A Forrester Total Economic Impact Study Prepared For Alfresco The Total Economic Impact Of Alfresco Enterprise Content Management Solution

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1 A Frrester Ttal Ecnmic Impact Study Prepared Fr Alfresc The Ttal Ecnmic Impact Of Alfresc Enterprise Cntent Management Slutin Prject Directr: Sebastian Selhrst December 2011

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

3 Executive Summary Organizatins cntinue t invest in enterprise cntent management (ECM) due t the cntinuing explsin f unstructured infrmatin such as dcuments, scanned images, rich media, web cntent, crprate recrds, s, and ther cntent. Enterprises specifically cite need fr prductin efficiencies, mre findable cntent, decreased time-tmarket (fr publicly facing cntent), risk mitigatin, and cmpliance as reasns fr nging ECM prjects. In additin, sme rganizatins are nw develping true enterprise cntent strategies after previusly relying n a cllectin f pint slutins. Investment in ECM therefre remains a pririty fr many rganizatins whether it is a new installatin r an extensin t an existing slutin. In August 2011, Alfresc cmmissined Frrester Cnsulting t examine the ttal ecnmic impact and ptential return n investment (ROI) enterprises may realize by deplying Alfresc s Enterprise Cntent Management (ECM) slutin. The purpse f this study is t prvide readers with a framewrk t evaluate the ptential financial impact f Alfresc s ECM slutin n their rganizatins. Alfresc s ECM slutin is a leading pen surce alternative fr ECM that enables rganizatins t capture, search, and cllabrate n dcuments with full library services and life-cycle management, n a unified, rbust repsitry. The Alfresc cntent platfrm uses flexible, pen-standards architecture t prvide dcument management, web cntent management, recrds management, and cllabratin sftware t enterprises wrldwide. Fr a mre detailed verview abut Alfresc s ECM platfrm, please refer t page 21. Alfresc Allws Cmpanies T Deply Flexible And Cst-Efficient ECM Slutins Our interviews with fur existing custmers and subsequent financial analysis fund that a cmpsite rganizatin based n the cmpanies we interviewed experienced the risk-adjusted ROI, csts, and benefits shwn in Table 1. See Appendix A fr a descriptin f the cmpsite rganizatin. Table 1 Cmpsite Organizatin Three-Year Risk-Adjusted ROI 1 ROI Payback perid Ttal benefits (PV) Ttal csts (PV) Net present value (NPV) 53% 10 mnths after g-live $1,316,786 ($862,022) $454,764 Benefits. The cmpsite rganizatin (see Appendix A) we used fr this analysis is a cmbinatin f the multiple interviews we cnducted t delve deeper int the peratinal impact f Alfresc s ECM slutin. This rganizatin is a large financial services cmpany based in the US and emplying 10,000 peple wrldwide. The cmpany decided t use the Alfresc ECM slutin in rder t create a new knwledge-sharing and Page 2

4 cllabratin platfrm that can als be integrated with the cmpany s CRM system. The new platfrm nw cntains 1 millin dcuments and can be accessed by all emplyees. The cmpsite cmpany realized the fllwing benefits, which are representative f thse experienced by the interviewed cmpanies: Avided sftware license csts. By using the pen surce ECM platfrm frm Alfresc, the cmpsite rganizatin avids upfrnt license and annual maintenance csts fr an alternative cmmercial ECM slutin. These cst savings have an estimated three-year, risk-adjusted PV f apprximately $792,000 fr ur cmpsite rganizatin. IT maintenance cst savings. By cnslidating several departmental cntent management slutins int the Alfresc platfrm and getting rid f a large number f lcal shared drives, the cmpsite rganizatin realizes maintenance cst savings. These cst savings have an estimated three-year, risk-adjusted PV in the regin f $244,000 in ur case. Use f less expensive develper resurces. Due t the ability t use general Java develpers instead f mre expensive and scarce specialized ECM resurces, the cmpsite rganizatin realizes cst savings that have a three-year, risk-adjusted PV f apprximately $195,000. IT cst avidance due t use f pen surce stack. Being able t easily integrate the Alfresc slutin with ther pen surce cmpnents saves the cmpsite rganizatin license and maintenance csts. These cst savings have an estimated three-year, risk-adjusted PV f apprximately $41,000 fr ur cmpsite rganizatin. Integratin and develpment efficiencies. Due t the access t the surce cde, the use f a cmmn prgrammer language, and the supprt f the pen surce cmmunity, the develpers f the cmpsite rganizatin saved time fr the custm integratin f the Alfresc slutin with the cmpany s CRM system. These cst savings have a three-year, risk-adjusted PV f apprximately $45,000. Csts. T achieve the abve benefits, the cmpsite rganizatin invested apprximately $862,000 ver a threeyear perid. Csts included: Alfresc subscriptin fee. The cmpsite rganizatin chse t subscribe t Alfresc s Enterprise editin with 24x7 services. These csts have a three-year risk-adjusted PV f apprximately $251,000. Integratin csts. The internal and external labr csts fr the platfrm design, planning, integratin including the ingestin f existing dcuments, and prject management have an estimated three-year riskadjusted PV f apprximately $315,000. Hardware csts. The cmpsite rganizatin had t invest in 15 Linux servers. The hardware csts have a three-year risk-adjusted PV f apprximately $76,000. Training csts. Training csts include a three-day develper training curse as well as end user training. Fr the end user training, we assumed that 80% f the 10,000 emplyees actually fllw a 30-minute webinar intrducing the new knwledge-sharing platfrm and cllabratin capabilities. The training csts have a three-year risk-adjusted PV f apprximately $220,000. Page 3

