ROI Benchmark Study Report: TriNet Group Inc. Human Resources Outsourcing Services. Gantry Group. November 2008

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1 Gantry Group ROI Benchmark Study Report: TriNet Group Inc. Human Resources Outsourcing Services November 2008 Solution Payback Assessment Average TriNet Customer ROI: Positive ROI Within First Year of Implementation 3-Year ROI NPV: $486,000 3-Year ROI NPV: 312% Payback Horizon: < 6 months Net Tangible Benefits: $636,000 Average Annual Time Saved on HR Services: 432 hours Average Recovered Employee Time From Improved Productivity: 4,909 hours Average Improvement in Payroll Accuracy: 83% Summary of Findings Gantry Group profiled the payback experiences of eight companies that have deployed TriNet Group s Outsourced HR services for at least two years. The study qualifies and quantified the expected bottom-line business impact and organizational effectiveness that this solution brings to small medium sized organizations. Business value was derived from the following: Top Tangible Value Drivers Avoided need for HR hires Lower healthcare premiums Reduced cost of benefits administration Reduced cost of payroll processing Lower percentage of payroll in error Reduced legal fees Reduced cost of employee communications Avoided cost of HRMS solution The Gantry Group, LLC 150 Baker Avenue, Suite 301 Concord, MA

2 Contents Contents... 2 Executive Summary... 1 The Case for HR Outsourcing: HR Challenges Overcome by TriNet... 2 Managing the High Cost of Benefits...2 Lack of Dedicated HR Resources...2 Inadequate Corporate Presence Employee Communications & Support...3 Lack of World Class Benefits Difficulty Competing for Employees...3 Need to Support Rapid Growth That Scales...3 Managing Risk: Employee Liability and Compliance...4 TriNet ROI Experience... 4 Tangible Benefit Summary... 6 Reduced Benefits Premium Costs...6 Reduced Cost of Benefits Administration...6 Avoided HR Hiring...7 Reduced Payroll Processing Costs...7 Avoided Legal Fees...8 Reduced Undiscovered Payroll Error...8 Reduced HR Data Entry Costs...9 Avoided Employee Communications Cost...9 Avoided Costs to Implement and Maintain HRMS Solution... Error! Bookmark not defined. Intangible Benefits Summary Improved Employee and Manager Productivity...11 Improved Payroll Accuracy...11 Improved Payroll Productivity...11 Reduced Time Spent on HR Functions...11 Conclusion Study Methodology Terminology & Definitions...13 ROI Benefits Investment Time to Payback Horizon About Gantry Group The Gantry Group, LLC 2

3 ROI Benchmark Study Report: Human Resources Outsourcing Product Spotlight: TriNet Group, Inc. PEO Services Executive Summary Across all industries, competitiveness relies upon a business ability to attract and retain employees. No matter the size or stage of the organization the Human Resource function is increasingly recognized as a strategic corporate partner with a critical role in employee recruitment, compensation, development, and retention. In small businesses in particular, HR is often considered a nice to have when compared with product development, finance and sales. However, to compete for the most highly skilled individuals, small companies must be able to offer big company benefits and the culture and services of a large organization. Fastgrowth companies usually do not have the resources to deploy on vital HR functions which frequently become the job of an individual who is already multi-tasking. TriNet Group, Inc. s PEO services (TriNet ) are specifically designed to help small to medium sized companies leverage their investment in human capital, freeing up already scarce resources to focus on strategy and business success. TriNet s outsourcing solution enables companies to: Scale up HR services to fast growth without additional resources Attract key employees with compelling benefits packages Put answers to important HR questions at the fingertips of employees through a webbased portal Lower the cost of HR administration Extend the reach and effectiveness of the HR budget By providing pre-negotiated, high quality benefits plans, complete payroll solutions, strategic HCM support and self-service functionality, TriNet gives companies the freedom to focus their talent and attention on the strategic issues critical to their business success. Outsourcing HR to TriNet on an end-to-end basis gives organizations a financial and operational advantage as well; the outsourced solution provides all the big company HR services without the need to invest in the resource to deliver them. TriNet s human capital management consulting also included in the outsourced services package frees executives from both the strategic and administrative aspects of HR including benefits, payroll management, recruitment, retention, compensation, and performance management. TriNet customers are confident that their HR services are based on best practices, are highly competitive, and are easy to manage. The end result for TriNet customers is that management is able to focus on the real work of running their business. Gantry Group profiled the experiences of eight companies who have deployed TriNet for at least three years to quantify the expected bottom-line business impact and organizational effectiveness that this HR management solution brings to small to medium-sized businesses. All customer companies had in common a fast-paced high growth scenario with limited resources. The results showed an average 3-year NPV ROI of $486,000 or 312%, with a payback period of less than 6 months The Gantry Group, LLC 1

