The Total Economic Impact Of BackOffice Associates Data Stewardship Platform

Transcription

1 A Forrester Total Economic Impact Study Commissioned By BackOffice Associates Project Director: Adrienne Breslin April 2014 The Total Economic Impact Of BackOffice Associates Data Stewardship Platform Cost Savings And Business Benefits Enabled By The Data Stewardship Platform

2 Table Of Contents Executive Summary... 1 Disclosures... 2 TEI Framework And Methodology... 3 Analysis... 4 Financial Summary BackOffice Associates Data Stewardship Platform: 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 1 Executive Summary Quality data is the backbone of business applications. It supports and impacts every corner of our companies, yet sometimes it does not get the attention it deserves. Understanding how data impacts our business and how it can affect our databased projects is key to understanding the value of high-quality data. Key to this is understanding the risk involved with not controlling the accuracy of that data, and the value of managing and maintaining high-quality data in our business applications. In August 2013, BackOffice Associates commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Data Stewardship Platform (DSP) to cleanse, manage, and maintain their data. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of the BackOffice Data Stewardship Platform (DSP ) on their organizations. To better understand the benefits, costs, and risks associated with the DSP, Forrester interviewed several customers with multiple years of experience using the DSP in their organization. These customers looked to BackOffice Associates to assess and cleanse their data, manage their migration to the new SAP environment, and to further support them as they worked to introduce ongoing data governance and data quality measures. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of the DSP on their organizations. THE DATA STEWARDSHIP PLATFORM IMPROVES DATA MIGRATION, QUALITY, AND GOVERNANCE Our interviews with four existing large enterprise customers and subsequent financial analysis found that a composite organization based on these interviewed organizations experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. See Appendix A for a description of the composite organization. 1 FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 218% Payback period: 4.7 months Total benefits (present value): $8,642,061 Total costs (present value): ($2,716,744) Net present value: $5,925,316

4 2 Benefits. The composite organization experienced the following risk-adjusted benefits that represent those experienced by the interviewed companies: Faster time to value. This benefit examines the financial impact of the time it takes to complete a data migration and governance project on their own than with BackOffice Associates. Avoided costs of hiring and training. This looks at the avoided costs of additional team members that would be needed to complete this project internally. Cost savings from improved data quality for migration. This benefit illustrates the cost savings associated with improved data quality working on a data migration project with BackOffice Associates. Cost savings from data governance and quality. This benefit examines how, with the help of BackOffice Associates, the composite organization was able to save money year over year by implementing a data governance program and improving its data quality. Time savings from improved reporting. The DSP enabled the composite organization to cut down on time spent manually creating reports to examine data quality, leading to time savings for the team. Savings from reduced legacy systems. With successful migration led by BackOffice Associates, previous systems were able to be taken offline, removing the cost for IT maintaining those systems. Costs. The composite organization experienced the following risk-adjusted costs: Internal implementation and labor costs. This is the cost for the internal team associated with planning, implementation, and support of the investment with BackOffice Associates. Planning, implementation, and solution costs for data migration and data governance. This represents the cost for working with BackOffice Associates to plan and implement the data migration and governance project, along with the application costs. Disclosures The reader should be aware of the following: The study is commissioned by BackOffice Associates 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 BackOffice Associates/the DSP. BackOffice Associates 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. BackOffice Associates provided the customer names for the interviews but did not participate in the interviews.

5 3 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 BackOffice Associates/the DSP. 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 BackOffice Associates/the DSP can have on an organization (see Figure 2). Specifically, we: Interviewed BackOffice Associates marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to the DSP and the marketplace for the DSP. Interviewed four organizations currently using BackOffice Associates/the DSP to obtain data with respect to costs, benefits, and risks. Designed a composite organization based on characteristics of the interviewed organizations (see Appendix A). Constructed a financial model representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews as applied to the composite organization. Risk 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 is detailed in each relevant section. Forrester employed four fundamental elements of TEI in modeling BackOffice Associates/the DSP solution: 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 Design composite organization Construct financial model using TEI framework Write case study