5 Figure 1 summarizes the yearly and cumulated cash flw, and Figure 2 shws the breakdwn f the benefit and cst categries fr the cmpsite rganizatin. Figure 1 Summary Financial Results (Risk-Adjusted) $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- $(200,000) $(400,000) $(600,000) $(800,000) Initial Year 1 Year 2 Year 3 Csts (risk-adjusted) Benefits (risk-adjusted) Cumulated cash flw (risk-adjusted) Figure 2 Breakdwn Of Ttal Csts And Benefits (Three-Year PV, Risk-Adjusted) Csts Benefits Avided sftware license csts 26% 29% Alfresc subscriptin Integratin csts 15% 3% 3% IT maintenance cst savings 9% 36% Hardware investment Training csts 19% 60% Use f less expensive develper resurces IT cst avidance due t use f pen surce stack Integratin and develpment efficiencies Factrs Affecting Benefits And Csts Table 1 illustrates the risk-adjusted financial results that were achieved by the cmpsite rganizatin. The riskadjusted values take int accunt any ptential uncertainty r variance that exists in estimating the csts and benefits, Page 4

6 which prduces mre cnservative estimates. The fllwing factrs may affect the financial results that an rganizatin may experience: Technlgy supprted by the cmpany. Cmpanies that already have extensive experience with Java technlgy and have the right technical skill set in place within their IT department are likely t gain mre benefits frm an investment in Alfresc than a cmpany fr which Java is a cmpletely new field. Prir experience with pen surce prducts. Cmpanies with prir experience with pen surce prducts and prjects are already used t the new way f wrking and are likely t realize the benefits faster and t extract mre value ut f the pen surce cmmunity. Prir experience with ECM prducts. Cmpanies that have previusly deplyed enterprisewide cntent management prducts are better psitined t address the assciated gvernance and plitical challenges than thse that have nly previusly implemented pint slutins. Scpe and functinal requirements. The scpe f the ECM deplyment and the set f functinal requirements will have an impact n the benefits that can be realized with the Alfresc slutin. Sme functinalities, fr example, might be readily available within a cmmercial ECM slutin, while they might need t be develped frm scratch n tp f the Alfresc platfrm, which wuld entail additinal csts. Cntrl f custmizatins. Organizatins that limit the amunt f custmizatins t ECM are mre likely t realize greater financial benefits than thse that custmize extensively; the latter tend t experience greater csts assciated with maintenance and upgrade paths. Disclsures The reader shuld be aware f the fllwing: The study is cmmissined by Alfresc and delivered by the Frrester Cnsulting grup. Frrester makes n assumptins as t the ptential ROI that ther rganizatins will receive. Frrester strngly advises that readers shuld use their wn estimates within the framewrk prvided in the reprt t determine the apprpriateness f an investment in Alfresc s ECM slutin. Alfresc reviewed and prvided feedback t Frrester, but Frrester maintains editrial cntrl ver the study and its findings and des nt accept changes t the study that cntradict Frrester s findings r bscure the meaning f the study. The custmer names fr the interviews were prvided by Alfresc. Page 5

7 TEI Framewrk And Methdlgy Intrductin Frm the infrmatin prvided in the interviews, Frrester has cnstructed a Ttal Ecnmic Impact (TEI) framewrk fr thse rganizatins cnsidering implementing Alfresc s ECM slutin. The bjective f the framewrk is t identify the cst, benefit, flexibility, and risk factrs that affect the investment decisin. Apprach And Methdlgy Frrester tk a multistep apprach t evaluate the impact that Alfresc s ECM slutin can have n an rganizatin (see Figure 3). Specifically, we: Interviewed Alfresc marketing and sales persnnel and Frrester analysts t gather data relative t Alfresc s ECM slutin and the ECM marketplace in general. Interviewed fur rganizatins currently using Alfresc s ECM slutin t btain data with respect t csts, benefits, and risks. Designed a cmpsite rganizatin based n characteristics f the interviewed rganizatins (see Appendix A). Cnstructed a financial mdel representative f the interviews using the TEI methdlgy. The financial mdel is ppulated with the cst and benefit data btained frm the interviews as applied t the cmpsite rganizatin. Figure 3 TEI Apprach Perfrm due diligence Cnduct custmer interviews Design cmpsite rganizatin Cnstruct financial mdel using TEI framewrk Write case study Frrester emplyed fur fundamental elements f TEI in mdeling Alfresc s ECM slutin: 1. Csts. 2. Benefits t the entire rganizatin. 3. Flexibility. 4. Risk. Given the increasing sphisticatin that enterprises have regarding ROI analyses related t IT investments, Frrester s TEI methdlgy serves the purpse f prviding a cmplete picture f the ttal ecnmic impact f purchase decisins. Please see Appendix B fr additinal infrmatin n the TEI methdlgy. Page 6

8 Analysis Interview Highlights A ttal f fur interviews were cnducted fr this study, invlving representatives frm the fllwing Alfresc custmers: 1. A large financial service rganizatin perating glbally with headquarters in Western Eurpe. 2. A large prvider and custdian f quality infrmatin serving custmers in mre than 100 cuntries and emplying mre than 15,000 peple wrldwide. 3. A large US health insurer with mre than 8,000 emplyees and prviding health benefits t mre than 6 millin individuals. 4. A glbal pharmaceutical and chemical cmpany with arund 40,000 emplyees in mre than 60 cuntries. These interviews uncvered a number f facts and insights that apply t the cmpsite rganizatin (see Appendix A) and may als apply t ther cmpanies that cnsider deplying Alfresc, including: All f the interviewed rganizatins already had experience with ECM slutins frm ther vendrs. Mst f the time, mre than ne slutin was installed acrss the cmpany and used by different business units. In the majrity f cases, the Alfresc platfrm was deplyed as part f a new initiative within the cmpany, such as the creatin f a knwledge-sharing platfrm, the intrductin f a new cllabrative wrkspace, r the establishment f a central repsitry fr the cmpany s websites. One f the interviewed rganizatins was actually replacing its entire legacy ECM slutin with the Alfresc platfrm. The cmmn business bjectives fr deplying Alfresc were t: Achieve a well-integrated and flexible dcument management envirnment. Give access t dcument management capabilities t a large number f users. Cntain the sftware licenses and maintenance csts. All f the interviewed rganizatins have used the Alfresc platfrm in prductin fr mre than 10 mnths, ne fr mre than fur years. The different interviewees reprted verall implementatin prjects ranging frm tw t six mnths. The number f end users with access t the Alfresc platfrm ranged frm 300 t 35,000 peple, and between 100,000 and 3.5 millin dcuments were managed by the Alfresc platfrm. All f the interviewed rganizatins appreciated the cmmercial pen surce mdel by Alfresc. They cnsidered that it allws them t intrduce a new ECM platfrm in a cst-effective but secure and managed way. Page 7

