A Forrester Total Economic Impact Study Prepared For Microsoft The Total Economic Impact Of Microsoft Dynamics CRM 2011

Transcription

1 A Frrester Ttal Ecnmic Impact Study Prepared Fr Micrsft The Ttal Ecnmic Impact Of Micrsft Dynamics CRM 2011 Prject Directr: Michelle S. Bishp, Senir Cnsultant May 2011

2 TABLE OF CONTENTS Executive Summary... 2 Micrsft Dynamics CRM 2011 Optimizes Business Prductivity... 2 Factrs Affecting Benefits And Csts... 4 Disclsures... 4 TEI Framewrk And Methdlgy... 5 Analysis... 6 Interview Highlights... 6 Csts... 7 Benefits Other Benefits Nt Quantified Flexibility Risk Financial Summary Micrsft Dynamics CRM 2011: Overview Appendix A: Cmpsite Organizatin Descriptin Appendix B: Ttal Ecnmic Impact Overview Appendix C: Glssary Appendix D: Endntes , Frrester Research, Inc. All rights reserved. Unauthrized reprductin is strictly prhibited. Infrmatin is based n best available resurces. Opinins reflect judgment at the time and are subject t change. Frrester, Techngraphics, Frrester Wave, RleView, TechRadar, and Ttal Ecnmic Impact are trademarks f Frrester Research, Inc. All ther trademarks are the prperty f their respective cmpanies. Fr additinal infrmatin, g t Abut Frrester Cnsulting Frrester Cnsulting prvides independent and bjective research-based cnsulting t help leaders succeed in their rganizatins. Ranging in scpe frm a shrt strategy sessin t custm prjects, Frrester s Cnsulting services cnnect yu directly with research analysts wh apply expert insight t yur specific business challenges. Fr mre infrmatin, visit Page 1

3 Executive Summary The fundamental business needs that drive the requirement fr effective and efficient custmer management practices remain unchanged: acquiring new custmers, building tighter bnds f lyalty, and reducing the csts f marketing, selling, and servicing. As a cnsequence, interest in investing in and deplying slutins t imprve custmer-facing business prcesses remains strng. Indeed, 55 percent f the 455 large rganizatins that Frrester surveyed in late 2010 in Nrth America and Eurpe have already implemented a custmer relatinship management (CRM) slutin and many f these are investing mre t upgrade their tl set. An additinal 19 percent have plans t buy a CRM slutin fr the first time within the next 12 t 24 mnths. 1 The pattern fr midsize rganizatins is similar. CRM slutins are widely deplyed, and interest in expanding their use is high. Hwever, given the cntinuing uncertainty in the current ecnmic climate, rganizatins are lking fr flexible and extensible slutins that prvide the functinality required at the best value. Micrsft Dynamics CRM 2011 business sftware is a slutin designed t bst the persnal and team prductivity f custmer-facing wrkers by ffering a full set f functinality with a familiar desktp user interface (UI) thrugh integratin with the Micrsft Outlk messaging and cllabratin client. The prduct ffers deplyment flexibility thrugh being available in tw versins: a traditinal perpetual license, n-premises slutin; and a sftware-as-aservice (SaaS) subscriptin service versin. The slutin enables mre efficient business prcesses and imprves team and persnal prductivity. In January 2011, Micrsft cmmissined Frrester Cnsulting t examine the ttal ecnmic impact and ptential return n investment (ROI) enterprises may realize by deplying Micrsft Dynamics CRM Frrester cnducted in-depth interviews with executives frm nine Micrsft Dynamics CRM 2011 custmers wh are nw in the early phases f implementing the slutin. Frrester then cmpiled the interview results, including frward-lking expectatins, int a cmpsite case study f a 2,000-emplyee rganizatin with an initial deplyment f 50 users. The purpse f this study is t prvide readers with a framewrk t evaluate the ptential financial impact f deplying Micrsft Dynamics CRM 2011 within their rganizatins. Micrsft Dynamics CRM 2011 Optimizes Business Prductivity Ttal Ecnmic Impact (TEI) is a standard methdlgy develped by Frrester Research that captures and quantifies the vice f the custmer relative t technlgy investments. In this study, we interviewed nine Micrsft custmers in ne-n-ne discussins abut each rganizatin s experience in implementing Micrsft Dynamics CRM Frrester s interviews and subsequent financial analysis determined that a cmpsite rganizatin, based n the rganizatins we interviewed, wuld expect t experience the risk-adjusted ROI, csts, and benefits summarized in Table 1. Table 1 Cmpsite Organizatin Three-Year Risk-Adjusted ROI ROI Payback perid Ttal benefits (PV) Ttal csts (PV) Net present value (NPV) 243% 4.1 mnths U.S. $665,086 U.S. $193,868 U.S. $665,086 Page 2

4 Summary. Overall this study cncludes that the cmpsite rganizatin achieved a three-year NPV f U.S. $665,086 (risk-adjusted net benefits) as a result f deplying Micrsft Dynamics CRM 2011 fr an initial team f 50 users. The payback perid was ver fur mnths with an average NPV per user f $13,302 ver three years. Benefits. The cmpsite rganizatin achieved the fllwing benefits that represent thse experienced by the interviewed cmpanies: Increased sales prductivity f 5 percent with the ease f use f Micrsft Dynamics CRM sftware and integratin with Outlk leading t higher adptin, imprved pprtunity and lead tracking and ruting, and a mre accurate picture f its sales pipeline. The interviewed cmpanies imprved their sales reprting and better managed their custmer database and achieved faster and mre efficient prcesses fr sales frecasting. Custmer service prductivity savings frm a better UI and dcumented prcesses. The cmpsite rganizatin avided hiring 1.5 full time equivalents (FTE) fr its 10-persn custmer service team even as its divisin grew. Custmer service agents imprved issue reslutin as new prcesses were implemented, and agents had access t all the custmer infrmatin they needed t reslve cases quickly and with precisin. Streamlined prcesses and peratins leading t lwer cst f sales as Micrsft Dynamics CRM enabled the cmpsite rganizatin s technical cnsultants t shrten time spent n the prpsal prcess by 10 percent. The interviewed rganizatins saw prcess imprvements fr their accunt management, engineering, rder taking, and prject delivery teams, which led t lwer peratinal csts and imprved custmer respnsiveness. Acceleratin f sales cnversin cycle by 50 percent and crrespnding revenue gain as teams wrked better tgether acrss different business systems, prcesses, and gegraphies. Marketing cst savings f mre than $200,000 (risk-adjusted ver three years) due t mre real-time insights and imprved campaign management frm better analytics. Prductivity savings f 16 man-hurs per mnth due t the better reprting tls in Micrsft Dynamics CRM with data cnslidatin, reprting autmatin, and richer dashbard capabilities. Imprved custmer service delivery with quicker respnse times, dialg bxes, and segmented levels f custmer service thrugh insights frm Micrsft Dynamics CRM. Imprved crss-sell cllabratin within sales and custmer service teams by prviding access t reprting tls and ther cllabratin sftware such as Micrsft SharePint Server Lwer csts and effrt t custmize the slutin t unique requirements, including extended CRM scenaris. Ease f integratin with ther business technlgy systems, imprving prcess efficiencies. Page 3

