A Forrester Total Economic Impact Study Prepared For Microsoft The Total Economic Impact Of Microsoft Application Lifecycle Management

Transcription

1 A Frrester Ttal Ecnmic Impact Study Prepared Fr Micrsft The Ttal Ecnmic Impact Of Micrsft Applicatin Lifecycle Management Prject Directr: Jnathan W. Lipsitz Cntributrs: Jn Ericksn March 2013

2 TABLE OF CONTENTS Executive Summary...2 Micrsft ALM Increases Prductivity, Lwers Csts, And Creates Mre Agile IT Organizatins...2 Factrs Affecting Benefits And Csts...7 Disclsures...7 TEI Framewrk And Methdlgy...9 Analysis...11 Interview Highlights...11 Csts...15 Benefits...20 Flexibility...25 Risk...26 Financial Summary...28 Micrsft ALM: Overview...30 Appendix A: Cmpsite Organizatin Descriptin...31 Appendix B: Ttal Ecnmic Impact Overview...31 Appendix C: Glssary...32 Appendix D: Endntes , Frrester Research, Inc. All rights reserved. Unauthrized reprductin is strictly prhibited. Infrmatin is based n best available resurces. Opinins reflect judgment at the time and are subject t change. Frrester, Techngraphics, Frrester Wave, RleView, TechRadar, and Ttal Ecnmic Impact are trademarks f Frrester Research, Inc. All ther trademarks are the prperty f their respective cmpanies. Fr additinal infrmatin, g t Abut Frrester Cnsulting Frrester Cnsulting prvides independent and bjective research-based cnsulting t help leaders succeed in their rganizatins. Ranging in scpe frm a shrt strategy sessin t custm prjects, Frrester s Cnsulting services cnnect yu directly with research analysts wh apply expert insight t yur specific business challenges. Fr mre infrmatin, visit Page 1

3 Executive Summary In Octber 2012, Micrsft cmmissined Frrester Cnsulting t examine the ttal ecnmic impact and ptential return n investment (ROI) enterprises may realize by deplying the Micrsft Applicatin Lifecycle Management (Micrsft ALM) slutin. Micrsft ALM cnsists primarily f Visual Studi and Team Fundatin Server. The purpse f this study is t prvide readers with a framewrk t evaluate the ptential financial impact f Micrsft ALM n their rganizatins. Micrsft ALM Increases Prductivity, Lwers Csts, And Creates Mre Agile IT Organizatins Our interviews with six existing custmers and subsequent financial analysis fund that a cmpsite rganizatin based n these cmpanies experienced the risk-adjusted ROI, internal rate f return (IRR), 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 IRR Payback perid Ttal benefits (PV) Ttal csts (PV) Net present value 295% 270% 6 mnths $7,058,736 ($1,785,237) $5,273,499 Page 2

4 Benefits. The cmpsite rganizatin experienced benefits acrss many areas that represent thse experienced by the interviewed cmpanies. Fr each benefit categry, descriptins f different benefit types are given as well as examples f hw these benefits translate int financial imprvements. Cntinuus delivery f business value An increased capacity f the IT rganizatin t take n new valueenabling prjects A cntinuus flw f sftware-enabled business value Faster validatin f value hypthesis, enabling timely pivts and faster decisinmaking High stakehlder and user net satisfactin Quantified examples Hw realized Increased prductivity means that mre can be dne with the same number f resurces. End-t-end prcesses have been streamlined, allwing the IT rganizatin t cmplete prjects mre efficiently and reduce the use f cntractrs. Switching t Agile develpment methdlgies means develpers can rll ut mre prjects mre quickly and deliver greater value. Develpment cycles have been cut in half in sme cases. Business applicatin wners wrk within the Agile framewrk, ensuring that what is being delivered is f maximum value. Autmated testing results in faster validatin and less time wasted ging dwn the wrng path. Prject managers, business analysts, and business applicatin wners all wrk tgether within a single prcess. This greatly accelerates decisin-making. Business applicatin wners have direct visibility int develpment and testing, prviding the infrmatin needed t keep them happy with prgress being made. All develpment and affected prductin SLAs are being met because the IT rganizatin is mre able t meet business needs. Prblems are ften identified and fixed befre custmers (internal r external) are even aware they exist. Reduced use f IT cntractrs Increased business satisfactin in the quality and quantity f wrk dne by the IT rganizatin means mre wrk is cmpleted in-huse. In Year 1 f the study, $200,000 f wrk that wuld therwise be farmed ut t cntractrs is kept in-huse, with a 35% cst advantage. By Year 2, this increases t $500,000 f wrk per year. Incremental revenue The IT rganizatin delivers mre tls t the sales and marketing rganizatin that allw them t win mre distributin/partnership deals with retailers. In Year 2 f the study, this equates t $150,000 in increased sales and grws t $300,000 per year by Year 3. Page 3