9 One f the key things we liked abut Alfresc is its pen surce nature. It s nt because it s free. As an enterprise, we d like the supprt frm a cmpany like Alfresc behind the scenes wh can cme in and slve prductinlevel issues if needed. And we are willing t pay fr their services t d that. (Senir architect and IT manager at a prvider f quality infrmatin) The usual interpretatin f pen surce is that, yes, it is cheap but that it is ging t cst the earth t try t actually cmmand and leverage it. And t be hnest, we have spent just as much if nt mre n the cmmercial ECM slutins t make them wrk fr ur rganizatin. S, I d nt see massive differentiatin between them except the cst. (Senir IT manager at a financial service cmpany) Basically, the license mdel makes an entry very appealing. We can satisfy business requirements with a functinal ffering, especially arund usability. And we get it fr a very reasnable price. It is als very interesting if yu have a large number f readers r ccasinal users. (Senir architect at a glbal pharmaceutical and chemical cmpany) Alfresc is right up with the cmmercial players. Almst in any kind f RFI/RFP nw, I will lk at a prfessinal pen surce cmpany alngside the cmmercial vendrs. (Senir IT manager at a financial service cmpany) One f the interviewees pinted ut a high degree f innvatin as ne f the benefits f an pen surce apprach. The rate f change at Alfresc as cmpared t ther vendrs is phenmenal. It was ne f the reasns why we were s keen f lking int it further. They are very innvative. The pace f change, the amunt f features that came in, was incredible. It has gt sme real cmpetitive edge elements t it. (Senir IT manager at a financial service cmpany) Others see increased prductivity and cntrl as direct benefits f an pen surce sftware slutin. The main reasn why we adpt pen surce sftware is that ur develpers are becming mre agile. They nw have access t the surce cde s they can build plug-ins, they can d many things t make the prduct better, even cntribute back t the cmmunity. They have mre visibility f what is ging n. It is nt a black bx. (Senir architect and IT manager at a prvider f quality infrmatin) Alfresc enables ur prjects t be built mre simply, with less effrts, and they are mre maintainable ver time. (Directr f sftware and infrastructure slutins at a large health insurance cmpany) Generally, the interviewees seemed less cncerned abut hardware infrastructure than abut peratinal aspects f their ECM platfrms. If yu wuld cnsider the exact same scpe, I think that Alfresc prbably has the minimum infrastructure ftprint. It can be very well integrated int ur cmpany s standard Linux servers and standard databases. But fr us, it is nt s much abut avided hardware csts but mre abut the peratins. Fr Alfresc, we already had the right skill set in-huse. (Senir architect at a glbal pharmaceutical and chemical cmpany) Our Alfresc implementatin has definitely a lighter infrastructure ftprint than ur legacy ECM envirnment. Hwever, we are nt t cncerned abut hardware as far as the csts are cncerned. We are really cncerned abut the maintenance aspects f it. (Senir architect and IT manager at a prvider f quality infrmatin) Page 8

10 Three ut f fur interviewees were participating in Alfresc s pen surce cmmunity at least t a certain degree. One f them even cnsiders cntributing develpments back t the cmmunity. We develped a plug-in, and we are in discussins with Alfresc t cntribute it back t the cmmunity because it is smething useful that ther cmpanies might be able t leverage. We d like t share it nt nly because f the pen surce spirit but we think that ther cntributrs might pick it up and make it even better. (Senir architect and IT manager at a prvider f quality infrmatin) The interviewees reprted that they had encuntered cmmn integratin challenges and that the effrts fr rlluts were ften underestimated. A way t mitigate these implementatin risks was t hire r cntract with highly experienced cnsultants and Java develpers. We fund that the effrts fr much f the prjects arund the platfrm were ften underestimated. In rganizatins like this, peple d nt really appreciate that it is nt actually nly abut installing a piece f sftware but putting the whle ffering arund it. And this actually csts mney. Even if yur prduct is cheap, yu need t talk abut things like engagement management, capacity planning, and cntinual upgrades. (Senir IT manager at a financial service cmpany) Our develpers had t g thrugh a learning curve. T d the implementatin crrectly and t set up best practices that we can use t mve frward with ther prjects, at that time, we had t bring in a really high-end cnsultant. (Senir architect and IT manager at a prvider f quality infrmatin) Cmpsite Organizatin Based n the interviews with the fur existing custmers prvided by Alfresc, Frrester cnstructed a TEI framewrk, a cmpsite cmpany, and an assciated ROI analysis that illustrates the areas financially affected. The cmpsite rganizatin that Frrester synthesized frm these results represents a large financial services cmpany based in the US. The cmpany emplys 10,000 peple in 15 cuntries. Like many ther large rganizatins, the cmpany creates a huge vlume f unstructured cntent. Sme f this cntent was in different pint cntent management slutins implemented at the departmental level, with varying levels f gvernance surrunding the management f this cntent. But sme f the time, this cntent was saved n lcal shared drives, preventing the cmpany frm prperly using these valuable assets. The cmpany wanted t fster a knwledge-sharing culture that facilitates infrmatin flw cmpanywide in a cmpliant manner. The crprate IT department was therefre asked t create a new knwledge-sharing and cllabratin platfrm. While ther ECM slutins were already in use fr specific business needs, the crprate IT department was lking fr a flexible, cst-effective repsitry that culd als wrk with ther existing enterprise tls such as the cmpany s CRM. The cmpany lked at different ptins, including extending ne f the existing ECM platfrms. In the end, the cmpany chse Alfresc because f the pen architecture f Alfresc s ECM platfrm, the lwer upfrnt csts, and the availability f experienced in-huse Java develpers. See Appendix A fr mre details n the cmpsite rganizatin. Framewrk Assumptins Table 2 prvides the mdel assumptins, including an average fully laded salary rate that Frrester used in this analysis. Page 9

