The Total Economic Impact Of D&B Direct

Transcription

1 A Forrester Total Economic Impact Study Commissioned By D&B Project Directors: Shaheen Parks Sarah Musto December 2014 The Total Economic Impact Of D&B Direct Cost Savings And Business Benefits Enabled By D&B Direct

2 Table Of Contents Executive Summary... 3 Disclosures... 4 TEI Framework And Methodology... 5 Analysis... 6 Financial Summary D&B Direct: Overview Appendix A: Composite Organization 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. 2014, 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 Dun & Bradstreet (D&B) commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying D&B Direct. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of D&B Direct on their organizations. D&B Direct can help save costs and improve productivity. The costs and benefits for a composite organization of 6,000 employees are: To better understand the benefits, costs, and risks associated with a D&B Direct implementation, Forrester interviewed and surveyed several customers with multiple years of experience using the solution. D&B Direct is an API web services platform that seamlessly integrates a company s data with D&B data to Three-year benefits (PV): $730,000. Three-year costs (PV): $431,000. assist in collecting and relating data and analytics from different sources and streaming in real time into any system, application, or device, enhancing accessibility to business intelligence. Prior to D&B Direct, most customers were receiving D&B data through periodic batch files. This meant that processes around acquiring, processing, and making data available often required considerable manual time as well as hardware and software resources. These limitations led to data latency, issues with data quality, and difficulty syncing data across systems and applications. With D&B Direct, customers were able to make data processes more efficient and reduce hardware and software costs due to the automation and streaming services provided through the solution. This improved data quality and sync-enabled productivity gains for sales, marketing, and supply management processes reliant on this information. Those customers who weren t using D&B previously had the additional benefit of introducing D-U-N-S numbers to accounts and being able to aggregate account information across systems, which meant more visible account information and activity was available to help boost sales, marketing, and supply management results further. D&B DIRECT ENABLES DATA COST SAVINGS AND SALES PRODUCTIVITY IMPROVEMENTS Our interviews with three existing customers and survey of 26 existing customers were the basis of our financial analysis, which found that a composite organization (the Organization) based on these interviewed organizations and survey respondents experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. 1 See Appendix A for a description of the composite organization. The analysis points to benefits of $290,000 to $295,000 per year versus costs of $160,000 per year, adding up to a net present value (NPV) over three years of $298,957. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 69% NPV: $298,957 Payback: three months Data handling time: 15% to 30%

4 4 Benefits. The Organization experienced the following risk-adjusted benefits that represent those experienced by the interviewed companies: Improved productivity in data integration time of 15% in Year 1 and 30% in years 2 and 3. With D&B Direct, the Organization no longer needs to process large D&B batch files, which reduces the manual burden associated with acquiring, processing, and making data available. Cost savings from eliminating hardware and software of $284,750 per year. This is due to reducing the infrastructure burden created by processing large D&B batch files, which is no longer required with D&B Direct. Costs. The Organization experienced the following risk-adjusted costs: Incremental D&B Direct license costs of $57,500 per year. This represents the 20% uplift in annual license costs paid to D&B with the move to D&B Direct over the prior use of D&B batch files. Internal resource costs of $21,202 upfront and $7,269 per year. This includes upfront implementation time of 350 hours for building the application to collect D&B data updates and push changes downstream, as well as 120 hours per year to maintain the application and build out additional functionality. Professional services costs of $11,025 upfront and $94,500 per year. This includes the use of professional services during implementation for 70 hours and the use of professional services for 600 hours per year for assistance with ongoing management. Training costs of $1,154 upfront and $577 per year. While costs were minimal, the Organization spent 20 hours upfront on training internal resources responsible for managing the use of D&B Direct and averages 10 hours per year for ongoing training. Disclosures The reader should be aware of the following: The study is commissioned by D&B 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 D&B Direct. D&B 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. D&B provided the customer names for the interviews but did not participate in the interviews.