5 Cycle time reductins Reduced requirements definitin cycle times Reduced develpment testing and cycle times Reduced user acceptance cycle times Reduced deplyment cycle times Reduced mean time t repair (MTTR) Quantified examples Hw realized There is nw mre invlvement frm internal custmers during requirements definitin, ensuring they are captured crrectly the first time. The IT rganizatin is mre diligent in making sure that cmplete requirements are dcumented, reducing the amunt f rewrk required. Testing is nw highly autmated, reducing test times and increasing the thrughness f testing. Develpment times have been cut by clse t 40% n many prjects because develpers and testers nw have all the tls they need in ne place and can cllabrate mre fully. There has been a cultural shift in hw everyne wrks tgether. This has cntributed t reduced cycle times. Greater internal custmer invlvement in the prcess has cut user acceptance testing (UAT) times by mre than 30%. UAT is nw dne thrughut the develpment prcess, nt just at the end. Cde builds and deplyment have been largely autmated, eliminating mst f the time assciated with these activities. Where deplyment is still manual, the respnsibility can be easily given t the peratins team, which frees up mre f the develpment team s time. MTTR has been reduced fr serius prblems frm ne day t less than 1 hur. Overall, custmer satisfactin is greatly imprved because prblems are addressed mre quickly and ften befre custmers are aware f them. Increased IT team prductivity Fr the 122 IT team members develpers, testers, and prject managers there has been an verall imprvement in prductivity. In Year 1 there is a 15% imprvement, and this increases t 30% in Year 2. By Year 2 this equals mre than $3 millin per year in savings by nt having t add additinal staff. Increased business applicatin wner prductivity The eight business wners f applicatins being develped using Micrsft ALM have a time savings f 3 hurs per week. This is because they can lk up status infrmatin n their wn, spend less time ding UAT, and generally have access t their slutins mre quickly. This equates t a savings f mre than $50,000 per year. Page 4