11 Table 2 Mdel Assumptins Ref. Metric Calculatin Value A1 Hurs wrked per day 8 A2 Average number f wrking days per year 240 A3 Average fully laded annual salary rate $100,000 A4 Average fully laded daily salary rate (runded) A3/A2 $417 A5 Average fully laded hurly salary rate (runded) A3/(A1*A2) $52 The discunt rate used in the PV and NPV calculatins is 10%, and time hrizn used fr the financial mdeling is three years. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult with their respective cmpany s finance department t determine the mst apprpriate discunt rate t use within their wn rganizatins. Csts This sectin describes and lists the incremental csts that have been reprted by the interviewed rganizatins and which incurred t the cmpsite rganizatin fr deplying and using Alfresc s ECM slutin ver a three-year perid. Alfresc Subscriptin Fee As an pen surce ECM slutin prvider, Alfresc des nt charge upfrnt enterprise license fees, but cmpanies that prefer t have a supprted slutin may subscribe t Alfresc s services. Fr the sake f this analysis, the cmpsite rganizatin chse an enterprise subscriptin with 24x7 services. Fr an annual fee f $100,000, the cmpany gets access t: The Alfresc Enterprise editin. Alfresc Technical Supprt services. Maintenance releases, patches, and ht fixes. Quality assurance (QA) prcess. Platfrm supprt. Page 10

12 Readers shuld define the level f supprt and services their rganizatins require in rder t determine the subscriptin fee that wuld be applicable t them. Integratin Csts The interviewed rganizatins reprted prject duratins frm tw t six mnths and generally recmmended t spradically cmplement the internal IT staff with experienced cnsultants wh have integrated Alfresc within ther rganizatins. In ur analysis, the equivalent f fur full-time emplyees (FTEs) is wrking fr six mnths n the integratin and deplyment f the slutin. They are being assisted by tw external experts during the first fur mnths. As indicated in Table 3 belw, the cmpsite rganizatin spends $300,000 in integratin csts. Table 3 Integratin Csts (Nn-Risk-Adjusted) Ref. Metric Value/ calculatin Initial Year 1 Year 2 Year 3 Ttal B1 Number f internal develpers 4 B2 Prject duratin (in mnths) 6 B3 Average fully laded annual salary rate $100,000 B4 Number f external cnsultants 2 B5 Number f mnths cntracted with external cnsultants 4 B6 Average fully laded annual salary rate (external cnsultant) $150,000 B7 Integratin csts (B1*B2*B3/12)+ (B4*B5*B6/12) $300,000 $0 $0 $0 $300,000 Hardware Csts The cmpsite rganizatin decided t use a clustered envirnment including six prductin servers, ne test server, tw quality assurance servers, and six servers in the disaster recvery data center. In this analysis, we assume that the cmpsite rganizatin has t invest in 15 new Linux servers with an average cst f $4,000 per server and an annual hardware maintenance fee f 10%. As indicated in Table 4, the cmpsite rganizatin invests $78,000 in hardware ver the three years. Page 11

13 Table 4 Hardware Csts (Nn-Risk-Adjusted) Ref. Metric Value/ calculatin Initial Year 1 Year 2 Year 3 Ttal C1 Number f Linux servers 15 C2 Average cst per Linux server $4,000 C3 Annual HW maintenance csts 10% C4 Hardware investment Initial: C1*C2 Years 1-3: C1*C2*C3 $60,000 $6,000 $6,000 $6,000 $78,000 Training Csts Develper and end user training are tw imprtant factrs fr a successful prject. In this analysis, we assume that fur develpers attend a five-day training class at $2,500 per develper and that 80% f the 10,000 end users actually fllw a 30-minute webinar intrducing the new ECM capability. The resulting training csts are indicated in Table 5 belw. Table 5 Training Csts (Nn-Risk-Adjusted) Ref. Metric Value/ calculatin Initial Year 1 Year 2 Year 3 Ttal D1 Initial develper training (fur staff) 4 FTEs*$2,500 $10,000 D2 Number f end users 10,000 D3 Percentage f users trained 80% D4 D5 Duratin f training fr infrmatin wrkers (in hurs) Average fully laded hurly salary rate (runded) 0.5 $52 (see A5) D6 End user training D2*D3*D4*D5 $208,000 D7 Training csts D1+D6 $218,000 $0 $0 $0 $218,000 Page 12