5 Csts. The rganizatins we interviewed incurred the fllwing csts: Vendr sftware license fees r subscriptin fees. Prfessinal fees paid t a Micrsft partner fr implementatin. Internal labr csts fr planning, design, and implementatin. User training csts. Onging administrative supprt csts. Factrs Affecting Benefits And Csts Table 1 illustrates the risk-adjusted financial results that wuld be expected by the cmpsite rganizatin described in Appendix A. The risk-adjusted values take int accunt ptential uncertainty r variance that exists in estimating the csts and benefits, which prduces mre cnservative estimates. The fllwing factrs may affect the financial results that an rganizatin may experience: The pre-micrsft Dynamics CRM 2011 envirnment (whether there was n preexisting CRM applicatin r whether anther CRM tl was being used). Level f deplyment f CRM tls within the rganizatin and integratin with ther business prcesses. Custmizatin required fr CRM deplyment and ther implementatin risks. Disclsures The reader shuld be aware f the fllwing: The study was cmmissined by Micrsft and delivered by the Frrester Cnsulting grup. Frrester makes n assumptins as t the ptential ROI that ther rganizatins will receive. Frrester strngly advises that readers shuld use their wn estimates within the framewrk prvided in the reprt t determine the apprpriateness f an investment in Micrsft Dynamics CRM Micrsft reviewed and prvided feedback t Frrester, but Frrester maintains editrial cntrl ver the study and its findings and des nt accept changes t the study that cntradict Frrester s findings r bscure the meaning f the study. The custmers fr the interviews were prvided by Micrsft. Page 4

6 TEI Framewrk And Methdlgy Intrductin Frm the infrmatin prvided in the interviews, Frrester has cnstructed a TEI framewrk fr thse rganizatins cnsidering implementing Micrsft Dynamics CRM The bjective f the framewrk is t identify the cst, benefit, flexibility, and risk factrs that affect the investment decisin. TEI is a standard methdlgy develped by Frrester Research that enhances an rganizatin s technlgy decisin-making prcesses. Apprach And Methdlgy Frrester tk a multistep apprach t evaluate the ecnmic impact that Micrsft Dynamics CRM 2011 can have n an rganizatin (see Figure 1). Specifically, we: Interviewed Micrsft Prduct Management Grup emplyees and Frrester Research analysts t gather data relative t Micrsft Dynamics CRM 2011 and the CRM market in general. Interviewed nine rganizatins currently using Micrsft Dynamics CRM 2011 t btain data with respect t csts, benefits, risk, and flexibility. Designed a cmpsite rganizatin based n characteristics f the interviewed rganizatins (see Appendix A). Cnstructed a financial mdel representative f the interviews using the TEI methdlgy. The financial mdel is ppulated with the cst and benefit data btained frm the interviews as applied t the cmpsite rganizatin. Figure 1 TEI Apprach Perfrm due diligence Cnduct custmer interviews Design cmpsite rganizatin Cnstruct financial mdel using TEI framewrk Write case study Frrester emplyed fur fundamental elements f TEI in mdeling the financial implicatins f deplying Micrsft Dynamics CRM 2011: 1. Csts. 2. Benefits t the entire rganizatin. 3. Flexibility. 4. Risk. Frrester s TEI methdlgy prvides a cmplete picture f the ttal ecnmic impact f technlgy investment decisins. Please see Appendix B fr additinal infrmatin n the TEI methdlgy. Page 5

7 Analysis Interview Highlights A ttal f nine interviews were cnducted fr this study, invlving representatives frm the fllwing cmpanies: 1. Leading Australian university with mre than 40,000 students in campuses in Sydney and Perth and satellite campuses in Asia Pacific. 2. Hng Kng-based IT infrastructure slutins prvider and systems integratr. 3. Nrth American firm that prvides utsurced accunting and financial slutins t midmarket CFOs. 4. Management cnsulting cmpany based in Eurpe fcused n banking and insurance with ffices in fur cuntries. 5. IT slutins prvider t public libraries and arts rganizatins in Eurpe with mre than $45 millin in revenue. 6. A diverse municipal gvernment entity that prvides lcal gvernment and plice services fr a leading financial and cmmercial city center. 7. Healthcare infrmatin technlgy services cmpany in the US that prvides integrated medical devices, sftware, and nline services slutins with mre than $15 millin in revenue. 8. Diversified engineering cmpany based in India with 1,400 emplyees and revenues f mre than $190 millin. 9. Largest buyer and seller f cars in the United Kingdm, with mre than 350 emplyees in 200 lcatins. These interviews uncvered a number f imprtant insights abut custmer rganizatins experience with Micrsft Dynamics CRM 2011: The majrity f the rganizatins interviewed either did nt have a CRM system in place r were using hmegrwn legacy sftware befre turning t Micrsft. A number f the rganizatins had been using ther packaged sftware CRM slutins in a limited capacity and decided t cnslidate arund Micrsft Dynamics CRM All the rganizatins were experiencing rapid grwth and had departmental cllabratin barriers that were hampering their sales prcesses. They needed mre cllabratin amng sales, marketing, custmer service, and delivery t get t the next level f custmer engagement. Fr mst f the cmpanies interviewed, familiarity and integratin with Micrsft Outlk were fundamental t their chice f a CRM slutin. One rganizatin even had representatives frm its sales team ging int the evaluatin prcess preferring different CRM sftware, but after the evaluatin, the team was unanimus in chsing Micrsft Dynamics CRM Page 6

