase in Productivity - Faster Decision Making $0 $963,900 $1,156,680 $1,445,850 $3,566,430 $2,918,495 Increase in IT Productivity - OpenText Process Btr $0 $361,463 $361,463 $361,463 $1,084,388 $898,904 Suite Ctr Reduction in organizations auditing costs $0 $270,000 $270,000 $270,000 $810,000 $671,450 Total benefits (risk-adjusted) $0 $1,595,363 $1,788,143 $2,077,313 $5,460,818 $4,488,849

12 12 COSTS The interviewed organization experienced the following two costs associated with the OpenText Process Suite: Implementation and customization costs. Annual maintenance costs. These represent the mix of internal and external costs experienced by the interviewed organization for initial planning, implementation, and ongoing maintenance associated with the solution. Implementation And Customization Costs Implementation costs and further customization costs for OpenText Process Suite were incurred during the implementation period over three years. Initial implementation costs were $800,000, which included system integration, training, and outside professional fees. Additionally, the interviewed organization purchased the enterprise license, for which they paid $375,000 in initial fees. In subsequent years, the organization spent $400,000 in costs for both internal and external consultants to customize the solution per its policies and business process management needs. This resulted in about $2.1 million in costs over three years for the organization (See Table 5). Implementation costs vary from organization to organization, considering different licensing agreements, what other products may be licensed from the same vendor, and other discounts. TABLE 5 Implementation And Customization Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total Initial implementation costs E1 (including training, linking to other internal systems, $800,000 professional service fees) Present Value E2 Enterprise license fees OpenText Process Suite $375,000 Customization of platform by E3 bank (development, testing, $400,000 $400,000 $400,000 deployment) Et Total implementation and customization costs $1,175,000 $400,000 $400,000 $400,000 $2,375,000 $2,169,741 Risk adjustment 100% Total implementation and Etr customization costs (riskadjusted) $1,175,000 $400,000 $400,000 $400,000 $2,375,000 $2,169,741

13 13 Annual Maintenance Costs Each year, the composite organization incurred maintenance for ongoing access to OpenText Process Suite software. The maintenance fee included support and software upgrades developed by OpenText that enhance core functionalities and expand the range of industry-specific features. The interviewed organization incurred $80,000 of annual maintenance costs, which results in a three-year PV cost of about $200,000 (see Table 6). An organization s annual maintenance fees may vary slightly from year to year. Maintenance costs are more variable from organization to organization, considering some organizations outsource this and some manage it in-house, perhaps augmented with third-party consulting help. TABLE 6 Annual Maintenance Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total Present Value D1 Annual maintenance cost $80,000 $80,000 $80,000 Dt Annual maintenance cost A1 $0 $80,000 $80,000 $80,000 $240,000 $198,948 Risk adjustment 100% Annual maintenance cost Dtr $0 $80,000 $80,000 $80,000 $240,000 $198,948 (risk-adjusted) Total Costs Table 7 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the interviewed organization expects total costs to total a net present value of a little more than $2.3 million. TABLE 7 Total Costs Ref. Cost Category Initial Year 1 Year 2 Year 3 Total Present Value Dtr Annual Maintenance Cost $0 ($80,000) ($80,000) ($80,000) ($240,000) ($198,948) Implementation & OpenText Process Suite Etr ($1,175,000) ($400,000) ($400,000) ($400,000) ($2,375,000) ($2,169,741) Customization Costs Total Costs (Risk-Adjusted) ($1,175,000) ($480,000) ($480,000) ($480,000) ($2,615,000) ($2,368,689)

14 14 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 OpenText Process Suite 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]). OpenText Process Suite software consists of various solutions that offer business process delivery and can integrate across all OpenText product suites. This allows organizations to more easily scale volumes of data and integrate other business lines, which in turn accelerates their time-to-value for customers and enhances their ability to integrate and innovate critical process and capabilities. Organizations can quickly automate complex processes and address complex case management challenges within a single platform. The solution includes a full set of tools within the core platform, which makes it more efficient to adapt the software tools to their business needs. The tools include: Business process management. Efficiently and effectively manage end-to-end processes across systems and applications covering integration-centric and human-centric workflows. Dynamic case management. Empower knowledge workers to achieve business outcomes and goals for cases or work units that combine structured data and unstructured information. Knowledge workers are guided through the process and have the ability to influence and change the process as per their judgment while keeping full transparency at the same time. Master data management (MDM). Manage your critical business data within a uniform, single-source platform. Business rules management. Seamlessly integrate rules within business processes and business objects during modeling and design time. OpenText Process Component Library. This set of prebuilt service delivery components and reports enables organizations to assemble rather than code applications and deploy them much faster than traditional tools. Process experience. Support a single and intuitive work experience for users, no matter which process engine may be driving a process on the back end. OpenText AppWorks Gateway. This is a set of RESTful APIs and developer resources across the broader enterprise information management (EIM) stack to allow developers to easily create solutions that span the breadth of the OpenText EIM portfolio. RISK 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 the OpenText Process Suite 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 OpenText Process Suite, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.