14 Ttal Csts Table 6 summarizes the incremental csts incurred by the cmpsite rganizatin fr deplying and using Alfresc s ECM slutin ver a three-year perid. In ttal, the cmpsite rganizatin spent $896,000 ver three years. Table 6 Ttal Csts (Nn-Risk-Adjusted) Ref. Csts Initial Year 1 Year 2 Year 3 Ttal E1 Alfresc subscriptin $0 $100,000 $100,000 $100,000 $300,000 E2 Integratin csts $300,000 $0 $0 $0 $300,000 E3 Hardware investment $60,000 $6,000 $6,000 $6,000 $78,000 E4 Training csts $218,000 $0 $0 $0 $218,000 E5 Ttal csts ($578,000) ($106,000) ($106,000) ($106,000) ($896,000) Benefits The Alfresc custmers wh were interviewed fr this study described a range f benefits that they have accrued frm their deplyment f the Alfresc ECM platfrm. The mst significant benefits described t Frrester were arund avided sftware licenses, maintenance cst savings, the ability t use less expensive develper resurces, avided IT csts due t the use f the pen surce stack, and integratin and develpment efficiencies. Each f these categries f benefit is discussed belw. Avided Sftware License Csts The interviewed rganizatins reprted that avided sftware licenses and maintenance csts fr an alternative cmmercial ECM slutin represented ne f the majr financial benefits f the Alfresc slutin. Cmmercial prprietary prducts typically have annual maintenance csts ranging frm 18% t 22% f the riginal license price. Estimatins frm the interviewees ranged frm $800,000 t mre than $2 millin in savings. Given the scpe f the deplyment as described fr the cmpsite rganizatin, Frrester cnservatively assumes an upfrnt cst avidance f $800,000 and a maintenance cst avidance f 18% fr Years 2 and 3. Readers shuld determine what the cst fr an alternative cmmercial ECM slutin wuld be in their particular case. Page 13

15 Table 7 Avided Sftware License Csts (Nn-Risk-Adjusted) Ref. Metric Value/calc. Year 1 Year 2 Year 3 Ttal F1 Avided upfrnt license fee including first-year maintenance $800,000 F2 Assumed sftware maintenance csts as percentage f upfrnt license fee 18% F3 Avided sftware license csts Year 1: F1 Years 2-3: F1*F2 $800,000 $144,000 $144,000 $1,088,000 IT Maintenance Cst Savings In ur scenari, the cmpsite rganizatin gets rid f several pint cntent management slutins at departmental level and part f their lcal shared drives that were previusly used t stre and share cntent. These pint slutins are typically used fr general dcument strage and management and cllabratin, and they result in a duplicatin f effrt when it cmes t administratin, maintenance, gvernance, and upgrades. The mve t the new Alfresc platfrm results in nging maintenance cst savings. In this analysis, we cnservatively assume that the equivalent f ne FTE can be reassigned t ther tasks. The resulting cst savings is indicated in Table 8 belw. Table 8 IT Maintenance Cst Savings (Nn-Risk-Adjusted) Ref. Metric Value/calc. Year 1 Year 2 Year 3 Ttal G1 Number f FTEs freed up 1 G2 Average fully laded annual salary rate $100,000 G3 IT maintenance cst savings H1*H2 $100,000 $100,000 $100,000 $300,000 Use Of Less Expensive Develper Resurces The interviewed rganizatins reprted that it was easier and mre cst-efficient fr them t find and hire skilled Java develpers than develpers with special knwledge abut a cmmercial ECM slutin. Due t the penness f the Alfresc platfrm, already hired develpers with experience in Java may have a shrter learning curve cmpared with learning a cmmercial, prprietary slutin. Fr the sake f this analysis, we assume that the cmpsite rganizatin Page 14

16 hires tw mre Java develpers at an average fully laded annual salary f $100,000 instead f tw specialized ECM develpers at a 40% higher rate. The resulting cst savings is indicated in Table 9 belw. Table 9 Use Of Less Expensive Develper Resurces (Nn-Risk-Adjusted) Ref. Metric Value/calc. Year 1 Year 2 Year 3 Ttal H1 FTEs hired 2 H2 Average fully laded annual salary rate $100,000 H3 Assumed fully laded annual salary rate fr a specialized ECM develper $140,000 H4 Salary difference $40,000 (J3-J2) H5 Use f less expensive develper resurces J1*J4 $80,000 $80,000 $80,000 $240,000 IT Cst Avidance Due T Use Of Open Surce Stack The Alfresc platfrm supprts the full pen surce stack. Sme f the interviewed rganizatins actually tk advantage f it and decided t use an pen surce database instead f a cmmercial database. S des ur cmpsite rganizatin. The assumed database license and maintenance cst savings are shwn in Table 10 belw. Readers shuld explre if there are ther pprtunities fr their cmpanies t take advantage f the pen surce stack and realize further savings. Table 10 IT Cst Avidance Due T Use Of Open Surce Stack (Nn-Risk-Adjusted) Ref. Metric Value/calc. Year 1 Year 2 Year 3 Ttal I1 Avided cmmercial database license cst $30,000 $0 $0 I2 Avided annual database maintenance csts $6,000 $6,000 $6,000 I3 IT cst avidance due t use f pen surce stack G1+G2 $36,000 $6,000 $6,000 $48,000 Page 15