5 5 TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing D&B Direct. 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 D&B Direct can have on an organization (see Figure 2). Specifically, we: Interviewed D&B marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative the marketplace for D&B Direct. Interviewed three organizations and surveyed 26 organizations currently using D&B Direct to obtain data with respect to costs, benefits, and risks. Designed a composite organization based on the characteristics of the interviewed/surveyed organizations (see Appendix A). Constructed a financial model representative of the interviews and survey using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews and survey as applied to the composite organization. Risk-adjusted the financial model based on issues and concerns the interviewed organizations highlighted in interviews. Risk adjustment is a key part of the TEI methodology. While interviewed organizations provided cost and benefit estimates, some categories included a broad range of responses or had a number of outside forces that might have affected the results. For that reason, some cost and benefit totals have been risk-adjusted and are detailed in each relevant section. Forrester employed four fundamental elements of TEI in modeling D&B Direct s service: 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 and field survey Design composite organization Construct financial model using TEI framework Write case study

6 6 Analysis COMPOSITE ORGANIZATION For this study, Forrester conducted interviews with representatives from the following companies, which are D&B customers: A multinational manufacturing organization headquartered in Europe that specializes in providing energy-efficient solutions to help manage various power sources. The organization has over 100,000 employees worldwide, recent fiscal year revenue of over $20 billion, and customers in over 150 countries. The organization uses D&B Direct data for supply management and sales and marketing. A US-based multinational mass media and information technology organization operating in over 100 countries. The organization has over 60,000 employees worldwide and recent fiscal year revenue of over $13 billion. The organization uses D&B Direct data for sales and marketing. Forrester also fielded a survey to 26 D&B customers. These customers are headquartered in the US with at least 100 employees and are representative of a variety of industries. The customers have been using D&B Direct for Sales and Marketing and/or D&B Direct for Supply Management for at least three months. Based on the interviews, Forrester constructed a TEI framework, a composite company (the Organization), and an associated ROI analysis that illustrates the areas financially affected. The composite organization that Forrester synthesized from these results represents an organization with the following characteristics: Is a US-based global services organization. Has 6,000 employees and $600 million in annual revenue. Uses D&B Direct for Sales and Marketing. After an extensive request for proposal (RFP) and business case process evaluating multiple vendors, the Organization chose D&B and began deployment: The Organization relied on a mix of internal resources and professional services for implementation. The Organization spent about two months integrating D&B Direct into existing systems and applications, building an application to pull in updates, creating rules for which changes to push, and checking data. Training was minimal. The key goal for the Organization was to streamline processes for cleansing and updating data in order to reduce data latency and quality issues and to improve sales processes that relied on having current and accurate information. INTERVIEW HIGHLIGHTS Situation A common theme across the interviewed and surveyed organizations was the need for a more efficient way to identify accounts and stream and update more complete account information to various systems and applications. The interviewees found themselves in the following situations: Two organizations were using D&B data via batch file, one for sales and marketing functions and one for supply management. The organizations received data periodically, and processing the batch files required a lot of manual effort, so data often wasn t up to date and updates to data weren t synced across all systems. This meant that sales processes were made more inefficient due to conflicting data and stale data, and that opportunities for new business and upsell were