8 These rganizatins deplyment chices ranged acrss all ptins, including: n-premises, nline, and partnerhsted. Organizatins with 10 t 100 initial users typically had an nline implementatin while thse with 200 users r mre implemented an n-premises CRM slutin. Interviewees als highlighted the cst effectiveness f the Micrsft Dynamics CRM 2011 and the ease f implementatin. Rllut t users was als characterized as smth and seamless, because users were already familiar with the UI and the CRM slutin was integrated with Outlk. Users n average had five hurs f training althugh ne rganizatin recmmended at least a full day f user training. All the cmpanies interviewed wrked extensively with Micrsft partners t cnfigure prcesses and rll ut the prject. As ne custmer stated, A partner s value shuldn t be underestimated. They gave us a reality check n what was needed. With ur experience, yu shuld trust them [Micrsft certified partners], and yu shuld set up yur gals tgether. The rganizatins interviewed als nted the cst savings they wuld experience during each extensin r custmizatin. Fr instance, ne rganizatin liked that it culd easily change the CRM screens using internal IT resurces, aviding the cst f utside cnsulting fees. Anther cmpany that had integrated Micrsft Dynamics CRM 2011 with its frnt-end website nted that with its initial investment, it culd nw scale its business internatinally withut a cmmensurate scale in its csts. While the integratin with Outlk enabled faster user adptin, these rganizatins als set up plicies and ther incentives t reinfrce use f the slutin fr custmer management with their accunt teams. Cmpsite Organizatin Frrester cnstructed a TEI framewrk, a cmpsite rganizatin, and an assciated ROI analysis that illustrates the areas financially affected based n interviews with nine Micrsft Dynamics CRM 2011 user rganizatins prvided by Micrsft. The cmpsite rganizatin that Frrester synthesized frm these results is a 2,000-emplyee diversified prfessinal services rganizatin with mre than $400 millin in annual sales. Micrsft Dynamics CRM 2011 was initially implemented fr 50 users in its 200-persn financial systems divisin. These users had rles in sales, custmer service, and marketing. The rganizatin has a distributed wrkfrce and was experiencing rapid grwth. The rganizatin was als using different systems t supprt sales, marketing, and custmer service prcesses, and these systems had n cnsistency f use amng its emplyees. Please see Appendix A fr a mre detailed descriptin f the cmpsite rganizatin. Framewrk Assumptins The discunt rate used in the PV and NPV calculatins is 10 percent, and the time hrizn used fr the financial mdeling is three years. Organizatins typically use discunt rates between 8 percent and 16 percent based n their current envirnment. Readers are urged t cnsult with their respective cmpany s finance department t determine the mst apprpriate discunt rate t use within their wn rganizatins. Other assumptins are shwn in later tables. Csts The main csts assciated with the cmpsite rganizatin s deplyment f Micrsft Dynamics CRM 2011 are: 1) mnthly sftware license fees; 2) prfessinal fees t a Micrsft partner fr implementatin; 3) internal labr csts fr planning and design; 4) internal labr csts fr implementatin; 5) training csts; and 6) annual administrative supprt csts fr the CRM slutin. The fllwing are the cst inputs t the financial analysis: Page 7

9 Sftware License Fees Micrsft has a flexible deplyment mdel, and the deplyment f cmpanies interviewed fr this study ranged frm nline t n-premises and partner-hsted deplyments. The cmpsite rganizatin initially implemented Micrsft Dynamics CRM 2011 nline with 50 users. It als cnsidered that this wuld give it the ptin t shift t an npremises slutin shuld it decide t expand its implementatin f Micrsft Dynamics CRM 2011 t ther divisins within the cmpany. The cst t the cmpsite rganizatin fr 50 users is U.S. $44 per user per mnth. Applicable taxes, levies, and duties f 12 percent are applied t this cst, resulting in annual user fees f $29,568 per year fr 50 users. Over three years, the cmpsite rganizatin will pay $88,704 fr its Micrsft Dynamics CRM 2011 subscriptin fr 50 users. Prfessinal Fees Partner Implementatin Organizatins can chse t implement Micrsft Dynamics CRM using internal resurces r thrugh emplying a Micrsft partner. The interviewed cmpanies wrked with a Micrsft partner t implement Micrsft Dynamics CRM This allwed the rganizatins t evaluate and find a partner whse experience matched the needs f their particular industry/vertical and the CRM use cases that they wanted t deply. The cmpsite rganizatin used a Micrsft partner fr three mnths. This wrk included business prcess analysis, prject management, applicatin custmizatin, and implementatin. Prfessinal fees fr this engagement were an initial $28,250 and an additinal $4,800 annually in supprt charges. Ttal prfessinal fees ver a three-year perid were $42,650. Planning And Design Csts Internal Labr Csts The cmpanies in this study described the effrt required by their sales, custmer service, marketing, and IT staff t evaluate, test, and pilt Micrsft Dynamics CRM This als includes the effrt the rganizatins spent in establishing business prcesses and wrking with their implementatin partners n custmizatin. With this reprted custmer experience as a basis, Frrester assumes that the cmpsite rganizatin had fur peple cnsisting f representatives frm the senir sales, marketing, and custmer service teams spend 20 percent f their time ver a perid f three mnths in planning and design. The mdel assumes that a year cnsists f 52 weeks with 40 wrking hurs per week r 2,080 hurs per year. The fully laded annual cst per FTE fr this blended team is $100,000 per year. Ttal internal labr csts fr planning and design was $20,000. Page 8