17 Integratin And Develpment Efficiencies In ur scenari, the new Alfresc platfrm is integrated with the cmpsite rganizatin s CRM system. The interviewed cmpanies that had experience with the integratin between Alfresc and different enterprise tls reprted prductivity gains fr their IT staff mainly due t the access t the surce cde, the use f a cmmn prgrammer language, and the supprt f the pen surce cmmunity. One f the interviewed rganizatins estimated an average cst savings f abut $150,000 per integratin prject. In ur analysis, we cnservatively assume a ne-time cst savings f $50,000, which in ur case wuld, fr example, crrespnd t a reductin f the prject duratin f 30 days with a team f fur develpers. Table 11 Integratin And Develpment Efficiencies (Nn-Risk-Adjusted) Ref. Metric Value/calc. Year 1 Year 2 Year 3 Ttal J1 Assumed integratin, develpment csts avided $50,000 $0 $0 J2 Integratin and develpment efficiencies I1 $50,000 $0 $0 $50,000 Ttal Benefits Table 12 shws the ttal benefits fr the cmpsite rganizatin that were quantifiable fr this study. Table 12 Ttal Benefits (Nn-Risk-Adjusted) Ref. Metric Year 1 Year 2 Year 3 Ttal K1 Avided sftware license csts $800,000 $144,000 $144,000 $1,088,000 K2 IT maintenance cst savings $100,000 $100,000 $100,000 $300,000 K3 Use f less expensive develper resurces $80,000 $80,000 $80,000 $240,000 K4 IT cst avidance due t use f pen surce stack $36,000 $6,000 $6,000 $48,000 K5 Integratin and develpment efficiencies $50,000 $0 $0 $50,000 K6 Ttal benefits $1,066,000 $330,000 $330,000 $1,726,000 Page 16

18 Flexibility Flexibility, as defined by TEI, represents an investment in additinal capacity r capability that culd be turned int business benefit fr sme future additinal investment. This prvides an rganizatin with the right r the ability t engage in future initiatives but nt the bligatin t d s. There are multiple scenaris in which a custmer might chse t implement Alfresc s ECM slutin and later realize additinal uses and business pprtunities. Flexibility wuld als be quantified when evaluated as part f a specific prject (described in mre detail in Appendix B). Fr the purpses f this financial analysis, we have nt quantified any flexibility benefits. Hwever, during ur interviews with the Alfresc custmers, the interviewees mentined ptential expansin f their use f the Alfresc ECM platfrm, such as: Replacement f ther cmmercial enterprise dcument management slutins. Many large rganizatins are running multiple ECM slutins in parallel fr multiple reasns, including histrical factrs, mergers and acquisitins, r very specific functinal requirements. As the cmpanies gain cnfidence in the capabilities f the Alfresc platfrm, they might investigate if it wuld be apprpriate and beneficial t their rganizatin t retire sme f the cmmercial ECM slutins and extend the scpe f the Alfresc platfrm. Integratin with ther enterprise tls. In ur example, the cmpsite rganizatin integrates the Alfresc platfrm with its CRM system. This rganizatin uses Alfresc s prduct t prvide cntent services (such as dcument check-in and checkut) frm within its CRM applicatin. Organizatins can use the slutin t cntent-enable ther enterprise tls and thus save further csts and realize mre prductivity gains. Pwering a cmpany intranet. Alfresc can be used beynd dcument and recrds management. In additin, it can be used as a cllabratin and web publishing platfrm that culd serve as the fundatin fr a crprate Internet. The value f flexibility is unique t each rganizatin, and the willingness t measure its value varies frm cmpany t cmpany (see Appendix B fr additinal infrmatin regarding the flexibility calculatin). Risk Frrester defines tw types f risk assciated with this analysis: implementatin risk and impact risk. Implementatin risk is the risk that a prpsed investment in Alfresc s ECM slutin may deviate frm the riginal r expected requirements, resulting in higher csts than anticipated. Impact risk refers t the risk that the business r technlgy needs f the rganizatin may nt be met by the investment in Alfresc s ECM slutin, resulting in lwer verall ttal benefits. The greater the uncertainty, the wider the ptential range f utcmes fr cst and benefit estimates. Quantitatively capturing implementatin and impact risk by directly adjusting the financial estimates results in mre meaningful and accurate estimates and a mre accurate prjectin f the ROI. In general, risks affect csts by raising the riginal estimates, and they affect benefits by reducing the riginal estimates. The risk-adjusted numbers shuld be taken as realistic expectatins, as they represent the expected values cnsidering risk. The fllwing implementatin risks that affect csts are identified as part f this analysis: Page 17

19 The amunt f the actual Alfresc subscriptin fee depends n several cnfiguratin ptins and might be slightly higher than riginally estimated. The amunt f labr, including the use f external cnsultants needed fr the integratin f the ECM slutin, depends n the cmplexity f the existing envirnment and may be higher than riginally estimated. The amunt and type f new hardware that has t be purchased depends n the cmpany s requirements and may be higher than riginally estimated. The amunt f training needed ver the three-year perid may depend n the amunt f peple t be trained and the emplyee turnver rate, and the csts may thus be higher than riginally estimated. The fllwing impact risks that affect benefits are identified as part f the analysis: The amunt f sftware license csts avided with regard t an alternative cmmercial ECM slutin depends n the exact scpe and the chsen vendr and might be lwer than riginally estimated. The amunt f IT maintenance cst savings might be lwer depending n the cmplexity f the retired pint slutins. The savings due t the use f skilled Java develpers instead f develpers with a high knwledge f the alternative cmmercial ECM slutin depends n the availability f such resurces and their actual difference in salary and might be lwer than riginally estimated. The amunt f IT cst savings due t the use f the pen surce stack depends n hw far the alternative slutin might leverage pen surce cmpnents as well and might therefre be lwer. The amunt f realized integratin and develpment efficiencies depends n the availability f skilled develpers and hw far they can leverage the pen surce cde and cmmunity and might be lwer than riginally estimated. Table 13 shws the values used t adjust fr risk and uncertainty in the cst and benefit estimates. The TEI mdel uses a triangular distributin methd t calculate risk-adjusted values. T cnstruct the distributin, it is necessary t first estimate the lw, mst likely, and high values that culd ccur within the current envirnment. The risk-adjusted value is the mean f the distributin f thse pints. Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Page 18