6 It rganizatin mdernizatin Hw realized IT rganizatin transitining t a cntinuus delivery cadence IT rganizatin adpting/applying mdern sftware develpment practices IT rganizatin attracting, retaining, and grwing tp sftware develpment talent Agile delivery has been rlled ut t all develpment teams, resulting in near-cntinuus delivery f business valueadding prjects. The imprvements in IT delivery have resulted in a change in hw business applicatin wners think abut delivering value acrss the rganizatin and t external custmers. They are nw mre fcused n quick wins and cnstantly imprving custmer (bth internal and external) satisfactin. Micrsft ALM has made it pssible fr remte wrkers t be prductive and better integrated int the entire team. There is nw greater flexibility in mving peple between prject teams because there is a cmmn set f tls and prcesses with which everyne is familiar. The IT teams are very happy with the tls and the pprtunities affrded them t wrk n interesting prjects and grw their skills. Wrking with the latest tls imprves the quality f applicants hired and retentin f IT staff. Quantified examples Eliminatin f ther applicatin life-cycle management tls The cmpsite rganizatin previusly had a wide variety f tls in place that apprximated all f the features ffered in Micrsft ALM. $25,000 in annual nging maintenance csts fr these previus slutins have been eliminated. Lwer IT attritin rates The IT rganizatin has abveaverage retentin rates, and this has imprved since adpting Micrsft ALM. Beginning in Year 2, attritin has decreased frm 10% t 5% per year, resulting in an annual savings f mre than $330,000 in new hire related csts. The Benefits sectin f this study lks in mre detailed at the six quantified benefits described abve. Csts. The cmpsite rganizatin experienced the fllwing csts: Implementatin internal labr. Frm an implementatin perspective, this study lks at the first tw phases nly an initial prf-f-cncept phase and the first full deplyment. The secnd phase fllwed almst immediately n the heels f the initial deplyment. Any subsequent expansins are excluded. Bth phases required a small team wrking part-time n the deplyment f the technlgies, and each deplyment lasted three mnths. The ttal internal labr csts acrss these first tw phases were $68,750. Page 5

7 Prfessinal services. The majrity f the implementatin effrt was cmpleted by in-huse resurces. Hwever, there was sme prfessinal service invlvement t prvide best practices and assist with the cnfiguratin f the slutins. In each phase, 1.5 full-time-equivalent (FTE) cnsultants wrked fr three mnths n the prject. The ttal cst acrss bth phases was $277,200. Hardware. Running Micrsft ALM required ne new physical server. The server was virtualized t prvide the varius functins required, e.g., applicatin server and database server. The cst ver the life f the study t purchase the servers and maintenance was $24,000. Sftware licenses s and assurance. License csts can vary greatly frm ne rganizatin t anther, largely depending n the number and type f users and ther Micrsft technlgies als in use. Fr the cmpsite rganizatin, a ttal f 130 users are using different levels f Visual Studi alng with Team Fundatin Server. All licenses were purchased upfrnt as part f an enterprise agreement (EA), which has lwer ttal csts cmpared with nn-ea licenses and spread the payments ut ver three years. The ttal license and assurance csts ver the life f the study are a little ver $1 millin. Training. During the rllut f Micrsft ALM, ne persn wrked full time n training all f the ther users. Users, n average, required a few hurs f training n the Micrsft ALM tls. In subsequent years, the training resurce wrked ne-quarter time t prvide updated training infrmatin t users. The cst f time fr individual user training is nt included. The three-year cst fr the training resurce is $110,000. Onging administratin. The Micrsft ALM slutin is mnitred, maintained, and updated by the IT peratins team. There is als a lt f activity t expand the use f Micrsft ALM n ther sftware develpment prjects. All f these activities are accmplished with 1.25 FTEs, which has a three-year cst f $412,500. Page 6

8 Figure 1 Three Year Risk-Adjusted Financial Results $6,000,000 $5,273,499 $4,000,000 $2,000,000 $494,971 $2,949,013 Csts (PV) Benefits (PV) Cumulative Cash Flw (PV) $0 $(2,000,000) $(604,153) Initial Year 1 Year 2 Year 3 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, which prduces mre cnservative estimates. The fllwing factrs may affect the financial results that an rganizatin may experience: Size f deplyment. The csts and benefits realized are, in many cases, directly prprtinal t the number f users. Therefre, larger rganizatins can expect in abslute terms greater benefits and larger csts. Frrester believes that the assciated payback perid and ROI is similar fr small and large rganizatins. Number f Micrsft prducts in use. License csts are the majr cst cmpnent in this study. Large cmpanies that use a lt f different Micrsft prducts and have enterprise agreements with significant discunts shuld see a higher ROI and quicker payback perid. Previus methd(s) f applicatin life-cycle management. Organizatins that previusly had cmprehensive, unified applicatin life-cycle management slutins in place will prbably have already captured sme f the mst accessible benefits. Instead, they will need t fcus n further streamlining peratins and delivering even greater business value. Disclsures The reader shuld be aware f the fllwing: The study is cmmissined by Micrsft and delivered by the Frrester Cnsulting grup. Page 7