10 Table 2 Planning And Design Internal Labr Csts Ref. Metric Calculatin Per perid A1 Number f peple 4 A2 Length f planning and design f custmizatin (mnths) 3 A3 Percentage f time spent 20% A4 Hurly rate per persn (fully laded) $48.08 At Planning and design csts internal labr A1*(A2/12)*2080 *A3*A4 $20,000 Implementatin Csts Internal Labr Csts The cmpsite rganizatin s prject team f fur peple als spent an additinal week, r 40 wrking hurs each, in deplying Micrsft Dynamics CRM 2011 t its 50 users. An IT resurce at a fully laded annual cmpensatin f $85,000 als wrked 30 hurs ver the curse f a mnth n the implementatin. Ttal internal labr cst f the deplyment fr the cmpsite rganizatin is $8,918. Table 3 Implementatin Csts Internal Labr Ref. Metric Calculatin Per perid B1 B2 Number f peple (sales/custmer service) Hurly rate per persn (fully laded) $100,000/2,080 hrs $ B3 Hurs 40 B4 Number f peple (IT) 1 B5 Hurly rate per persn (fully laded) $85,000/2,080 hurs $40.87 B6 Hurs 30 Bt Implementatin csts internal labr (B1*B2*B3)+ (B4*B5*B6) $8,918 Page 9

11 Training Csts Training csts fr the custmers interviewed varied depending n the level f custmizatin and the business prcess change that accmpanied the Micrsft Dynamics CRM 2011 deplyment. Fr the cmpsite rganizatin, ne persn spent 40 hurs develping a training mdule. This resurce is cmpensated at $65,000 annually r $31.25 per hur, fully laded. The 50 users in the cmpsite rganizatin each underwent five hurs f training. At an average fully laded cmpensatin per FTE f $100,000 per year r $48.08 per hur, the ttal training cst t the rganizatin is $13,269. Table 4 Training Csts Ref. Metric Calculatin Per perid C1 Number f peple (training develpment) 1 C2 Hurly rate per persn (fully laded) $31.25 C3 Hurs 40 C4 Number f peple trained 50 C5 Hurly rate per persn (fully laded) $48.08 C6 Hurs 5 Ct Training csts internal (C1*C2*C3)+ (C4*C5*C6) $13,269 Administrative Csts The rganizatins interviewed estimated minimal administrative csts fr day-t-day supprt f Micrsft Dynamics CRM As ne custmer nted, It s nt hard t run, maintain, r tweak it at all. As the cmpsite rganizatin is als wrking with a partner fr annual supprt, Frrester estimates the annual internal administrative csts fr the rganizatin t be 20 percent f ne persn s time, at an annual fully laded cmpensatin f $65,000 per FTE. This translates t $13,000 per year r $39,000 ver a three-year perid. Ttal Csts Ttal csts fr the cmpsite rganizatin s deplyment f Micrsft Dynamics CRM 2011 are shwn in the fllwing table. Page 10

12 Table 5 Ttal Csts (Nn-Risk Adjusted)* Csts Initial Year 1 Year 2 Year 3 Ttal Sftware license fees $29,568 $29,568 $29,568 $88,704 Prfessinal fees partner implementatin Planning and design csts internal labr Implementatin csts internal labr 28,250 4,800 4,800 4,800 42,650 20,000 20,000 8,918 8,918 Training csts internal 13,269 13,269 Administrative csts 0 13,000 13,000 13,000 39,000 Ttal $70,438 $47,368 $47,368 $47,368 $212,542 *Nte that numbers may nt align due t runding. Benefits In interviews with Micrsft custmers, Frrester identified several benefits f implementing Micrsft Dynamics CRM 2011 in the areas f persnal and prcess prductivity. These quantified benefits include: 1) imprved sales prductivity because f the ease f use f the CRM sftware and imprved pprtunity/deal tracking and ruting thrugh integratin with Outlk; 2) custmer service prductivity savings frm a better UI, dcumented prcesses, a hlistic view f the custmer, and faster case reslutin; 3) streamlined prcesses and peratins leading t lwer cst f sales; 4) shrtened sales and cnversin cycle and crrespnding revenue gain as teams imprved their cllabratin and were better cnnected acrss systems; 5) marketing cst savings due t mre real-time insights frm better analytics; and 6) prductivity savings due t better reprting tls. If yu can scale a cmpany up t 35% year ver year and utilize Micrsft Dynamics CRM 2011 t prvide a cmmn thread between yur cmpany and yur custmer, it truly is priceless. (VP f marketing, healthcare IT cmpany) Other benefits nted by the custmers but nt quantified in the study include: 1) imprved cllabratin; 2) lwer cst and effrt t custmize the slutin fr unique requirements, including extended CRM scenaris; and 3) cmpatibility and ease f integratins with ther systems imprving prcess efficiencies. Imprved Sales Prductivity The custmers interviewed talked abut the challenges f implementing any new technlgy with sales teams wh usually d nt have a technical backgrund, have multiple demands n their time, and have extensive mbility Page 11