20 Table 13 Cst And Benefit Risk Adjustments Csts Lw Mst likely High Mean Alfresc subscriptin 98% 100% 105% 101% Integratin csts 100% 100% 115% 105% Hardware investment 98% 100% 105% 101% Training csts 98% 100% 105% 101% Benefits Lw Mst likely High Mean Avided sftware license csts 50% 100% 100% 83% IT maintenance cst savings 90% 100% 105% 98% Use f less expensive develper resurces 90% 100% 105% 98% IT cst avidance due t use f pen surce stack 90% 100% 105% 98% Integratin and develpment efficiencies 90% 100% 105% 98% Page 19

21 Financial Summary The financial results calculated in the Csts and Benefits sectins can be used t determine the ROI, NPV, and payback perid fr the rganizatin s investment in Alfresc s ECM slutin. These are shwn in Table 14 belw. Table 14 Cash Flw Nn-Risk-Adjusted Cash flw riginal estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($578,000) ($106,000) ($106,000) ($106,000) ($896,000) ($841,606) Benefits $0 $1,066,000 $330,000 $330,000 $1,726,000 $1,489,752 Ttal ($578,000) $960,000 $224,000 $224,000 $830,000 $648,146 ROI 77% Payback perid 8 mnths after g-live Table 15 belw shws the risk-adjusted ROI, NPV, and payback perid values. These values are determined by applying the risk-adjustment values frm Table 13 in the Risk sectin t the cst and benefits numbers in Tables 6 and 12. Table 15 Cash Flw Risk-Adjusted Cash flw risk-adjusted estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($595,780) ($107,060) ($107,060) ($107,060) ($916,960) ($862,022) Benefits $0 $924,680 $301,800 $301,800 $1,528,280 $1,316,786 Ttal ($595,780) $817,620 $194,740 $194,740 $611,320 $454,764 ROI 53% Payback perid 10 mnths after g-live Page 20

22 Alfresc s Enterprise Cntent Management Slutin: Overview Accrding t Alfresc, Alfresc is a leading pen surce alternative fr ECM that enables rganizatins t capture, search, and cllabrate n dcuments with full library services and life-cycle management, n a unified, rbust repsitry. The Alfresc cntent platfrm uses flexible, pen-standards architecture t prvide dcument management, web cntent management, recrds management, and cllabratin sftware t 2,200 enterprise custmers in 56 cuntries. Integratins exist fr SAP, IBM Ltus, Micrsft Office, SharePint, and Ggle Dcs. Alfresc is built using the latest pen surce infrastructure cmpnents including Spring, Activiti BPM, Apache Slr, Lucene, and MyFaces and is based n aspect-riented prgramming. As an pen surce ECM slutin prvider, Alfresc des nt charge upfrnt enterprise license fees. Instead, Alfresc charges an annual subscriptin. This scalable mdel allws cmpanies f any size t deply the slutin. The subscriptin prvides custmers with access t Alfresc Team, Alfresc Standard, r Alfresc Enterprise, and a number f key subscriptin-nly services. These Enterprise Subscriptin services include: Access t the Alfresc Team, Alfresc Standard, r Alfresc Enterprise editins. Alfresc Technical Supprt services. There are tw levels available: 8x5 With telephne access and a 4-business-hur respnse time fr all severities, 8x5 supprt is mst apprpriate fr nn-missin-critical applicatins. 24x7 Ideal fr high-availability systems, this level f supprt ffers the fastest respnse time. Any severity 1 issue will be respnded t within 2 hurs, 24x7. Any severity 2 r 3 issues will be respnded t within 2 business hurs by a lcal Alfresc Supprt Center. Additinal service fferings include: Premier and Premier Advantage supprt: Amng ther advantages, the Premier supprt includes a designated Alfresc Technical Accunt Manager (TAM), practive services, release upgrade assistance, quarterly supprt reviews, and annual health checks. Maintenance releases, patches, and ht fixes. An extended QA prcess. Extensive platfrm supprt. This apprach allws Alfresc t ffer an ecnmic slutin t any cmpany lking fr a fully supprted, fully tested, full-featured ECM slutin. Page 21

23 Appendix A: Cmpsite Organizatin Descriptin In this TEI study, Frrester has created a cmpsite rganizatin t illustrate the quantifiable csts and benefits f deplying Alfresc s ECM platfrm. Frrester s cnclusins were derived in large part frm infrmatin received in a series f in-depth interviews with executives and persnnel at fur rganizatins currently using Alfresc s ECM slutin. As each f the interviewed rganizatins was prmised annymity, Frrester cnstructed a cmpsite cmpany, a TEI framewrk, and an assciated ROI analysis based n ur findings frm these Alfresc custmers. This study illustrates the financial impact f deplying Alfresc s ECM platfrm by aggregating the findings frm the custmer interviews and prtraying a cmpsite rganizatin that is achieving value frm Alfresc s slutin. The cmpsite rganizatin in this study represents a large financial service cmpany based in the US. The cmpany emplys 10,000 peple in 15 cuntries. Like many ther large rganizatins, the cmpany creates a huge vlume f unstructured cntent that includes cllaterals, guidelines, cllabrative dcuments, messages, scanned images, and mre. Sme f this cntent was in different pint cntent management slutins implemented at the departmental level, with varying levels f gvernance (i.e., metadata, wrkflws, retentin plicies, etc.) surrunding the management f this cntent. But sme f the time, this cntent was saved n lcal shared drives, preventing the cmpany frm prperly using these valuable assets. The cmpany wanted t fster a knwledge-sharing culture that facilitates infrmatin flw cmpanywide in a cmpliant manner. The crprate IT department was therefre asked t create a new knwledge-sharing and cllabratin platfrm. While ther ECM slutins were already in use fr specific business needs, the crprate IT department was lking fr a flexible, cst-effective repsitry that culd als wrk with ther existing enterprise tls and systems. The cmpany lked at different ptins, including extending ne f the existing ECM platfrms. In the end, the cmpany chse Alfresc because f the pen architecture f Alfresc s ECM platfrm, the lwer upfrnt csts, and the availability f experienced in-huse Java develpers. The main business bjectives fr the investment in the Alfresc ECM platfrm were t: Create a cmpanywide knwledge-sharing and cllabratin platfrm. Prvide general dcument management (fr lwer-level business cntent as ppsed t regulatry cntent) capabilities t all f the cmpany s 10,000 emplyees. Achieve a well-integrated envirnment at affrdable csts. Imprve the ability t find cntent via search. Tday, the cmpany essentially uses the dcument management mdule f the Alfresc ECM platfrm that serves as back end t the knwledge-sharing platfrm and the cmpany s CRM system. It cntains abut 1 millin dcuments in ttal. The technical platfrm cnsists f a clustered envirnment including six prductin servers, ne test server, tw quality assurance servers, and six servers in the disaster recvery data center. All servers are Linux-based. Page 22