4 Average ROI Scorecard for TriNet ($ in Thousands) Year1 Year2 Year3 Average Net Benefits $255 $220 $239 Average Investment $54 $57 $57 ROI ($) $201 $163 $182 3-Yr NPV ROI ($) $486,000 3-Yr NPV ROI (%) 312% Payback (months) <6 The Case for HR Outsourcing: HR Challenges Overcome by TriNet As a first step in this ROI benchmark study, Gantry Group interviewed 5 executives at TriNet customer companies to pinpoint the top problems that their organizations grappled with prior to implementation of TriNet. Fast growing companies turn to outsourcing of HR functions in order to have access to world class benefits, keep focused on the business of the company, and have a scalable HR management solution that can grow with the organization. Synthesizing the results from these executive interviews, TriNet value delivery was judged by how well the solution suite remedied the following challenges. Managing the High Cost of Benefits No matter if they are start-up companies or medium-sized firms, benefits are always a major component of an HR budget. With ever-increasing focus on rising healthcare costs, the premiums for health plans represent a large and growing expense. As healthcare costs shift to the consumer, FSA and HSA plans are becoming the norm, adding an additional administrative expense and complexity. Furthermore, fast growth companies have neither the resources nor the bandwidth to offer a wide menu of plans to their employees, despite being an important requirement for shifting to consumer driven healthcare. Prior to implementation, TriNet customers were paying high premiums due to lack of volume purchasing leverage, with significant impact on the bottom line. In all cases health plan choices were either non-existent or severely limited. As a small company we had no leverage to negotiate for better health plan rates. TriNet helped us to address not only high premium costs but the size of the co-pays as well. Lack of Dedicated HR Resources Companies that are growing fast need to focus their new hires on corporate functions such as product/service development and delivery, sales, operations, and finance. In the case of 2008 The Gantry Group, LLC 2

5 smaller companies, the critical functions of HR are typically handled by an individual who is also responsible for many other non-hr processes. However, as the employee base grows, so does the need for dedicated HR professionals to manage the numerous and critical HR functions. TriNet customers affirmed the challenges and difficulties of managing HR that arose as their companies grew. Prior to TriNet, some of these companies were outsourcing components of HR to multiple vendors, adding the task of vendor management to an already overloaded to-do list. TriNet s role was to assist the company to focus on the key business objectives while minimizing the non-strategic activities such as HR administration. Inadequate Corporate Presence Employee Communications & Support Due to budget constraints, TriNet customers interviewed in the study either had no employee handbook or at best an informal set of documents that were not necessarily consistent, prior to implementation of TriNet. As a result employee questions and issues about benefits, compensation, pay, etc. were not supported by formal channels or procedures leading to confusion and unresolved concerns. The cost of writing 401K SPDs and open enrollment documentation was high and due to compliance requirements, unavoidable. Additionally these customers had no formal corporate presence or destination website for employees, reflecting an ad hoc HR approach that did not compare well with larger more established organizations. We needed a way to communicate all the details of compensation and benefits to our employees. TriNet s employee solution center gave us the support we needed. If we had gone with an in-house solution we would have had to provide the support ourselves. Lack of World Class Benefits Difficulty Competing for Employees The ability to attract and retain the most highly skilled, top-producing employees can mean the difference between a company s business success or failure. Especially in smaller and mediumsized organizations there is no margin for error in employing individuals who meet or exceed talent levels required to achieve corporate objectives. Today, as healthcare costs impact consumers and ratchet up a greater percentage of consumer expenses, companies are competing for the top employees not only with salaries but also with health plans in the context of coverage, plan choices, and cost (premiums and co-pays). All TriNet customers in the study reported that benefits (healthcare and non-healthcare insurance) prior to TriNet outsourcing were not competitive in any of the above contexts. We were competing for the best tech people in the area so we had to be able to offer world class benefits including offering more than one insurance plan in order to attract the top people. With TriNet we now offer 6-7 plans. Need to Support Rapid Growth That Scales In a typical HR department, the financial and human resources required to support a growing employee base is linearly related to number of employees. TriNet customers all keenly felt the need for an HR solution that would scale with company growth without the need for additional resources. Non-strategic HR administration can be especially time consuming and difficult to manage, especially with the scarce resources typical in rapid growth environments where the need to focus on key business objectives is paramount. However, because corporate goals are ultimately achieved by people, the lack of proper HR administration does indeed have strategic impact The Gantry Group, LLC 3