13 requirements. They nted that these cncerns were less f an issue with Micrsft Dynamics CRM 2011 due t their sales teams familiarity with the sftware, the sftware s integratin with Outlk, and easy navigatin. Users did nt have t extensively change their prcesses as CRM wrkflws were integrated int the business prductivity sftware (such as Micrsft Outlk and SharePint) that they were already using. Custmers wh had implemented ther CRM tls befre shifting t Micrsft Dynamics CRM 2011 reprted higher adptin rates. One custmer s cntacts database grew by 733 percent in its first year f adptin f Micrsft Dynamics CRM. Anther characterized its user adptin as phenmenal. At the same time, these rganizatins als set up cmmunicatin and plicies with the deplyment t incentivize their emplyees t use the CRM sftware. Salespeple and accunt managers want t d things as rapidly and as flexibly as they can. Adpting [Micrsft Dynamics CRM 2011] was easy frm their perspective they embraced it because f their familiarity with Outlk. (Operatins directr, IT slutins service prvider) The key n the sales team side was integratin with Outlk. It was why we gt such high user adptin. It s easy. There s integratin and there s integratin, and this is really integrated. (CEO, financial and accunting slutins firm) Custmers als nted that the benefit f the true integratin f Micrsft Dynamics CRM functinality with their Outlk and Micrsft Office sftware n the desktp and n mbile devices enabled their sales teams t be mre prductive. Data entered in Outlk and Office was autmatically captured in the CRM system, making it very easy t use. Even if they didn t try t use it, it wuld still g, ne custmer bserved. The single mst imprtant feature fr us was integratin with Outlk, anther cnfirmed. One custmer with a mbile wrkfrce based n custmer sites utside the cmpany s firewall said the ability t update data directly int Outlk imprved their rganizatin s sales efficiency. The interviewed cmpanies estimated sales prductivity imprvements frm 5 percent t 20 percent. This prductivity imprvement was experienced by the sales teams f the interviewed cmpanies thrugh imprved sales reprting and better management f their custmer database leading t faster and mre efficient prcesses fr sales frecasting. These cmpanies nw had a mre accurate picture f their sales pipeline. With all the data in Micrsft Dynamics CRM, their sales teams culd nw, as ne custmer said, walk in the dr with real-time infrmatin n clients and better manage the relatinship. Custmers als nted that their sales teams were spending less time in internal meetings and mre time with their custmers in the field. Fr the cmpsite rganizatin, the ease f use leading t higher adptin f the CRM sftware and the imprved wrk efficiency thrugh full integratin with Office and Outlk increased sales prductivity by an estimated 5 percent. T cnservatively value this benefit, Frrester calculates prductivity savings as a functin f an emplyee s cmpensatin. At a fully laded annual cst f $100,000 per sales FTE fr 30 salespersns, this translates t $150,000 in annual savings. Hwever, Frrester further assumes that with user prductivity savings, nly 50 percent f that time is captured fr prductive wrk. This risk adjustment is applied as Frrester takes int cnsideratin that the custmers interviewed are in the early stages f their implementatin. Ttal savings fr the cmpsite rganizatin is $225,000 ver a perid f three years. Page 12

14 Table 6 Sales Prductivity Benefit Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal D1 Number f FTEs 30 D2 Average annual cmpensatin (fully laded) per FTE $100,000 D3 Prductivity imprvement 5% D4 Deplyment percentage 50% Dt Sales prductivity benefit D1*D2*D3*D4 $75,000 $75,000 $75,000 $225,000 Custmer Service Prductivity Savings Cmpanies that had deplyed Micrsft Dynamics CRM 2011 t their custmer service teams reprted that their persnnel bserved that it was fast and intuitive t use. As ne rganizatin nted, Our agents liked [Micrsft Dynamics CRM] 2011 fr the lk, the interface, and fewer clicks. This mre streamlined user interface, which included the ribbn interface that changes cntextually and imprves navigatin with fewer clicks fr the user, received favrable reviews. One rganizatin nted that its custmer care agents culd nw view their custmers frm a glbal perspective, with everyne n the same page. The agents culd see all f a custmer s interactins with the cmpany frm marketing campaigns t website leads, sales, and prject delivery. The imprved custmer service efficiency frm these changes resulted, in turn, in a better custmer experience. Several f the rganizatins interviewed als restructured their custmer service prcesses and rerganized their custmer service teams with their deplyment f Micrsft Dynamics CRM These rganizatins had experienced rapid grwth and had ill-defined r incnsistent custmer service prcesses verlapping acrss functins. Our peple were mre respnsive since we culd quickly manage and cmmunicate a new business prcess, ne IT head nted. One cmpany we interviewed nw filtered custmer service inquiries frm its cnsulting wrkflw, resulting in faster respnsiveness t its custmers. Anther rganizatin that was undertaking a massive verseas expansin integrated Micrsft Dynamics CRM 2011 t its frnt-end applicatins and rlled ut standardized wrkflws t the field. With the capabilities prvided by Micrsft Dynamics CRM 2011, the rganizatin culd nw hire field representatives at the branch level that were 40 percent cheaper than its current technical custmer-facing wrkfrce. These cmpanies saw, n average, labr cst avidance savings in custmer service even as their rganizatins requirements grew. The cmpsite rganizatin rerganized its custmer service prcesses and deplyed Micrsft Dynamics CRM 2011 t 10 custmer service agents. By pushing standardized wrkflws t its agents thrugh the sftware s easy-t-use UI, the cmpsite rganizatin increased the efficiency f its custmer service team. With this imprved prductivity, the rganizatin saved hiring an additinal 1.2 FTEs even as the divisin grew 20 percent each year. At a fully laded cst f $60,000 per FTE, these custmer service labr cst avidance savings are valued at $216,000 ver a three-year perid. Page 13

15 Table 7 Custmer Service Prductivity Benefit Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal E1 Number f custmer service wrkers 10 E2 Number f custmer service FTE saved 1.2 E3 Et Average annual cmpensatin (fully laded) Labr savings due t imprved custmer service prductivity $60,000 E2*E3 $72,000 $72,000 $72,000 $216,000 Surce: Frrester Research, Inc Reduced Cst Of Sales Organizatins als fund the planning and design phase f the Micrsft Dynamics CRM 2011 implementatin valuable, as they were able t examine and mdify their internal prcesses and cmmunicate these widely. These rganizatins effectively streamlined their peratins and shrtened prcessing time with their deplyment f Micrsft Dynamics CRM One interviewed cmpany with a lt f bespke prducts used the sftware t embed wrkflws at critical pints in its qutatin prcess t standardize prducts and pricing and t maximize cntrl f this prcess. This rganizatin als used the CRM sftware t link its accunt management, rder taking, and prject delivery teams in rder t evaluate effrt quted versus effrt delivered and analyze discrepancies. One engineering rganizatin interviewed fund that Micrsft Dynamics CRM 2011 enabled it t keep better track f where its custmers were in the sales prcess. The prcess f identificatin t qutatin was clearer, and its engineers were able t spend less time and respnd faster t multiple revisins t qutatins required by the cnstructin market. The engineering rganizatin reprted saving five engineering man-hurs per metric tn at 2,000 metric tns per mnth and grwing. The cmpsite rganizatin benefited frm standardizatin f its request fr qutatin (RFQ) prcess and imprved slutins management thrugh its CRM implementatin. Its technical cnsultants spent n average 20 man-hurs per prpsal in the RFQ prcess, and this time was reduced by 10 percent. At an estimated 600 prpsals per year and a fully laded cst per technical cnsultant FTE f $40.87 per hur (r $85,000 per year), this has reduced the cst f sales t the rganizatin by $147,115 ver three years. Page 14