15 15 TABLE 8 Benefit And Cost Risk Adjustments Benefits Increase in business productivity (knowledge workers) from faster decision-making Adjustment 10% Increase in IT productivity 10% Reduction in auditing costs 10% 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.

16 Cash Flows 16 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 interviewed organization s investment in the OpenText Process Suite. Figure 3 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 8 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 3 Cash Flow Chart (Risk-Adjusted) $3,500,000 $3,000,000 $2,500,000 $2,000,000 Financial Analysis (risk-adjusted) $1,500,000 $1,000,000 $500,000 $0 ($500,000) ($1,000,000) ($1,500,000) Initial Year 1 Year 2 Year 3 Total Costs Total Benefits Cumulative Total TABLE 9 Cash Flow (Risk-Adjusted) Summary Initial Year 1 Year 2 Year 3 Total Present Value Total Costs ($1,175,000) ($480,000) ($480,000) ($480,000) ($2,615,000) ($2,368,689) Total Benefits Total ROI Payback Period (months) $0 $1,595,363 $1,788,143 $2,077,313 $5,460,818 $4,488,849 ($1,175,000) $1,115,363 $1,308,143 $1,597,313 $2,845,818 $2,120,160 90% 12.5

17 17 OpenText Process Suite: Overview By 2020, organizations must have aggressive digital strategies for customer engagement, supply chain, and internal operations to achieve the agility, efficiency, and productivity to remain competitive. OpenText calls this the digital transformation. OpenText has the tools and techniques to help their customers take a different look at their enterprises. Instead of automating these more challenging human-centric processes using the perspectives of boxes, arrows, decisions, and rules, OpenText allows organizations to represent themselves with digital objects, which represent physical and logical entities both inside and outside the organization. They better identify and map the information, processes, relationships, context, and dependencies, and help organizations better manage their assets and entities as they drive their digital transformation. To assist customers in transforming their organizations, OpenText has created a set of digital solutions to help organizations more easily transform their high-value and human-centric business functions. These out-of-the-box applications and frameworks lower the cost, increase the speed of deployment, and capture process best practices to help organizations maximize the benefits of their digital transformations. These solutions include Cloud Service Brokerage, ROSMA Procurement Performance Management, Contract Management, Digital Media Supply Chain, Case Management Framework, Project Management Framework, and Supply Chain Optimization. The Process Suite is a comprehensive process and case management foundation for an organization s digital transformation. This suite includes a platform with a cloud-based process engine and strong integration capabilities, including a SOA framework, ESB functionality, MDM, and prebuilt connectors. The Process Component Library (PCL), as part of the Process Suite, provides prebuilt case and project management frameworks and other service components and UIs to help speed solution development. Also included with the Process Suite is Process Intelligence, providing advanced big data analytics and visualization. The OpenText Process Suite, combined with OpenText s digital solutions, provides the needed capabilities to power digital transformations. It will simplify an organization s information management, transform its processes, and accelerate its business cadence, providing the competitive advantage needed to be a market leader in the digital age of 2020.

18 18 Appendix A: Interviewed Organization Description For this TEI study, Forrester interviewed a large financial services organization based in the United States. The financial analysis and case study to illustrate the quantifiable benefits and costs of implementing OpenText s Process Suite is based on an in-depth interview with the organization, which has the following characteristics: Is a large financial institution that provides loans to over 180 countries for capital programs. Is headquartered in the US, with over 10,000 employees across 120 countries. Deploys capital of over $4 billion a year through approximately 135,000 separate transactions ranging from $50,000 to $200 million. Makes investments in various verticals including education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. FRAMEWORK ASSUMPTIONS Table 10 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 10 Model Assumptions Ref. Metric Calculation Value C1 Hours per year 2,040 C2 Average hourly cost knowledge worker globally C3 Average hourly cost IT support FTE $75 C4 Average hourly cost auditor $150 $75

19 19 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. 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 C: Forrester And The Age Of The Customer Your technology-empowered customers now know more than you do about your products and services, pricing, and reputation. Your competitors can copy or undermine the moves you take to compete. The only way to win, serve, and retain customers is to become customer-obsessed. A customer-obsessed enterprise focuses its strategy, energy, and budget on processes that enhance knowledge of and engagement with customers and prioritizes these over maintaining traditional competitive barriers. CMOs and CIOs must work together to create this companywide transformation. Forrester has a four-part blueprint for strategy in the age of the customer, including the following imperatives to help establish new competitive advantages: Transform the customer experience to gain sustainable competitive advantage. Accelerate your digital business with new technology strategies that fuel business growth. Embrace the mobile mind shift by giving customers what they want, when they want it. Turn big data into business insights through innovative analytics.

21 21 Appendix D: 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

22 22 Appendix E: Endnotes 1 Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more information, see the section on Risks.