6 We needed a solution that would support rapid growth. With TriNet we were able to grow the business without adding resources. TriNet completely removes the scalability cost of administration in a fast growth environment. Managing Risk: Employee Liability and Compliance A key area of concern for the TriNet customers, who participated in the ROI study, was exposure to employee-related risk and the risks of non-compliance. Due to the lack of consistent and complete processes for employee communications, terminations and relations, TriNet customers reported discomfort with their ability to effectively mitigate risk from employee lawsuits. Additionally, achieving and tracking regulatory compliance regarding transparency, transaction reporting, and employee training required expensive outside legal services. We were growing fast but had no policies in place for compliance-related issues. No employee handbook, safety procedures, what to do on extended leave policies, no termination procedures -- all of which left us liable to fines or lawsuits. TriNet has given us a complete solution that formalizes everything for us and we know we are covered in these areas. TriNet Customer ROI Experience Gantry conducted ROI profile interviews to gather before and after data for each of the business processes where value was delivered as a result of TriNet. In some cases customers had been using point-specific solutions (e.g. payroll services) and in others nothing at all was in place. An analysis of results is provided for each tangible and intangible component of value delivery. Average ROI Scorecard for TriNet ($ in Thousands) Year1 Year2 Year3 Average Net Benefits $255 $220 $239 Average Investment $54 $57 $57 ROI ($) $201 $163 $182 3-Yr NPV ROI ($) $486,000 3-Yr NPV ROI (%) 312% Payback (months) <6 bottom-line ROI impact of $486,000. Aggregated, averaged ROI outcomes for five customer studies are reflected in the ROI Scorecard below for the first three years following TriNet deployment. Of the companies participating in this study, all reported a positive ROI within the first year of deployment. TriNet returned, on average, tangible benefits totaling $255,000 and an ROI of $201,000 by the close of the first year of solution deployment. Over a three year post-deployment period, TriNet averaged $636,000 (NPV) in tangible benefits, delivering positive 2008 The Gantry Group, LLC 4

7 Overall, TriNet payback horizon was well under one year, with an average of less than 6 months. Although there is a slight decrease in year over year annual ROI shown in the graph below, this is largely due to two effects: 1. Large avoided upfront costs for items such as employee handbook and HRMS implementation 2. Decrease in number of employees for all five companies in year 3. Average Annual ROI ($) $250,000 $200,000 $150,000 $200,404 $162,302 $182,279 $100,000 $50,000 Year 2 Year 3 Source: Gantry Group, 2008 Average Annual Cost/Benefit $300,000 $254,852 $250,000 $219,637 $238,949 $200,000 $150,000 $100,000 $50,000 $54,448 $57,335 $56,670 Average Tangible Benefit Year 2 Year 3 Average Investment Source: Gantry Group, The Gantry Group, LLC 5