16 Table 8 Reduced Cst Of Sales Benefit Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal F1 Number f prpsals per year 600 F2 Number f cnsultant hurs spent per prpsal 20 F3 Hurly rate per wrker $40.87 F4 Ft Percentage reductin in cnsultant time spent in prpsal preparatin Reduced cst f sales due t cnsultant hurs saved 10% F1*F2*F3*F4 $49,038 $49,038 $49,038 $147,115 Revenue Gain Frm Imprved Deal Cnversin Implementing Micrsft Dynamics CRM 2011 als cntributed t revenue gains t several f the rganizatins interviewed as a result f imprving the number f prpsals cnverted t deals. One rganizatin reduced its sales cycle by 50 percent, frm six mnths t three mnths, because f imprved infrmatin sharing amng its marketing and accunt teams and fine-tuning its sales cycle. As its CEO nted, We can g in and get the lead frm a website r marketing campaign. I might knw that persn and can quickly update the system. We nw have the ability t tap int ur peple s netwrks. Withut it, a lt f thse pprtunities wuld be lst. With ur prduct, we need that trusted referral and validatin t get smene t sign n, and we saw such a sharp decrease in the sales cycle as a result. Fr anther rganizatin we interviewed, this imprved ability t keep track f custmers resulted in a faster prpsal prcess with a 35 percent increase in qutatins made in its first mnth f implementatin. As deal cnversin in its industry was a functin f pricing prpsal speed, the head f crprate planning and prjects expected their rganizatin s hit rate t increase frm 10 percent t 15 percent. Imprving the hit rate r deal cnversin translates t additinal revenue fr these cmpanies. The value f additinal revenue is unique t each rganizatin and may vary frm cmpany t cmpany. Fr the summary ROI calculatins presented in this study, Frrester has cncentrated n persnal and prcess prductivity benefits and has nt included any values fr revenue gain. Nevertheless, given custmer validatin f this benefit, a sample calculatin is shwn as fllws. Table 9 summarizes the additinal revenue that Frrester believes the cmpsite cmpany can gain as a result f the mve t Micrsft Dynamics CRM In this example, the cmpsite rganizatin has imprved its deal cnversin by 50 percent, which results in an additinal revenue increase f 2 percent. At annual revenue f $60 millin fr the medical devices IT divisin and a 20 percent grss margin n revenue, this benefit f imprved deal cnversin is valued at $720,000 ver a three-year perid. Page 15

17 Table 9 Revenue Gain Benefit Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal G1 Annual revenue 60,000,000 G2 Percentage revenue increase due t imprved deal cnversin 2% G3 Grss margin 20% Gt Revenue gain frm imprved deal cnversin G1*G2*G3 $240,000 $240,000 $240,000 $720,000 Nte that if the benefit described earlier is included in the financial framewrk, the risk-adjusted ROI fr this analysis wuld be 551 percent, a cmpelling indicatr fr the success f a Micrsft Dynamics CRM 2011 implementatin. Hwever, with a cnservative evaluatin apprach, Frrester des nt include this benefit categry in its summary ROI calculatins. Marketing Cst Avidance Achieving relevant, real-time insights thrugh imprved reprting and analytics was cnsistently cited by the rganizatins interviewed as ne f the benefits f Micrsft Dynamics CRM Custmers reprted imprved factbased insights frm better sales pipeline reprting, time savings in reprt cnslidatin acrss different systems, imprved lead qualificatin, and imprved ROI analysis f marketing campaigns and trade shws, amng ther use cases. Micrsft Dynamics CRM 2011 prvided us with much greater ability t see ur business, market trends, and make strategic decisins. I dn t need t wait a week. I can see at any pint in time hw we re ding. (General manager, IT infrastructure slutins prvider) Agility is a key thing fr us. Micrsft Dynamics CRM 2011 gives us the ability t react n an hurly, instead f weekly, basis. (IT grup head, autmtive cnsumer firm) We did nt have the infrmatin t make the decisins we are making nw, ne custmer reprted. Befre [Micrsft Dynamics] CRM 2011, there were breaks in cmmunicatin with all departments. Nw ur sales teams have real-time infrmatin n clients and can better manage them. Anther rganizatin that was heavily reliant n wrkflws and prcesses fr its utsurced peratins nted that Micrsft has a mre significantly rbust marketing ffering in terms f campaigns and ROI analysis. This rganizatin was able t track multiple marketing campaigns, evaluate them mre thrughly, and redirect limited marketing dllars t thse campaigns that had better ratis. The cmpsite rganizatin ran all its marketing campaigns using Micrsft Dynamics CRM It was able t get immediate, real-time insight int the ROI f these campaigns and adjust its marketing peratins n a cntinuus imprvement cycle t be mre efficient with its marketing spend. With this reprting, the cmpsite rganizatin acted Page 16

18 quickly and cancelled three underperfrming marketing campaigns at a cst f $25,000 each. This faster decisinmaking thrugh imprved reprting has saved the rganizatin $75,000 per year r $225,000 ver a three-year perid. Table 10 Marketing Cst Avidance Benefit Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal H1 Number f marketing campaigns (saved) 3 H2 Cst per marketing campaign $25,000 Ht Marketing cst avidance frm imprved analytics H1*H2 $75,000 $75,000 $75,000 $225,000 Increased Prductivity Sme rganizatins interviewed had mved t Micrsft Dynamics CRM 2011 frm scenaris in which mst f their custmer infrmatin was cntained in spreadsheets spread ver different departments, r in which they had varying CRM systems deplyed thrughut their rganizatins with n cnsistency f use. These rganizatins reprted labr savings due t cnslidatin f their data, reprting autmatin, and richer dashbard capabilities thrugh Micrsft Dynamics CRM One rganizatin with legacy sftware fr its frnt-end transactin applicatin had a dedicated team f 15 peple t analyze data and prepare reprts. With its rllut f Micrsft Dynamics CRM 2011, it was planning t use the sftware s real-time dashbards t push this data in a mre structured way ut t the business. This meant the cmpany wuld be able t redistribute the 15-persn data team t ther areas f the business, and it wuld als nt have t grw its infrastructure and develpment teams that were currently supprting this legacy reprting prcess. With the deplyment, the cmpsite rganizatin has saved tw days r 16 man-hurs per mnth fr reprt preparatin. At a fully laded cst f $75,000 per year r $36.06 per FTE reprting resurce, this has saved the cmpsite rganizatin $20,769 ver three years. Page 17