6 4 Analysis COMPOSITE ORGANIZATION For this study, Forrester conducted a total of four interviews with representatives from the following large enterprises, which are BackOffice Associates customers based in the US: A large US-based utilities company, with annual revenues of just over $3 billion dollars. It serves over a million customers with electricity and gas. It successfully managed a data migration to SAP for Utilities with the help of BackOffice Associates to better serve its customers. A global distributor of unified communications and data center solutions, headquartered in the US. It has over $4 billion in annual revenue and operates in more than 60 countries. Together with BackOffice Associates, it migrated legacy data from a previous ERP system into SAP, and continued its work with BackOffice Associates to manage the ongoing quality of its data. A global processed and packaged goods organization with over $14 billion a year in revenue. It has roughly 35,000 employees in over 45 countries. When it noticed a decrease in the quality of its data in its SAP HR system, it turned to BackOffice Associates to help it put together a data governance program in order to successfully identify, track, and mitigate data quality issues. A global reinsurance organization with annual revenues of $6 billion. Looking to undertake a large data migration project to modernize its systems from a legacy system into SAP, it looked to BackOffice Associates for its expertise in data migration and governance to support it. Based on the interviews, Forrester constructed a TEI framework, a composite company, 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: A global enterprise based in the US with $7 billion in annual revenues. Our representative organization was looking to update its environment, moving its data from many old legacy systems into a new SAP environment. After an internal analysis, it was decided its legacy IT systems were becoming costly to manage and lacked the functionality to support various areas of the business. In addition, the composite organization had growing concerns around the accuracy of its current data and wanted to ensure it was able to guarantee the quality of the data now and in the future. The representative organization was looking to migrate eight source systems that affect four process areas. After researching a number of solutions and partners, the composite organization chose to implement an SAP environment. Realizing the complexity of the work, our composite organization turned to BackOffice Associates to assess and cleanse its data, manage its migration to the new SAP environment, and to further support it as it worked to introduce ongoing data governance and data quality measures. INTERVIEW HIGHLIGHTS The four interviews uncovered the following drivers behind the search for a data migration and governance partner: Accurate data is critical to every part of the business. Each company we spoke with told us about how important their data was to their company. The different companies we spoke with were each concentrating on data from a different part of their company customer service platforms, human resource systems, financial applications across the board, data

7 5 was integral to how these companies ran their business. This data impacted all areas of the company which means bad data could easily impact the company in major ways. One interviewee told us about how they quickly realized how farreaching their data was: We always thought of things like our HR systems being very HR-centric, only used by us. But over time, we have learned that we use this data for access to company information, for compliance training, for workflow process, for approvals. Our data affects many, many, many things. Over time we realized we had 75 to 100 systems using this data. With data this far-reaching, it became abundantly clear: Bad data could quickly affect the bottom line. If our inventory data is wrong, and we lack the ability to sell, you get in trouble very quickly. ~Global director of MDM at unified communication distributor There is a major risk involved with not controlling the accuracy of the data. Whether the companies we spoke with were going through a migration project, a governance project, or both, each company spoke of the danger of not controlling the accuracy of their data. As one interviewee put it, If we have a data error in the wrong place, it means we can t sell. And the cost of not selling is very high. Customers have at least three or four other places to buy the product from. If our inventory data is wrong, and we lack the ability to sell, you get in trouble very quickly. There is a lot of data backing any of our sales, and if you can t do that work, you are quickly in big trouble. Another company told us, When we have data errors, our customer experience is deteriorated. The customer is impacted, and they have to spend time on the phone with us trying to get to the bottom of our data error. No matter the type of data project that a company was undertaking, the companies we spoke with highlighted that the most risk was around doing nothing. The closer we looked, the more we realized we had all these skeletons in our data closet, and we needed to fix them fast. As another interviewee noted, There is no doubt about it, we have to modernize our data to stay in business. The internal teams lacked the expertise and bandwidth to manage major data migration and governance projects. Companies were concerned about having the in-house expertise and bandwidth to manage these kinds of major data projects. Three interviewed companies attempted to take these projects on by themselves, and quickly realized that it was a major drain on their teams. We quickly got to a point in the The experience that BackOffice Associates brought to the table was a key factor to our success of our project. ~Business director of customer support operations at utilities company project where we realized we did not have the capacity or the knowledge to make the data conversion go smoothly. That s when we started looking outwards for a company that specialized in these kinds of conversions. As another interviewee put it, This project was such a drain on our internal resources and a logistical nightmare of trying to tie into the right people at the right time. We couldn t get up and running. Without the time and knowledge in house, the interviewed organizations knew they d need to turn to a partner to support them through their project. A partner with both industry knowledge and data expertise was critical to the success of these projects. When the companies decided to look outside their company for help with their data governance and data migration projects, they knew they needed an expert in data migration. This type of project is such a specialized skill set that it made sense to use expert in that space and I wish we had considered it a component of our project from the beginning. That would be a lesson that I would share with other people that are considering this think about your data and think about whether or not you really have the expertise. However, the companies we spoke with were concerned about finding a partner who not only specialized in these types of data projects, but someone who also understood the intricate details of their industry and how that was reflected in their data. In each case, BackOffice Associates was selected not only for its proven track record with these types of SAP-specific data