7 7 missed. Also, information on suppliers and distributors could be out of date, resulting in an incomplete risk and cost picture. One organization realized that it didn t have a good method for aggregating customer information between business systems, and it didn t have a common identifier for customer accounts. This meant that there was no link for customer accounts from system to system; therefore, there was little visibility into the entire account relationship and activity. The result was missed opportunities and lost revenue. Solution Using D&B Direct and matching our customer records enables us to clearly see the landscape, see who s working with whom, and identify cross-selling opportunities for sales resources who may not have known the opportunities were there. ~ Sales marketing manager The interviewed and surveyed organizations selected D&B Direct for its ability to stream data updates in real time and automatically push account information to relevant systems and applications, the use of D-U-N-S numbers for identifying and monitoring accounts, and the universe of customers and breadth of information D&B could provide. Results The interviews revealed that the organization realized the following benefits: Efficiency of internal processes related to sales productivity and supply management improved with the introduction of D&B Direct. For organizations that hadn t previously used D&B data, the addition of D-U-N-S numbers to accounts along with real-time data updates and data aggregation provided better visibility and information about key accounts and improved processes dependent on that data. For organizations that previously were receiving periodic D&B batch files, the switch to streaming updates reduced the amount of manual labor associated Using the D&B Direct tool, we ve with processing changes and kept account information up to date and in sync across systems for a sales boost. increased our efficiency in D&B The switch from D&B batch files to D&B Direct brought software and infrastructure cost savings. With batch files, the organizations would have dedicated infrastructure to process all of the account records. When the organizations switched to D&B Direct, they could instead build an application that can pull in updates and push information downstream. Therefore, they process significantly less information and can reduce the infrastructure burden. cleansing by almost 50%, a dramatic improvement. ~ Sales marketing manager

8 8 BENEFITS The Organization experienced two quantified benefits in this case study: Improved efficiency of data integration processes. Cost savings from eliminating hardware and software. Improved Efficiency Of Data Integration Processes The Organization indicated that a key benefit from the D&B Direct implementation was the ability to reduce time and effort needed to acquire, process, and make data available when compared with prior processes. Prior to D&B Direct, the Organization was collecting and processing data via periodic large batch files. A team of internal resources would spend a portion of its time gathering records, cleansing data, and processing updates, and then making sure that the data was in sync across all systems and applications. Following the D&B Direct implementation, the Organization was able to reduce the number of hours needed for these activities by 15% in the first year and by 30% in years 2 and 3. This is based on the Organization s estimate that prior to D&B Direct, internal resources would spend 650 hours per year on data integration work. As a result, the Organization saved 98 hours in the first year and 195 hours in years 2 and 3. At a fully loaded annual compensation of $120,000 per year, or $58 per hour, the total benefit resulting from improved efficiency of data integration processes over the three years was $28,125. Productivity savings can vary from organization to organization based on the number of relevant resources, differing processes, and differing compensation. Additionally, it can be difficult to accurately estimate productivity savings within an organization. To compensate, this benefit was risk-adjusted and reduced by 5%. The risk-adjusted total benefit resulting from improved efficiency of data integration processes over the three years was $26,719. See the section on Risks for more detail. TABLE 1 Improved Efficiency Of Data Integration Processes Ref. Metric Calculation Year 1 Year 2 Year 3 A1 Previous hours spent A2 Productivity improvement 15% 30% 30% A3 Average hourly salary ($120,000/2080) $58 $58 $58 At Productivity improvement A1*A2*A3 $5,625 $11,250 $11,250 Risk adjustment 5% Atr Productivity improvement (risk-adjusted) $5,344 $10,688 $10,688 Cost Savings From Eliminating Hardware And Software As part of the move to D&B Direct, the Organization was able to eliminate hardware and software previously used to process large D&B batch files, store data, and push updates and information to downstream systems. This infrastructure burden is reduced due to the use of a custom application with D&B Direct, which reduces the need to process such large data files and provides streaming updates. The average cost savings per year is estimated to be $335,000.