19 Table 11 Increased Prductivity Due T Imprved Reprting Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal I1 Number f wrkers 1 I2 Hurly rate per wrker $36.06 I3 Number f hurs saved (per year) 16 hrs*12 mnths 192 It Increased prductivity due t imprved reprting I1*I2*I3 $6,923 $6,923 $6,923 $20,769 Ttal Benefits Table 12 summarizes the quantified benefits frm an investment in Micrsft Dynamics CRM 2011 fr the cmpsite cmpany. Table 12 Ttal Benefits (Nn-Risk Adjusted) Benefits Initial Year 1 Year 2 Year 3 Ttal Increased sales prductivity 75,000 75,000 75, ,000 Custmer service prductivity savings 72,000 72,000 72, ,000 Reduced cst f sales 49,038 49,038 49, ,115 Revenue gain(nt included in ROI) 240, , , ,000 Marketing cst avidance 75,000 75,000 75, ,000 Increased prductivity 6,923 6,923 6,923 20,769 Ttal $277,962 $277,962 $277,962 $833,885 Other Benefits Nt Quantified Other qualitative benefits cited by the custmers interviewed but nt quantified in this study, include the fllwing: Page 18

20 Imprved Cllabratin One f the main themes that eched thrugh the interviews was the imprved cllabratin that was enabled by Micrsft Dynamics CRM One custmer characterized it as, Everyne is lking at the custmer frm the same page. Accunt team, custmer service rep they all knw what s ging n. Everyne s gt a 360-degree view f the prspect. Fr sme cmpanies, internal prcesses requiring lng, manual wrk t share infrmatin served as a barrier t cllabratin. Nw, rganizatins gained custmer insight acrss all functins by linking thse with rles in sales, marketing, custmer service, prject delivery, and even finance. Cllabratin was further enhanced fr thse cmpanies that integrated their CRM system with SharePint. Cnnecting everyne up makes a lt f business sense, cmmented ne CEO wh used Micrsft Dynamic CRM 2011 and SharePint t manage his sales and prject delivery teams in different cuntries. One rganizatin used Micrsft Dynamic CRM 2011 and its easy-t-use wrkflws t build a prcess int the system that prvided cntract dates frm finance t its accunt teams. It reprted an increase in its renewal business by 56 percent. Flexibility Ease Of Custmizatin And Develpment The ability t custmize the CRM slutin t their requirements in a cst-effective way was anther ne f the benefits cited by the custmers interviewed. One cnsulting cmpany that was switching CRM slutins nted that, The custmizatin tls in [Micrsft Dynamics] CRM 2011 are really gd. Its migratin was simple t implement, and it required less effrt, with an estimate f 130 days saved, t prduce the screens it needed. (One f the benefits was) just the flexibility that [Micrsft] Dynamics [CRM] ffered us in terms f ur wn labeling we weren t driven by the prduct. We culd make ur wn decisins. (Operatins directr, IT slutins prvider) One gvernment entity nted that with Micrsft Dynamics CRM, it culd create custmized event management sftware where an individual culd have five frmal rles, smething that ther CRM slutins culd nt wrk with. A university interviewed, which was planning t build a member management system and deply it t ther campuses, nted that, The prduct is flexible enugh t build basic applicatins n tp f it. One 90-persn cmpany said the flexibility f Micrsft Dynamics CRM 2011 t match the custmizatin needs f its small rganizatin withut burdening it with excessive cnfiguratins and requirements enabled it t have a much faster deplyment and in turn, faster realizatin f value. The custmers interviewed als cited varius extended CRM scenaris that they planned t implement, which wuld bring mre benefit alng the value chain, frm the transactin and purchasing prcess t data asset management t prject management t strategic planning. Cmpatibility And Ease Of Integratin With Other Systems A number f the rganizatins we interviewed als nted that in evaluating CRM slutins, they chse Micrsft Dynamics CRM 2011 because it had better integratin capability with their existing applicatins. Fr sme, integratin with SharePint was ne f the main drivers as they wanted t cnslidate data acrss relevant departments. The directr f business systems at ne university nted that they were pursuing a technlgy strategy that required tight integratin with their existing cre systems. One general manager talked abut the pssibility f vice ver IP (VIP) integratin with ther Micrsft slutins. Anther firm that was utgrwing its accunting system wanted a CRM slutin and an accunting system that spke t each ther seamlessly. If we lked at the ther CRMs, they didn t give us all the cmpnents we needed, a cmpany VP nted. Page 19

21 Flexibility Flexibility, as defined by TEI, represents an investment in additinal capacity r capability that culd be turned int business benefit fr sme future additinal investment. This prvides an rganizatin with the right r the ability t engage in future initiatives but nt the bligatin t d s. Frm ur interviews, we ve fund that with the flexibility f Micrsft Dynamics CRM 2011, there are multiple scenaris in which a custmer deplys the CRM slutin nw and later realizes additinal uses and business pprtunities. Our interviews identified several areas that culd prduce flexibility ptins based n next-stage real ptins that have been described by study participants as fllws: Expanding use f the CRM slutin t understand their custmer prfile and evaluate their nline advertising t prduce a mre targeted apprach t their nline marketing spend. Using the scial marketing cmpnent f Micrsft Dynamics CRM 2011 t gain labr cst avidance savings in reprting and t reduce by half the hurs f ne FTE. Using Micrsft Dynamics CRM fr their quality system t replace current manual prcedures. (This wuld require integratin with fur different systems.) Expsing CRM functinality t custmers. One cmpany is planning t replace its nline transactin system with Micrsft Dynamics CRM Anther is evaluating presenting dashbards t its custmers s it culd track the prgress f its implementatin and integratin prjects. The cmpsite rganizatin is planning t implement a prgram t identify and track high-grwth custmer cntacts within its market. Extending the CRM slutin fr this purpse wuld require additinal applicatin develpment at a cst f $8,070 in prfessinal fees and an estimated $4,842 in internal labr. In the flexibility analysis, the ttal benefit r asset value f this extended CRM prject is estimated as the ttal cst avidance f hiring a market research firm t cnduct this wrk at a cst f $32,280 per year. The flexibility cmpnent f TEI captures that value using either the financial industry standard Black-Schles r the binmial ptin pricing mdels. With a tw-year time frame t use this ptin, as the cmpsite rganizatin will nly start cnsidering this pprtunity after Year 1, Frrester values the abve flexibility ptin at $21,102. This value exists in additin t risk-adjusted benefits and ROI described in this analysis. Page 20