8 projects, but for the level of expertise that its staff brings to each project. Quite honestly, their industry expertise was their biggest selling point in my mind. With the complexity of our data, we would not have gotten anywhere with someone who did not understand both data itself and our industry, we just wouldn t. The experience that BackOffice Associates brought to the table was a key factor to our success for our project. That deep functional expertise really in my mind was the most important part. Companies noted that BackOffice Associates was the partner of choice due to their vigorous methodology for data migrations and governance, proven processes that ensure timely delivery of the data projects, and the professional staff who work closely with the team to ensure a successful go-live. 6

9 7 BENEFITS The composite organization experienced a number of quantified benefits in this case study: Faster time to value. Avoided costs of hiring and training. Cost savings from improved data quality for migration. Cost savings from data governance and quality. Time savings from improved reporting. Savings from reduced legacy systems. Faster Time To Value Interviewees noted that the time to complete this type of data migration project would take significantly more time to do on their own than with BackOffice Associates. Each interviewee noted that their existing teams lacked the bandwidth and expertise to complete this type of project in a timely manner. While the existing teams had a solid handle on the legacy systems, they lacked the knowledge of the SAP environment the data is moving to, and they also often lacked the tools to do so. As one organization we interview noted, We started out with an internal team to work with the data and go through the conversion process. We did not have enough expertise, technical or functional expertise, to be able to touch the kind of volume of data that we needed to do, and that became a huge barrier. The first benefit identified as part of this analysis takes a look at the financial impact the faster time to value has on our representative organization. Our representative organization recognized early on that it would be unable to match the expertise of BackOffice Associates, and decided to have it come in to perform an initial audit. This initial audit was seen as a key factor into gaining visibility into the current state of the existing data, and identified problem areas and gaps that could affect the project moving forward. It also helped uncover why this data migration and governance project was key In five days [BackOffice Associates] came back with a very good understanding of what the data looked like, what the problems were, how it hung together, and how to move forward. ~Global director of MDM at unified communication distributor to its success as an organization. As one interviewed organization stated, It exposed all that bad data upfront, before we even got started I didn t know the data was that bad until BackOffice exposed it to me. It also demonstrated to the organization the level of expertise and knowledge that BackOffice Associates brought to the table. They came in and had them connect to our existing ERP system we didn t provide too many tips and tricks, and in five days they came back with a very good understanding of what the data looked like, what the problems were, how it hung together, and how to move forward. Moving into the data migration project, a task that would have taken our representative organization eight months to complete internally took BackOffice Associates two months to complete, a savings of 75%. The major factor here was not needing to wait for bandwidth or struggle to find the right talent to complete the migration. At the extreme, one organization told us, I don t think we actually could have even done it when I think about the amount of volume that we have and the expertise we need, I don t think we even would have gotten off of the ground.

10 8 Talent and time were major factors in the data governance project as well. Based off of our interviews, Forrester estimates that it would take our representative organization 21 months to complete the data governance project, while it would take BackOffice Associates only 12 months. To calculate the total faster time to value benefit, the model looks at the time it would take our representative organization to find the right team of individuals, analyze the data to understand the current state, and perform the tasks for the data migration as well as the data governance projects. It then compares these numbers to the time it takes BackOffice Associates to do the same. The model assumes that each month the project continues costs the company at least $160,000, a low-end estimate based on our interviews with existing customers. Working with BackOffice Associates allowed our representative organization to complete its data migration and governance project 20 months earlier than if it had done this project by itself, saving the company over $3 million. Table 1 illustrates the calculations used. In order to compensate for fluctuations in the time it takes any given organization to complete these tasks, Forrester riskadjusted this benefit and reduced the benefit by 6%. The risk-adjusted total benefit resulting from the faster time value is $2,983,936. TABLE 1 Faster Time To Value Ref. Metric Calculation Year 1 A1 Initial data audit on own 5 months A2 Initial data audit with BackOffice Associates 5 days.16 months A3 Initial data audit delta 4.84 months A4 Data migration on own 8 months A5 Data migration with BackOffice Associates 2 months A6 Data migration delta 6 months A7 Data governance on own 21 months A8 Data governance with BackOffice Associates 12 months A9 Data governance delta 9 months A10 Total project delta in months A3+A6+A9 20 months A11 Estimated savings per month $160, At Faster time to value A10*A11 $0 $3,174,400 Ato Total (original) $0 $3,174,400 Risk adjustment Medium 94% Atr Total (risk-adjusted) $0 $2,983,936