24 Appendix B: Ttal Ecnmic Impact Overview Ttal Ecnmic Impact is a methdlgy develped by Frrester Research that enhances a cmpany s technlgy decisin-making prcesses and assists vendrs in cmmunicating the value prpsitin f their prducts and services t clients. The TEI methdlgy helps cmpanies demnstrate, justify, and realize the tangible value f IT initiatives t bth senir management and ther key business stakehlders. The TEI methdlgy cnsists f fur cmpnents t evaluate investment value: benefits, csts, risks, and flexibility. Benefits Benefits represent the value delivered t the user rganizatin IT and/r business units by the prpsed prduct r prject. Often prduct r prject justificatin exercises fcus just n IT cst and cst reductin, leaving little rm t analyze the effect f the technlgy n the entire rganizatin. The TEI methdlgy and the resulting financial mdel place equal weight n the measure f benefits and the measure f csts, allwing fr a full examinatin f the effect f the technlgy n the entire rganizatin. Calculatin f benefit estimates invlves a clear dialgue with the user rganizatin t understand the specific value that is created. In additin, Frrester als requires that there be a clear line f accuntability established between the measurement and justificatin f benefit estimates after the prject has been cmpleted. This ensures that benefit estimates tie back directly t the bttm line. Csts Csts represent the investment necessary t capture the value, r benefits, f the prpsed prject. IT r the business units may incur csts in the frm f fully burdened labr, subcntractrs, r materials. Csts cnsider all the investments and expenses necessary t deliver the prpsed value. In additin, the cst categry within TEI captures any incremental csts ver the existing envirnment fr nging csts assciated with the slutin. All csts must be tied t the benefits that are created. Risk Risk measures the uncertainty f benefit and cst estimates cntained within the investment. Uncertainty is measured in tw ways: 1) the likelihd that the cst and benefit estimates will meet the riginal prjectins, and 2) the likelihd that the estimates will be measured and tracked ver time. TEI applies a prbability density functin knwn as triangular distributin t the values entered. At minimum, three values are calculated t estimate the underlying range arund each cst and benefit. Flexibility Within the TEI methdlgy, direct benefits represent ne part f the investment value. While direct benefits can typically be the primary way t justify a prject, Frrester believes that rganizatins shuld be able t measure the strategic value f an investment. Flexibility represents the value that can be btained fr sme future additinal investment building n tp f the initial investment already made. Fr instance, an investment in an enterprisewide upgrade f an ffice prductivity suite can ptentially increase standardizatin (t increase efficiency) and reduce licensing csts. Hwever, an embedded cllabratin feature may translate t greater wrker prductivity if activated. The cllabratin can nly be used with additinal investment in training at sme future pint in time. Hwever, Page 23

25 having the ability t capture that benefit has a present value that can be estimated. The flexibility cmpnent f TEI captures that value. Appendix C: Glssary Discunt rate: The interest rate used in cash flw analysis t take int accunt the time value f mney. Althugh the Federal Reserve Bank sets a discunt rate, cmpanies ften set a discunt rate based n their business and investment envirnment. Frrester assumes a yearly discunt rate f 10% fr this analysis. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult their respective rganizatin t determine the mst apprpriate discunt rate t use in their wn envirnment. Net present value (NPV): The present r current value f (discunted) future net cash flws given an interest rate (the discunt rate). A psitive prject NPV nrmally indicates that the investment shuld be made, unless ther prjects have higher NPVs. Present value (PV): The present r current value f (discunted) cst and benefit estimates given at an interest rate (the discunt rate). The PV f csts and benefits feed int the ttal net present value f cash flws. Payback perid: The breakeven pint fr an investment. The pint in time at which net benefits (benefits minus csts) equal initial investment r cst. Return n investment (ROI): A measure f a prject s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus csts) by csts. A Nte On Cash Flw Tables The fllwing is a nte n the cash flw tables used in this study (see the example table belw). The initial investment clumn cntains csts incurred at time 0 r at the beginning f Year 1. Thse csts are nt discunted. All ther cash flws in Years 1 thrugh 3 are discunted using the discunt rate (shwn in Framewrk Assumptins sectin) at the end f the year. Present value (PV) calculatins are calculated fr each ttal cst and benefit estimate. Net present value (NPV) calculatins are nt calculated until the summary tables and are the sum f the initial investment and the discunted cash flws in each year. Table [Example] Example Table Ref. Categry Calculatin Initial cst Year 1 Year 2 Year 3 Ttal Page 24

26 Appendix D: Related Frrester Research The Frrester Wave : Enterprise Cntent Management Suites, Q4 2009, Frrester Research, Inc., Nvember 12, 2009 Appendix E: Endntes 1 Frrester risk-adjusts the summary financial metrics t take int accunt the ptential uncertainty f the cst and benefit estimates. Fr mre infrmatin n Risk, please see page 17. Page 25