22 Table 13 Flexibility Analysis Extended CRM Ref. Metric Calculatin Per perid J1 J2 Asset value (benefit) cst avidance f hiring a market research firm Cst t acquire partner develpment fees and internal labr 32,280 12,912 J3 Expiratin (time t expire, in years) 2 Jt Flexibility extended CRM fr identificatin f high-grwth cntacts Black-Schles mdel $21,102 The value f flexibility is unique t each rganizatin, and the willingness t measure its value varies frm cmpany t cmpany (see Appendix A fr additinal infrmatin regarding the flexibility calculatin). Risk Frrester defines tw types f risk assciated with this analysis: implementatin risk and impact risk. Implementatin risk is the risk that a prpsed investment in Micrsft Dynamics CRM 2011 may deviate frm the riginal r expected requirements, resulting in higher csts than anticipated. Impact risk refers t the risk that the business r technlgy needs f the rganizatin may nt be met by the investment in Micrsft Dynamics CRM 2011, resulting in lwer verall ttal benefits. The greater the uncertainty, the wider the ptential range f utcmes fr cst and benefit estimates. Quantitatively capturing investment and impact risks by directly adjusting the financial estimates results in mre meaningful and accurate estimates and a mre accurate prjectin f the ROI. In general, risks affect csts by raising the riginal estimates, and they affect benefits by reducing the riginal estimates. The risk-adjusted numbers shuld be taken as realistic expectatins, as they represent the expected values cnsidering risk. The fllwing implementatin risk that affects csts is identified as part f this analysis: Internal labr needed fr planning and design, implementatin, training, and supprt may exceed initial estimates. The fllwing impact risks that affect benefits are identified as part f this analysis: Variability in prductivity and labr savings fr different cmpany deplyments. Variability in the amunt f cst savings frm mre streamlined peratins. Table 14 shws the values used t adjust fr risk and uncertainty in the cst and benefit estimates. The TEI mdel uses a triangular distributin methd t calculate risk-adjusted values. T cnstruct the distributin, it is necessary t first Page 21

23 estimate the lw, mst likely, and high values that culd ccur within the current envirnment. The risk-adjusted value is the mean f the distributin f thse pints. Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Table 14 Cst And Benefit Risk Adjustments Csts Lw Mst likely High Mean Sftware license fees 100% 100% 100% 100% Prfessinal fees partner implementatin 100% 100% 115% 105% Planning and design csts internal labr 100% 100% 125% 108% Implementatin csts internal labr 100% 100% 125% 108% Training csts internal 100% 100% 115% 105% Administrative csts 100% 100% 105% 102% Benefits Lw Mst likely High Mean Increased sales prductivity 90% 100% 105% 98% Custmer service prductivity savings 90% 100% 105% 98% Reduced cst f sales 80% 100% 103% 94% Marketing cst avidance 80% 100% 103% 94% Increased prductivity 90% 100% 105% 98% Page 22

24 Financial Summary The financial results calculated in the Csts and Benefits sectins can be used t determine the ROI, NPV, and payback perid fr the rganizatin s investment in Micrsft Dynamics CRM These are shwn in Table 15. Table 15 Cash Flw Nn-Risk-Adjusted Cash flw riginal estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($70,438) ($47,368) ($47,368) ($47,368) ($212,542) ($188,235) Benefits $277,962 $277,962 $277,962 $833,885 $691,249 Net benefits ($70,438) $230,594 $230,594 $230,594 $621,343 $503,015 ROI 267% Payback perid 3.7 mnths Table 16 shws the risk-adjusted ROI, NPV, and payback perid. These values are determined by applying the riskadjustment values frm Table 14 in the Risk sectin t the cst and benefits numbers in Tables 5 and 12. Table 16 Cash Flw Risk-Adjusted Cash flw risk-adjusted estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($74,827) ($47,868) ($47,868) ($47,868) ($218,431) ($193,868) Benefits $267,441 $267,441 $267,441 $802,322 $665,086 Net benefits ($74,827) $219,573 $219,573 $219,573 $583,891 $471,218 ROI 243% Payback perid 4.1 mnths Page 23

25 The data cllected in this study indicates that deplying Micrsft Dynamics CRM 2011 has the ptential t prvide a slid ROI thrugh quantifiable prductivity benefits fr peple and prcesses. The risk-adjusted ROI f 243 percent, alng with a rapid payback perid (breakeven pint), raises cnfidence that the investment is likely t prduce a psitive utcme, especially after the risks and uncertainty that may affect the prject have been cnsidered, quantified, and incrprated int the business case. In interviews with Micrsft custmers, Frrester fund that rganizatins can realize benefits in the frm f: Increased sales prductivity with the ease f use f the CRM sftware and imprved pprtunity/deal tracking and ruting thrugh integratin with Outlk. Custmer service prductivity savings frm a better UI, dcumented prcesses, a hlistic custmer view, and faster case reslutin. Streamlined prcesses and peratins leading t lwer cst f sales. Shrtened sales and cnversin cycle and crrespnding revenue gain as teams are better cnnected acrss systems. Marketing cst savings due t mre real-time insights frm better analytics. Prductivity savings due t better reprting tls. Imprved cllabratin within sales and custmer service teams. Lwer csts and effrt t custmize the slutin fr unique requirements, including extended CRM scenaris. Ease f integratin with ther systems imprving t prcess efficiencies. Based n these findings, cmpanies lking t implement Micrsft Dynamics CRM 2011 can anticipate significant prductivity gains and cst savings. Using the TEI framewrk, many cmpanies may find a ptentially cmpelling business case t make such an investment. Page 24