11 9 Avoided Costs Of Hiring And Training In addition to the fast time reported by the interviewed organizations, this benefit examines the avoided cost of hiring and training the correct people to work on this project if our composite organization were to take the project on internally. Not only does it take time to find the right people with the expertise for this type of project, but there are also the added costs associated with training and salary. Based off of our interviews, our representative organization estimates that they would need to hire three additional full-time employees to support the data migration project. In addition, it expects to need two additional headcount to support the ongoing data governance project as well. To calculate this benefit, we estimate a fully loaded salary of $100,000, with an estimated training cost of 10% of the average salary per employee. Through working with BackOffice Associates, the representative organization is able to avoid $990,000 in salary and training costs. Table 2 shows this calculation. Interviewed organizations handle training and salary differently. Since there are a variety of factors that may impact salary and training, the benefit was risk-adjusted and reduced by 6%. The risk-adjusted total benefit resulting from avoided costs of hiring and training over the three years is $930,600. TABLE 2 Avoided Costs of Hiring and Training Ref. Metric Calculation Initial Year 1 Year 2 Year 3 B1 Number of new headcount for data migration 3 B2 Number of new headcount for data governance B3 Average fully loaded salary $100,000 $100,000 $100,000 B4 Cost of training 10% of salary $10,000 $10,000 $10,000 Bt Avoided costs of hiring and training (B1+B2)*(B3+B4) $0 $550,000 $220,000 $220,000 Bto Total (original) $0 $550,000 $220,000 $220,000 Risk adjustment Medium 94% Btr Total (risk-adjusted) $0 $517,000 $206,800 $206,800 Cost Savings From Data Migration With BackOffice Associates Our next benefit looks at cost savings from working with BackOffice Associates for a data migration project. As we uncovered in our interviews, data errors resulted in bottom line impacts for these companies. Working with BackOffice Associates, one company uncovered an error in employee birthdays that was impacting retirement benefits. Another organization discovered a date error that was causing incorrect contract details. Before, these organizations lacked the ability to easily identify and resolve these issues and would have carried them over into the new system during the data migration. Through working with BackOffice Associates, they were able to more easily determine and fix these costly data errors before the data migration, and before they impacted the bottom line. To understand the total cost savings from working with BackOffice Associates for a data migration project, first we must calculate the total cost of data errors if our representative organization was not working with BackOffice Associates. Our model assumes that the representative organization identifies 100,000 minor data errors and 50,000 major data errors. A minor data error is an error that must be fixed; they do not meet the requirements of the project. However, they take relatively

12 10 little time to fix, and have a relatively low cost to fix. Major data errors are not as easy to fix; they require human input to fix, and therefore take a bit longer and are more costly than minor data errors. By multiplying the time it takes to fix each type of error by the average hourly salary, we can understand the internal expense associated with fixing these data errors on our own. However, our interviewees noted that there is not only the expense associated with finding and fixing the error (what we refer to as the internal expense), but there are additional, external repercussions of each data error. To understand the financial impact that these data errors have, our model assigns a general degree of magnitude for both minor and major data errors, based off of the internal expense associated with each. By multiplying the degree of magnitude by the internal expense, we can calculate the external expense associated with a major or minor data error. To understand the total cost of major and minor data errors our representative organization may incur if it were not working with BackOffice Associates, we add the internal and external expense of each type of error, resulting in an expense of $1,502,500. This calculation is outline in Table 3. TABLE 3 Cost Of Minor And Major Data Errors Before BackOffice Associates Ref. Metric Calculation Year 1 C1 Number of minor errors 100,000 C2 Number of major errors 50,000 C3 C4 Time to find and fix each minor data error (in hours) before BackOffice Associates Time to find and fix each major data error (in hours) before BackOffice Associates C5 Average hourly salary $48.08 C6 Internal expense before BackOffice Associates for minor errors C1*C3*C5 $240,400 C7 Internal expense before BackOffice Associates for major errors C2*C4*C5 $601,000 C8 External repercussion of minor data error (degree of magnitude) 0.25x C9 External repercussion of major data error (degree of magnitude) 1x C10 External expenses before BackOffice Associates for minor errors C6*C8 $60,100 C11 External expenses before BackOffice Associates for major errors C7*C9 $601,000 C12 Total cost of minor and major data errors before BackOffice Associates C6+C7+C10+C11 $1,502,500 Next, using a similar calculation, we calculate the total cost of data errors when our representative organization is working with BackOffice Associates. Our interviews uncovered that working with BackOffice Associates cut down on the time it took to find and fix each type of data error, resulting in a lower internal expense, which therefore lowers the associated external expense. When working with BackOffice Associates, the cost of major and minor data errors is $540,900. This calculation is outlined in Table