8 Tangible Benefit Summary The following sections provide detail on the quantitative ROI derived from each of the tangible value drivers identified in the study. Reduced Benefits Premium Costs Through Pre-Negotiated Plan Premiums $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $89,010 $148,175 Savings from 1 Reduced Cost of Benefits Premiums NPV savings of $148,000 over the three year period. No matter the company size, health plan benefits premiums are a significant expense on the HR budget and all of TriNet customers voiced a concern that premiums were a key consideration when choosing TriNet as a vendor. As a major HR outsourcing firm, TriNet is able to pre-negotiate volume discounts on a range of healthcare plans with the best and largest health insurance providers in the country. All TriNet customers in the study reported a savings on benefits premiums with an average 3-year In addition, some study participants noted that co-pays for employees where also much improved as was plan coverage and deductible options. Benefits included health plans, dental, group life/disability, and annual workers comp. Reduced Cost of Benefits Administration Through Lower Cost/Employee/Month Fees While benefits premiums are a key cost component, the cost of third party benefits administration can also mount as the employee base grows. Typically, businesses are charged a base fee per employee per month to administer benefits. On top of this, additional fees are incurred for administration of FSA or HSA plans, and the annual Workers Comp liability deposit. Of the five customers interviewed, only one had been using a third party vendor for benefits administration. This company (approximately 50 employees) reported benefits administration savings after implementing TriNet of $5,000 annually on average. Because of its all inclusive service fee, TriNet greatly reduces the administrative overhead on workers comp, Cobra, opportunity for billing errors, and overall reduction in vendor payables The Gantry Group, LLC 6

9 Avoided HR Hiring Through Outsourced HR Functions A major advantage of $300,000 TriNet s comprehensive HR outsourcing services is the $250,689 $250,000 avoided need to staff up an HR team to deliver $200,000 services. $150,000 TriNet customers were all keenly aware of the $100,000 $86,817 savings they have incurred by not hiring HR $50,000 professionals. Those companies that grew significantly who did hire Avoided Cost 1 of HR Hires additional HR staff, were able to bring on fewer new HR hires than they would otherwise need (e.g. without TriNet). The graph above shows an average savings of $86,817 in year 1, resulting in a 3-year NPV savings of $250,689. Reduced Payroll Processing Costs Through Improved Efficiency and Accuracy $60,000 $50,000 $40,000 $30,000 $20,000 $17,956 $54,498 TriNet s customers who were using a payroll service prior to outsourcing HR to TriNet were charged per check and per employee per month fees, as well as fees for W-2 and tax reporting. $10,000 Savings from 1 Reduced Payroll Processing Costs Other additional costs included wage garnishment, multiple tax jurisdictions, FSA, section 125 s, workers comp, etc. With TriNet, all costs relating to payroll and tax reporting are included in the annual service fee. Because all of TriNet s services are included in the annual administration fee, there is no separate payroll fee. The savings in payroll processing costs amounted to nearly $18,000 on average in year 1, producing a NPV of $ 54,500 over the three year period The Gantry Group, LLC 7

10 Avoided Legal Fees Through TriNet Consultants $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $5,000 $13,365 Due to TriNet s comprehensive HR audit, employee training, employee termination services, and generation of an employee handbook, customers all reported lowered concern about risk to employee litigation and regulatory non-compliance. Because TriNet includes Savings from 1Avoided Legal these services in the Fees annual fee, companies reported savings in legal fees that they would otherwise have incurred to achieve the same level of risk mitigation they now enjoy. In two of the case companies interviewed, costs of legal advice prior to TriNet implementation were not available. Companies that did report such savings, however, indicated that savings had been achieved once the company reached employees. Reduced Undiscovered Payroll Error Through Improved Efficiency and Accuracy $120,000 $100,000 $80,000 $118,928 According to the American Payroll Association, undiscovered payroll errors average between 1 8% of payroll annually. $60,000 $40,000 $36,429 TriNet customers reported significant reduction in payroll errors with TriNet $20,000 and a related decrease in the time spent resolving them. Savings from 1 Reduced Undiscovered Payroll Errors Even customers who previously used a payroll service found that with TriNet payroll errors were virtually eliminated. Savings from reduced payroll errors were on average $36,429 in the first year following implementation, driving a 3-year average NPV savings of $118, The Gantry Group, LLC 8