9 9 Interviewed organizations provided a broad range of cost savings estimates, since there are a variety of differences that can impact the ability to reduce hardware or software spend. To compensate, this benefit was risk-adjusted and reduced by 15%. The risk-adjusted total benefit resulting from hardware and software cost savings over the three years was $854,250. See the section on Risks for more detail. TABLE 2 Cost Savings From Eliminating Hardware And Software Ref. Metric Calculation Year 1 Year 2 Year 3 Bt Average cost savings per year $335,000 $335,000 $335,000 Risk adjustment 15% Btr Average cost savings per year (risk-adjusted) $284,750 $284,750 $284,750 Total Benefits Table 3 shows the total of all benefits across the two areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the Organization expects risk-adjusted total benefits to be a PV of slightly less than $730,000. TABLE 3 Total Benefits (Risk-Adjusted) Ref. Benefit Initial Year 1 Year 2 Year 3 Total Present Value Atr Improved efficiency of data integration processes $0 $5,344 $10,688 $10,688 $26,719 $21,720 Btr Cost savings from eliminating hardware/software Total benefits (riskadjusted) $0 $284,750 $284,750 $284,750 $854,250 $708,131 $0 $290,094 $295,438 $295,438 $880,969 $729,851 Sales Productivity And Supply Chain Management Improvements The Organization also experienced benefits in sales productivity metrics that it was not able to quantify. The end result of streamlining the processes around data updates was the improvement in data quality and the reduction in data latency. For sales and marketing teams, which need to be able to anticipate opportunities and act quickly, this enabled an upswing in key sales and marketing activities and the associated metrics. With D&B Direct for Sales and Marketing, these teams get access to a more complete and current view of customers and prospects, can identify untapped market segments and market trends, and ultimately improve selling effectiveness and campaign performance. The following are key areas of improvement that the Organization identified:

10 10 A 20% reduction in the average cost of sale. This is due to better customer intelligence and a shorter sales cycle, requiring less time for the sales force to identify, pursue, and close deals. A 20% reduction in lost sales revenue. This is due to both the reduction in channel conflict that obscured or prevented sales and also an improved ability to identify upsell and cross-sell opportunities. A 15% improvement in campaign performance. This is from improved market segmentation and better social media intelligence enabled with D&B Direct. In addition, while the Organization does not currently use D&B Direct for Supply Management, survey respondents identified further areas of improvement through their use of this product. With D&B Direct for Supply Management, they are able to get a more informed view of suppliers and partners so that they can build a more reliable supply chain and decrease supply costs. Key areas of improvement are: A 30% reduction in the risk of supply chain disruption. Respondents noted that with D&B Direct, the number of incidents and disruptions that happened per year was reduced considerably, along with the number of partner or supplier defaults. A 15% reduction in the cost to certify potential partners and suppliers. With more information available on potential partners and suppliers, and therefore more flexibility in managing and growing the supply chain, the cost and effort of certifying new partners and suppliers is reduced.

11 11 COSTS The Organization experienced a number of costs associated with the D&B Direct solution: D&B Direct incremental license costs. Internal resource costs for implementation and ongoing management. Professional services costs. Training costs. These represent the mix of internal and external costs experienced by the Organization for initial planning, implementation, and ongoing maintenance associated with the solution. D&B Direct Incremental License Costs The Organization was paying D&B license costs prior to the switch to D&B Direct. To maintain consistency with the quantified benefits, which are based on incremental improvements in cost and resource time due to D&B Direct, we have calculated the incremental license cost. This cost represents an approximate 20% uplift over the previous license fees. Software costs vary from organization to organization, considering different licensing agreements, what other products may be licensed from the same vendor, and other discounts. To compensate, this cost was risk-adjusted up by 15%. The riskadjusted cost of software over the three years was $172,500. See the section on Risks for more detail. TABLE 4 D&B Direct Incremental License Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Ct D&B Direct incremental license costs $50,000 $50,000 $50,000 Ctr Risk adjustment 15% D&B Direct incremental license costs (risk-adjusted) $57,500 $57,500 $57,500 Internal Resource Costs For Implementation And Ongoing Management The Organization involved internal resources in the D&B Direct implementation and in ongoing management of the D&B Direct tool. For implementation work, including building out an application to collect data updates, aggregate data, and push information downstream, the internal resources spent a combined 350 hours. On an ongoing basis, internal resources spend approximately 2 hours per week, or 120 hours per year, to maintain the D&B Direct application and build out additional automation and functionality. With an annual fully loaded compensation of $120,000, this results in $20,192 of internal resource costs upfront and slightly less than $7,000 annually. Internal resource costs are more variable from organization to organization, considering differences in compensation, skill, and environment complexity. Additionally, issues with scope can lift resource costs over estimates. To compensate, this cost was risk-adjusted up by 5%. The risk-adjusted cost of internal resource time over the three years was $43,010. See the section on Risks for more detail.