13 11 TABLE 4 Cost Of Minor And Major Data Errors With BackOffice Associates Ref. Metric Calculation Year 1 C13 Time to find and fix each minor data error (in hours) with BackOffice Associates 0.01 C14 Time to find and fix each major data error (in hours) with BackOffice Associates 0.10 C15 Internal expense with BackOffice Associates for minor errors C1*C5*C13 $48,080 C16 Internal expense with BackOffice Associates for major errors C2*C5*C14 $240,400 C17 External expenses for minor errors with BackOffice Associates C8*C15 $12,020 C18 External expenses for major errors with BackOffice Associates C9*C16 $240,400 Ct Total cost of minor and major data errors with BackOffice Associates C15+C16+C17+C18 $540,900 Finally, to understand the total cost savings from working with BackOffice Associates for the data migration, we look at the delta of the cost of data errors without working with BackOffice Associates versus the cost of data errors while working with BackOffice Associates. Through working with BackOffice Associates on its data migration project, our representative organization saved $961,600. This calculation is illustrated in Table 5. Forrester took into consideration that organizations may have differing data error numbers and costs. Since there are a variety of factors that may impact this benefit, Forrester risk-adjusted the benefit and reduced it by 13%. The risk-adjusted total benefit resulting from working with BackOffice Associates on the data migration project was $836,592. See the section on Risks for more detail. TABLE 5 Total Cost Savings From Data Migration With BackOffice Associates Ref. Metric Calculation Year 1 C19 Total cost of minor and major data errors before BackOffice Associates C6+C7+C10+C11 1,502,500 C20 Total cost of minor and major data errors with BackOffice Associates C15+C16+C17+C ,900 Ct Total cost savings from data migration with BackOffice Associates C19-C20 $961,600 Cto Total (original) $961,600 Risk adjustment High 87% Ctr Total (risk-adjusted) $836,592 Cost Savings From Data Governance And Quality With BackOffice Associates Our next benefit looks at cost savings from working with BackOffice Associates on a data governance and quality project. In addition to conducting a data migration project with BackOffice Associates, our representative organization also took on a

14 12 data governance project with them to ensure the ongoing quality of its data. The goal of this project was to maintain the high standard of data quality that was used during the data migration to ensure that as new data is added to the new SAP environment, the data remains robust and accurate. As our interviews uncovered, working with BackOffice Associates helps to assure that the data is continuously improved upon as time goes by. To understand the total cost savings from working with BackOffice Associates for a data governance project, first we must look back to the total cost of major and minor data errors before working with BackOffice Associates $1,502,500. Our model assumes that this number stays static year over year. We then determine the cost of data errors working with BackOffice Associates, this time bringing into the calculation the year-over-year improvement of data quality due to the representative organization s data governance project. With BackOffice Associates solutions monitoring the quality of the composite organization s data each year, we assume that the number of minor and major errors decrease 25% each month that the data is monitored. Using a similar calculation as we did for our data migration project, we can calculate out the total cost the composite organization sees each year for data errors. Finally, to understand the total cost savings from working with BackOffice Associates for the data governance project, we look at the delta of the cost of data errors without working with BackOffice Associates year-over-year versus the cost of data errors while working with BackOffice Associates. Through working with BackOffice Associates on its data governance project, our representative organization saves $3,770,459 over three years. This calculation is illustrated in Table 6. Forrester took into consideration that organizations may have differing data error numbers and costs. Since there are a variety of factors that may impact this benefit, Forrester risk-adjusted the benefit and reduced it by 13%. The risk-adjusted total benefit resulting from working with BackOffice Associates on the data governance and quality project was $3,280,299. See the section on Risks for more detail.