11 Reduced HR Data Entry Costs Through Integrated Automation $25,000 $20,000 $15,000 $10,000 $5,000 $9,192 $24,570 Savings from 1Reduced HR Data Entry Costs With TriNet complete, allin-one outsourced HR service, customer companies were able to reduce requirements for double manual entry of HR data. In the cases where a payroll service had previously been engaged with a separate broker for the health benefits, customers were entering duplicate HR data in multiple systems. No centralized employee database of employee records existed. As a result of implementing TriNet customers were able to reduce the costs of redundant data entry, resulting in a 3-year average NPV savings of $24,570. Avoided Employee Communications Cost Included in TriNet Services The costs of design, $20,000 $18,533 production and distribution $18,000 of an employee handbook $16,000 are substantial and $14,000 beyond the resources of $12,000 many companies. $10,000 $7,546 $8,000 In the case of the TriNet $6,000 $4,000 customers interviewed in $2,000 the study, not one had already produced a formal Savings from 1 Reduced Employee employee handbook such as the one included in Communications Costs TriNet s services. Additionally, SPDs and open enrollment documentation was provided manually in paper format. Customers reported savings in both money and time from TriNet services and particularly to the website where online documentation is easily accessible to employees The Gantry Group, LLC 9

12 According to SHRM, online benefits enrollment saves nearly $30 per employee in postage, and print costs for hardcopy paper documentation. Others estimate the total cost of HR employee communication can easily exceed $50 per employee for paper-based HR documentation. Intangible Benefits Summary While intangible benefits are not included in the ROI calculation, they are important metrics that further support and drive the bottom-line impact of TriNet. Not measured are the qualitative benefits of increased employee satisfaction that may minimize employee turnover (e.g. reduced costs of attrition) and decreased time-to-hire. Also not quantifiable but important is the impact TriNet has on improved employee morale. While many factors drive morale and employee retention, customers all felt that TriNet s benefits and employee self-service portal contribute positively. Avoided Costs to Implement and Maintain HRMS Solution Through TriNet Outsourcing $29,400 $29,380 $29,360 $29,340 $29,320 $29,300 $29,280 $29,260 $29,397 $29,312 Savings from 1Avoided HRMS Implementation In order for customers to reproduce and deliver the same services being provided by TriNet today, it would be necessary to implement a Human Resources Management Solution. The TCO of these solutions includes costly implementation, possible purchase and maintenance of hardware infrastructure (if onpremise solution), and either substantial one- time license fees or recurring annual fees for a remotely hosted system. The average savings comes primarily in the first year (assuming a one-time license fee for an on-premise solution), when the cost of implementation is borne. On average companies saved approximately $30,000 by avoiding purchase of a third party in-house HRMS solution. With TriNet, the same capabilities are completely outsourced requiring very little in the way of upfront implementation costs and entirely avoiding the cost of infrastructure. Furthermore, the IT staff required to maintain an HRMS solution is also avoided completely. TriNet takes full responsibility for its technology including upgrades and migration. As a point of comparison, consider the following cost to implement and operate one of the leading HRMS solutions: For a 400 employee company a one-time license and implementation fees are in the range of $100,000, with annual maintenance/support charges of $10,000 per year thereafter The Gantry Group, LLC 10