12 12 TABLE 5 Internal Resource Costs For Implementation And Ongoing Management Ref. Metric Calculation Initial Year 1 Year 2 Year 3 D1 Hours spent on implementation 350 D2 Hours spent on ongoing management D3 Average hourly salary ($120,000/2080) $58 $58 $58 $58 Dt Internal resource costs (D1+D2)*D3 $20,192 $6,923 $6,923 $6,923 Risk adjustment 5% Dtr Internal resource costs (risk-adjusted) $21,202 $7,269 $7,269 $7,269 Professional Services Costs The Organization also relied on third-party resources to help with the implementation of D&B Direct and with ongoing management of the application. The Organization used professional services resources for 70 hours during implementation and for 600 hours per year for maintenance and building additional functionality. At $150 per hour, this results in costs of $10,500 upfront and $90,000 per year. Professional services costs are more variable from organization to organization, considering differences in hourly rates, skill of internal resources, and environment complexity. Additionally, issues with scope can lift resource costs over estimates. To compensate, this cost was risk-adjusted up by 5%. The risk-adjusted cost of professional services over the three years was $294,525. See the section on Risks for more detail. TABLE 6 Professional Services Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 E1 Professional services hours E2 Average hourly rate $150 $150 $150 $150 Et Professional services costs E1*E2 $10,500 $90,000 $90,000 $90,000 Risk adjustment 5% Etr Professional services costs (riskadjusted) $11,025 $94,500 $94,500 $94,500 Training Costs The Organization spent minimal time on training. No training was required for end users who are able to benefit from D&B Direct. For those managing the use of D&B Direct, 20 hours of training was provided upfront along with 10 hours per year. With an annual fully loaded compensation of $120,000, this results in a training cost of $1,154 upfront and $577 per year.

13 13 Based on our interviews as well as survey responses, we did not see much variability in training costs, so there is no risk adjustment for this category. TABLE 7 Training Costs Ref. Metric Calculation Initial Year 1 Year 2 Year 3 F1 Hours spent on training F2 Average hourly salary ($120,000/2080) $58 $58 $58 $58 Ft Training costs F1*F2 $1,154 $577 $577 $577 Total Costs Table 8 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the Organization expects total costs to total a present value of a little more than $430,000. TABLE 8 Total Costs (Risk-Adjusted) Ref. Cost Initial Year 1 Year 2 Year 3 Total Present Value Ctr D&B Direct incremental license costs $0 $57,500 $57,500 $57,500 $172,500 $142,994 Dtr Etr Internal resource costs for implementation and ongoing management Professional services costs $21,202 $7,269 $7,269 $7,269 $43,010 $39,279 $11,025 $94,500 $94,500 $94,500 $294,525 $246,033 Ft Training costs $1,154 $577 $577 $577 $2,885 $2,589 Total costs (riskadjusted) $33,381 $159,846 $159,846 $159,846 $512,919 $430,894 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 D&B Direct 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).

14 14 Additional productivity and process efficiency savings may be realized as organizations expand their use of D&B Direct to additional functional areas. Organizations can also continue to improve processes in sales, marketing, supply management, and risk evaluation through data analysis based on D&B Direct data. Organizations may also choose to expand the use of D&B Direct to multiple devices. 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 D&B Direct 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 D&B Direct, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. TABLE 9 Benefit And Cost Risk Adjustments Benefits Adjustment Improved efficiency in data integration 5% Cost savings from eliminating hardware and software 15% Costs Adjustment D&B Direct incremental license costs 15% Internal resource/professional services costs 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 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: Productivity savings can vary from organization to organization based on the number of relevant resources, differing processes, and differing compensation. Additionally, it can be difficult to accurately estimate productivity savings within an organization. Hardware and software cost savings will be dependent on the organizations previous environments and processes. The following implementation risks that affect costs are identified as part of this analysis: License costs can be highly variable from organization to organization, based on a number of factors including vendor discounts, use of a vendor s other products, and differing license agreements. Resource costs, both internal and external, may vary from organization to organization based on differences in compensation, differences in processes and environment complexity, and differences in internal resource skill levels. Additionally, challenges with skill and scope can lift the resource time needed over the estimated times.