15 13 TABLE 6 Cost Savings From Data Governance And Quality With BackOffice Associates Ref. Metric Calculation Year 1 Year 2 Year 3 D1 Total cost of minor and major data errors before BackOffice Associates C19 $1,502,500 $1,502,500 $1,502,500 D2 Number of minor errors 100,000 32,276 1,022 D3 Number of major errors 50,000 16, D4 D5 Time to find and fix each minor data error (in hours) with BackOffice Associates Time to find and fix each major data error (in hours) with BackOffice Associates D6 Average hourly salary $48.08 $48.08 $48.08 D7 D8 D9 Dt External repercussion of minor data error (degree of magnitude) External repercussion of major data error (degree of magnitude) Cost of minor and major data errors with BackOffice Associates Cost savings from data governance with BackOffice Associates (D2*D4*D6)+(D2*D4* D6*D7)+(D3*D5*D6)+ (D3*D5*D6*D8) 0.5x 0.5x 0.5x 1x 1x 1x $552,920 $178,470 $5,651 D1-D9 $949,580 $1,324,030 $1,496,849 Dto Total (original) $949,580 $1,324,030 $1,496,849 Dtr Risk adjustment High 87% Total (risk-adjusted) $826,135 $1,151,906 $1,302,259 Cost Savings From Improved Reporting For Data Governance BackOffice Associates also helped the organization save time on report creation during the data governance process. Our organizations highlighted that creating reports using BackOffice Associates solutions cut down drastically on the time it took to create reports. What was previously an extremely labor-intensive process that led to few reports being created to examine and monitor data quality is now available at the touch of a button. The out-of-the-box data quality reports available mean that the organization can now quickly access the right information at the right time, whereas previously it spent many hours trying to track down the right information. To calculate this benefit, the model assumes that our organization was pulling only 12 reports a year due to how long it took to create each report. Based on our customer interviews, we assume that it previously took 24 hours per report to gather the information and build it out in a usable format. Based on feedback from the interviewed organizations, the composite organization now sees a 90% reduction in the time it takes to create a report with the DSP. With an assumed salary of $60.09, the cost savings from improved reporting for data governance is valued at $186,904 each year. Table 7 illustrates the calculations used.

16 14 While each organization we spoke with that used reporting capabilities noted a dramatic decrease in the time spent to create a report, Forrester risk-adjusted the benefit by decreasing it by 1% in order to account for any circumstances that may impact this benefit. The risk-adjusted benefit resulting from time savings from improved reporting is $185,035 each year. See the section on Risks for more detail. TABLE 7 Cost Savings From Improved Reporting For Data Governance Ref. Metric Calculation Initial Year 1 Year 2 Year 3 E1 Number of reports 1 per month due to how long it took E2 Time spent before pulling reports to ensure quality 24 hours per report E3 Percent savings creating reports 90% 90% 90% E4 Hourly salary $125,000 fully loaded $60.09 $60.09 $60.09 Et Cost savings from improved reporting for data governance E1*E2*E3*E4 $0 $186,904 $186,904 $186,904 Eto Total (original) $0 $186,904 $186,904 $186,904 Risk adjustment Low 99% Etr Total (risk-adjusted) $0 $185,035 $185,035 $185,035 Savings From Reduced Legacy Systems Migrating data to the new SAP environment eliminated the need for the representative organization to continue maintaining legacy applications that are no longer used. This calculation represents the savings from the cost of maintaining those systems, for a total savings of $500,000 each year. Table 8 illustrates the calculations used. To compensate for variations in the annual cost of maintenance for legacy systems, Forrester risk-adjusted the benefit by decreasing it by 1%. The risk-adjusted total benefit resulting from time savings on report creation over the three years was $1,485,000. See the section on Risks for more detail.