13 Improved Employee and Manager Productivity Through Availability of Online Self-Service and Employee Call Center As a result of TriNet implementation, customer companies noted increased productivity for both employees and managers. With TriNet s included self-service for employees, the incidence of employee questions is greatly reduced. Employees now use the TriNet online portal for tracking down information claims forms, FSA detail, and payroll history. Prior to TriNet all of these issues would have come to the individual assigned to HR functions. In addition, management can use self-service to approve payroll and execute other workforce management tasks such as new hire on-boarding, quickly and efficiently. Customer companies reported that management previously spent considerable time tracking accrued time off and entering other employee data. On average, TriNet customers recovered nearly 5,000 hours per year in gained employee productivity, while managers reduced the time spent on payroll and workforce management by an average of 89%. Improved Payroll Accuracy Through Automation and Single Entry System A key benefit reported by all TriNet customers is the integration of payroll with all the other HR functions particularly benefits. Prior to TriNet customers were challenged to correctly transmit data between benefits and payroll. Whether or not it was measurable, all TriNet customers interviewed believed that their payroll with TriNet had increased accuracy. Of those that could measure it, the average improvement in payroll accuracy was 83%. Improved Payroll Productivity Through Improved Accuracy and Time to Resolve Issues According to the American Payroll Association, e-payroll technologies-like self service systems, paperless payroll operations, and automated tax filing-can be leveraged to reduce costs. In particular approximately 10% of payroll processing time is spent in error correction. Because of the reduction in payroll errors and the availability of online self-service to employees, TriNet customers reported a significant savings from improved payroll productivity post TriNet implementation. On average over the three year period TriNet customers gained 98% in payroll productivity. Reduced Time Spent on HR Functions Through TriNet Outsourcing No matter the company size, the most frequent complaint of HR professionals concerns their lack of time for strategic analysis due to the huge burden of administration and employee support. Forrester Research found that, on average, over 50% of a human resource department s time is spent processing employee information and answering questions. TriNet customers all reported a decrease in the time spent on HR functions post TriNet implementation with an average of 432 hours saved annually. The dollar savings represented by this hourly savings is driven by the pay scale of those individuals whose time is being recovered. Conclusion Upon aggregation and analysis of ROI interviews of eight customers with TriNet services, it is readily apparent that the economic value gained from TriNet implementation easily justifies the 2008 The Gantry Group, LLC 11

14 initial cost and ongoing administrative fees. In addition, TriNet is an enabling service investment that provides companies the opportunities to focus on their business objectives while gaining HR function best practices. The fact that TriNet combines multiple HR functionalities under one umbrella is crucial not only to day-to-day operations; it also scales to company growth without adding high overhead costs associated with rapid hiring. The companies in the ROI study all fast growth enterprises were able to bring new hires on board quickly and efficiently, and support retention with world class benefits plans. Average Tangible Value Drivers: Reduced/Avoided Costs Average Average Savings from Reduced Cost of Benefits Premiums $89,000 $148,000 Savings from Reduced Cost of Benefits Administration $3,000 $7,770 Savings from Avoided Need to Hire HR Staff $86,800 $250,700 Savings from Reduced Payroll Processing Costs $18,000 $55,000 Savings from Avoided Legal Fees $5,000 $13,360 Savings from Reduced Undiscovered Payroll Error $36,400 $119,000 Savings from Reduced HR Staff Data Entry Costs $9,000 $24,600 Savings from Avoided Employee Communications $7,500 $18,500 TOTALAVERAGE TANGIBLE BENEFIT: $255,000 $637,000 ROI: $200,000 $487,000 Average Intangible Value Drivers Average 3-Year Average Improved Employee Productivity (hrs) 1,256 4,909 Improvement in Payroll Accuracy (%) 75% 83% Reduction in Payroll Staff Time Spent on Resolving Errors (%) 96% 98% Recovered Manager Time Spent on Payroll/Workforce Mgmt(hrs) 100% 89% Hours Saved on HR Functions (per year) Savings Due to Reduced Hours Spent on HR Functions ($) $20,590 $20,590 Study Methodology Beginning in summer 2008, Gantry Group conducted an objective ROI study that examined, inventoried, and quantified the key ROI value drivers and areas of cost savings realized by companies through the adoption and deployment of TriNet Outsourced HR services. Gantry Group began the project by conducting interviews with 8 separate TriNet customers, all executives who directly dealt with the TriNet solution. Applying the findings, Gantry Group inventoried the discrete areas of value delivery and created a custom ROI calculator that modeled each value and cost driver prior to and after solution deployment, as well as capturing capital, and ongoing support and maintenance costs associated with TriNet and its implementation The Gantry Group, LLC 12