15 Table 9 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. 15

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 Organization s investment in D&B Direct. Table 10 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 9 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 3 Cash Flow Chart (Risk-Adjusted) $400,000 Financial Analysis (risk-adjusted) $300,000 $200,000 $100,000 $0 ($100,000) ($200,000) Initial Year 1 Year 2 Year 3 Total Costs Total Benefits Cumulative Total TABLE 10 Cash Flow (Risk-Adjusted) Initial Year 1 Year 2 Year 3 Total Present Value Costs ($33,381) ($159,846) ($159,846) ($159,846) ($512,919) ($430,894) Benefits $0 $290,094 $295,438 $295,438 $880,969 $729,851 Net benefits ($33,381) $130,248 $135,591 $135,591 $368,050 $298,957 ROI 69% Payback period 3.1 months

17 17 D&B Direct: Overview The following information is provided by D&B. Forrester has not validated any claims and does not endorse D&B or its offerings. D&B Direct is an API that exposes Dun & Bradstreet s vast business database to customers in a programmable form to suit their unique needs. D&B s business data streams into customer workflows to serve as inputs to various activities across the enterprise: Source: Dun & Bradstreet IT function: master data management. D&B Direct provides a master version of customer, partner, and vendor data, with additional data points from D&B s business database. Finance function: credit risk assessment. D&B Direct streams credit scores, predictive analytics, and alerts to evaluate the credit risk of new customers instantly. Supply function: supplier risk assessment. D&B Direct streams predictive scores, alerts, and consolidated supplier information to assess the risk of prospective and current suppliers going out of business in the near term. Marketing function: targeting and lead capture. D&B Direct increases lead conversion during early touchpoints on websites via IP address-d-u-n-s linkage and lead form enrichment. Marketing function: lead nurture. D&B Direct updates customer and prospect data within marketing automation platforms to enable delivery of qualified leads to sales teams. Sales function: pipeline acceleration. D&B Direct streams sales intelligence to enable sales teams to serve as consultative experts and close opportunities.

18 18 Appendix A: Composite Organization Description For this TEI study, Forrester has created a composite organization, the Organization, to illustrate the quantifiable benefits and costs of implementing D&B Direct for Sales and Marketing. The composite company is intended to represent the three interviewees as well as the survey respondents. The composite organization that Forrester synthesized from these results represents a US-based global services organization that implemented D&B Direct for Sales and Marketing. The Organization has about 6,000 employees worldwide and $600 million in annual revenue. The Organization was facing rising resource and infrastructure costs needed to process data updates, which led to data quality and sales productivity challenges. In purchasing D&B Direct, the Organization has the following objectives: Reduce or automate manual processes required to cleanse and publish data updates delivered via batch files. Reduce data latency and data quality issues due to the previous manual burden. Improve sales processes and boost sales growth through providing real-time updates to all systems and applications. For the purpose of the analysis, Forrester assumes that prior to implementing D&B Direct for Sales and Marketing, the Organization was receiving changes and updates to data via large quarterly batch files from D&B. The Organization required a lot of resource time to cleanse, match, and process these files and then push changes to all downstream systems. This meant that some systems and applications were out of sync; data latency could sometimes be up to two to three months based on manual time to process these batch files; and sales processes dependent on accurate information were negatively affected, which resulted in missed opportunities and longer sales cycles. FRAMEWORK ASSUMPTIONS Table 11 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 11 Model Assumptions Ref. Metric Calculation 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) 8,736 X5 FTE annual fully loaded compensation $120,000 X6 Hourly (C5/C3) $58

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. 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: 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

21 21 Appendix D: 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.