17 15 TABLE 8 Savings from Reduced Legacy Systems Ref. Metric Calculation Year1 Year2 Year3 F1 Annual cost of maintaining legacy systems $500,000 $500,000 $500,000 Ft Savings from reduced legacy systems $500,000 $500,000 $500,000 Fto Total (original) $500,000 $500,000 $500,000 Risk adjustment Low 99% Ftr Total (risk-adjusted) $495,000 $495,000 $495,000 Total Benefits Table 9 shows the total of all benefits across the six 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 $9 million. TABLE 9 Total Benefits (Risk-Adjusted) Benefit category Year 1 Year 2 Year 3 Total Present value Faster time to value $2,983,936 $0 $0 $2,983,936 $2,712,669 Avoided costs of hiring and training Cost savings from data migration with BackOffice Associates Cost savings from data governance with BackOffice Associates Cost savings from improved reporting for data governance Savings from reduced legacy systems Total benefits (riskadjusted) $517,000 $206,800 $206,800 $930,600 $796,281 $836,592 $0 $0 $836,592 $836,592 $826,135 $1,151,906 $1,302,259 $3,280,299 $2,681,426 $185,035 $185,035 $185,035 $555,105 $460,154 $495,000 $495,000 $495,000 $1,485,000 $1,230,992 $5,843,697 $2,038,741 $2,189,094 $10,071,532 $8,642,061

18 16 COSTS The composite organization experienced a number of costs associated with the DSP solution: Internal implementation and labor costs. Planning, implementation, and solution costs for data migration and data governance. Internal Implementation And Labor Costs Based on feedback from the interviewed organizations, Forrester estimates the composite organization will spend 3,000 man-hours for planning, implementing, and supporting the BackOffice Associates team on this project. Table 10 outlines the calculation for this cost. The hours required for planning and implementation will vary from company to company. To compensate, this cost was riskadjusted up by 8%. The risk-adjusted cost of internal labor costs was $194,400. See the section on Risks for more detail. TABLE 10 Internal Implementation And Labor Costs Ref. Metric Calculation Initial G1 Man-hours 3,000 G2 Average hourly salary 60 Gt Internal labor costs G1*G2 $180,000 Gto Total (original) ($180,000) Risk adjustment Medium 108% Gtr Total (risk-adjusted) ($194,400) Planning, Implementation, And Solution Costs For Data Migration And Data Governance The composite organization paid an upfront cost to BackOffice Associates for professional services and solution costs for the data migration and data governance investment. For the data migration investment, the costs focus on the number of source systems our composite organization has, and the number of process areas that will be impacted. Our organization was migrating eight source systems that impacted four process areas. Each source system costs $125,000 to migrate and each process area is an additional $250,000 fee. These fees include the planning and implementation costs that were paid to BackOffice Associates. For the data governance and quality project, our composite organization pays a recurring yearly fee of $200,000. Note that these costs are variable based on your specific companies environment; different companies may have different agreements. Table 11 below outlines the calculation for this investment. As these costs are variable from organization to organization, this cost was risk-adjusted up by 1%. The total risk-adjusted cost of planning, implementation, and solution costs for data migration and data governance over the three years was $2,626,000. See the section on Risks for more detail.

19 17 TABLE 11 Planning, Implementation, And Solution Costs For Data Migration And Data Governance Ref. Metric Calculation Initial Year 1 Year 2 Year 3 H1 Number of source systems 8 H2 Cost per source system 125,000 H3 Number of process areas 4 H4 Cost per process area 250,000 H5 H6 Ht Total cost of planning, implementation, and solution for data migration Planning, implementation, and solution for data governance Planning, implementation, and solution (H1*H2)+(H3*H4) 2,000, , , ,000 H5+H6 $2,000,000 $200,000 $200,000 $200,000 Hto Total (original) ($2,000,000) ($200,000) ($200,000) ($200,000) Risk adjustment Low 101% Htr Total (risk-adjusted) ($2,020,000) ($202,000) ($202,000) ($202,000) Total Costs Table 12 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the composite organization expects total costs to total a net present value of a little more than $2.7 million. TABLE 12 Total Costs (Risk-Adjusted) Ref. Cost category Initial Year 1 Year 2 Year 3 Total Present value Gtr Internal labor costs ($194,400) $0 $0 $0 ($194,400) ($194,400) Htr Planning, implementation, and solution Total costs (riskadjusted) ($2,020,000) ($202,000) ($202,000) ($202,000) ($2,626,000) ($2,522,344) ($2,214,400) ($202,000) ($202,000) ($202,000) ($2,820,400) ($2,716,744) 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 the