15 This ROI worksheet, an Excel-based tool, is segmented into multiple worksheets: tangible value drivers, intangible value drivers, investment data, and the ROI scorecard. The ROI worksheet is configured to capture metrics data for a period of three years from the signing of the contract. The costs of implementation and the length of implementation are included in the measured time period. The ROI worksheet generates total annual benefits by taking the sum of the net incremental changes in the business metrics that are included; annual costs are similarly a summation of all charges and fees associated with the implementation of TriNet s services. The annual ROI for each year of the three year period is calculated by subtracting Total Investment Costs from Total Tangible Benefits. Using this ROI worksheet, Gantry Group consistently profiled the business impact and payback experience of these companies, each selected to have over one year and preferably three years of deployment experience, with TriNet to determine: The discrete areas of impact that TriNet has on HR costs, employee productivity and corporate performance overall. The average $ benefit for each TriNet value/cost driver. The average $ ROI for a company that deploys TriNet over a three year timeframe. The average payback horizon time to predict when a company should expect to recoup its TriNet investment. Gantry Group aggregated the ROI benchmark data for TriNet customers to compute the average ROI for each discrete area of experienced value and overall ROI as a $ savings and a percentage. Terminology & Definitions ROI The equation for determining annual ROI is: ROI = Tangible Benefits Investment. Using a time-value-of-money approach, the Net Present Value ROI is calculated using a standard NPV formula that discounts the net cash flows by the cost of capital (in this case 10% was used). Benefits Benefits were categorized as both tangible and intangible. Tangible Benefits can be directly tracked and connected to bottom line financial impact. Tangible benefits include increased revenue, new business opportunities and avoided/reduced costs. Only tangible benefits were used in computing ROI and payback horizon. Intangible Benefits include benefits that either cannot be measured, or are quantifiable, but do not drop to the bottom line. Investment Investment, alternatively referred to as the Total Cost of Ownership (TCO), represents the financial expenditure that must be made in the solution in order to extract its benefits. Investment covers both upfront deployment costs and recurring annual costs The Gantry Group, LLC 13

16 Deployment costs include implementation costs, training, and optional customization fees (e.g. for GL interface integration). Recurring costs include annual services fees (scaled by number of employees), additional training, and fees for paper options (employee handbook, checks, etc.). Time to Payback Horizon Payback Horizon measures the time that it takes the organization to gain sufficient benefit and to break even on its solution investment. About Gantry Group The Gantry Group is a research and consulting firm specializing in technology ROI. With over 300 technology clients, 4,000 business process interviews and profiles in our knowledgebase, and more than 1,000 ROI business processes and value drivers modeled, we offer our clients the greatest depth and breadth of ROI experience and invaluable objectivity. The Gantry Group uses analysis drawn from practiced operational experience, supported by custom primary research, to help IT vendors and enterprises forecast accurate ROI and TCO. Gantry Group translates the business process enhancements that result from IT solutions into enterprise bottom-line impact. This analysis helps vendors to sell their solutions more persuasively and enterprises to make more informed buying decisions. Through a rigorous interview approach, Gantry Group profiles real enterprises with solution deployments to isolate and capture actual business performance metrics before and after implementation. Gantry Group develops predictive ROI tools that measure and quantify the effect of the technology on business performance prior to investment. Using these results, technology vendors can substantiate their solutions real ROI and expected payback horizons to increase revenue. Enterprises can realistically evaluate and forecast the likelihood of net financial benefit derived from a technology solution. For more information about Gantry Group, visit or call The Gantry Group, LLC 14