20 18 DSP 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). While there are many opportunities for future benefit, one particular scenario could be around leveraging data governance for an additional part of the business to improve the data quality in additional areas. 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 the DSP 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 the DSP, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. TABLE 13 Benefit And Cost Risk Adjustments Benefits Adjustment Faster time to value 6% Avoided costs of hiring and training 6% Cost savings from data migration with BackOffice Associates 13% Cost savings from data governance with BackOffice Associates 13% Cost savings from improved reporting for data governance 1% Savings from reduced legacy systems 1% Costs Adjustment Internal labor costs 8% Planning, implementation, and solution 1% 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 risk that affects benefits is identified as part of the analysis: Variability of efficiencies gained with BackOffice Associates. The following implementation risk that affects costs is identified as part of this analysis: Internal labor needed for planning and implementation is higher than expected. Table 13 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

21 19

22 Cash flows 20 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 the DSP. Table 14 below shows the risk adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 13 in the Risks section to the unadjusted results in each relevant Costs and Benefits section. FIGURE 3 Cash Flow Chart (Risk-Adjusted) $8,000,000 $6,000,000 Financial analysis (risk-adjusted) $4,000,000 $2,000,000 $0 ($2,000,000) ($4,000,000) Initial Year 1 Year 2 Year 3 Total Costs Total Benefits Running Total TABLE 14 Cash Flow: Risk-Adjusted Summary Initial Year 1 Year 2 Year 3 Total Present value Total costs ($2,214,400) ($202,000) ($202,000) ($202,000) ($2,820,400) ($2,716,744) Total benefits $0 $5,843,697 $2,038,741 $2,189,094 $10,071,532 $8,642,061 Total ($2,214,400) $5,641,697 $1,836,741 $1,987,094 $7,251,132 $5,925,316 ROI 218% Running total ($2,214,400) $3,427,297 $5,264,038 $7,251,132 Payback period (months) 4.7

23 21 BackOffice Associates Data Stewardship Platform: Overview The following information is provided by BackOffice Associates. Forrester has not validated any claims and does not endorse BackOffice Associates or its offerings. The BackOffice Data Stewardship Platform (DSP ) is a next-generation, uniform platform of functions and capabilities designed specifically to help customers keep pace with rapidly changing business conditions that affect data quality and information governance. The DSP delivers the core data quality, data migration, and information governance functionality required by business users to achieve Business-Ready Data, all within a completely new framework. The DSP supports our applications, business suite applications (ERP, CRM, SCM, HCM, etc.) and ongoing development of new applications for information management. The DSP fulfills a standardized and scalable approach to creating and maintaining core, customized, and configurable applications. For SAP users, it provides embedded SAP Data Services ETL functionality. The DSP provides access to our Business Reference Model (BRM) content and universal functions across the entire platform. DSP benefits: Empowers an organization to achieve business-ready data ensuring that your enterprise data contains not just zero errors, but is accurate, complete, and tested. This eliminates business process interruptions due to bad data and speeds efficiency while reducing costs and risk of noncompliance. Reduces time-to-productivity through access to rich, prebuilt content libraries and a Business Reference Model to deliver that content in the DSP applications as needed. Provides automation and reusability that lowers migration costs by as much as 80%. Maintains durability of your investment by providing a solution that can be leveraged multiple times and for multiple projects throughout the life cycle of your data.

24 22 Appendix A: Composite Organization Description Based on the interviews, Forrester constructed a TEI framework, a composite company, 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: A global enterprise based in the US with $7 billion in annual revenues. Our representative organization was looking to update its environment, moving its data from many old legacy systems into a new SAP environment. After an internal analysis, it was decided its legacy IT systems were becoming costly to manage and lacked the functionality to support various areas of the business. In addition, the composite organization had growing concerns around the accuracy of its current data and wanted to ensure it was able to guarantee the quality of the data now and in the future. The representative organization was looking to migrate eight source systems that affect four process areas. After researching a number of solutions and partners, the composite organization chose to implement an SAP environment. Realizing the complexity of the work, our composite organization turned to BackOffice Associates to assess and cleanse its data, manage its migration to the new SAP environment, and to further support it as it worked to introduce ongoing data governance and data quality measures. FRAMEWORK ASSUMPTIONS Table 15 provides the model assumptions that Forrester used in this analysis. The discount rate used in the PV and NPV calculations is 10% and 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 15 Model Assumptions Ref. Metric Calculation Value C1 Hours per week 40 C2 Weeks per year 52 C3 Hours per year (M-F, 9-5) 2,080 C4 Hours per year (24x7) 8,736

25 23 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 applies a probability density function known as triangular distribution to the values entered. At a minimum, three values are calculated to estimate the underlying range around each cost and benefit.