9 Frrester makes n assumptins as t the ptential return n investment that ther rganizatins will receive. Frrester strngly advises that readers shuld use their wn estimates within the framewrk prvided in the reprt t determine the apprpriateness f an investment in Micrsft ALM slutins. Micrsft reviewed and prvided feedback t Frrester, but Frrester maintains editrial cntrl ver the study and its findings and des nt accept changes t the study that cntradict Frrester s findings r bscure the meaning f the study. The custmer names fr the interviews were prvided by Micrsft. Page 8

10 TEI Framewrk And Methdlgy Intrductin Frm the infrmatin prvided in the interviews, Frrester has cnstructed a Ttal Ecnmic Impact framewrk fr thse rganizatins cnsidering implementing Micrsft ALM. 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 Micrsft ALM can have n an rganizatin (see Figure 2). Specifically, we: Interviewed Micrsft marketing, sales, and prfessinal services persnnel and Frrester analysts t gather data relative t Micrsft ALM and the marketplace in general fr applicatin life-cycle management slutins. Interviewed six rganizatins currently using Micrsft ALM slutins 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 2 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 Micrsft ALM slutins: 1. Csts. 2. Benefits t the entire rganizatin. 3. Flexibility. Page 9

11 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 10

12 Analysis Interview Highlights A ttal f six interviews were cnducted fr this study, invlving representatives frm the fllwing cmpanies: 1. Payrll services cmpany. This rganizatin prvides sftware-as-a-service (SaaS) payrll services t small and medium-size businesses. It is grwing at 30% per year in custmer base and revenue. Micrsft ALM was first implemented in In that time, the develpment team has grwn frm six t 75 peple. Of these, apprximately 40 peple are currently using Micrsft ALM. Previusly, a range f cmmercially available and in-huse tls were being used, but these culd nt supprt the level f grwth taking place. 2. Glbal IT prfessinal services cmpany. The internal IT develpment team f a glbal cnsultancy uses Micrsft ALM. These slutins were first deplyed in Develpers, testers, and business applicatin wners are all using these tls in ne way r anther. Out f an IT team f 250, 200 are using these tls. The cmpany upgraded frm previus versins f Micrsft tls t better supprt Agile methdlgies. 3. ecmmerce cmpany. The IT rganizatin prvides ecmmerce tls t a partner rganizatin and runs several ecmmerce websites. The cmpany began with Micrsft ALM in 2008 and deplyed it in tw phases; the first phase fcused purely n develpment and testing, and the secnd phase expanded t include HR and accunting business prcesses. It ttal, there are apprximately 40 users. Previusly, the cmpany used a variety f tls fr applicatin life-cycle management that wuld nt supprt a shift t Agile develpment methdlgies. 4. Cnsumer sprting gds and clthing cmpany. This rganizatin manufactures and sells sprting gds and clthing thrugh its wn stres as well as ther stres and websites. Prir t deplying the 2012 versin f Micrsft ALM, nly tw develpment teams were using the 2010 versin. Upgrading t 2012 supprted the cmpany s grwth and expansin acrss the entire IT rganizatin. There are apprximately 40 emplyees and 10 cntractrs using these tls. 5. Glbal business services cmpany. Micrsft ALM was deplyed at the ffshre develpment center f a glbal cmpany t prvide better IT develpment t internal custmers. The IT rganizatin uses a mix f 2010 and 2012 Micrsft ALM slutins. In ttal, mre than 400 develpers and testers are using Micrsft ALM tls acrss multiple platfrms, including Java and Micrsft. Previusly, spreadsheets, pen surce tls, and ther paid slutins were being used in a disjinted fashin. 6. Glbal IT sftware cmpany. Micrsft ALM slutins are used by the internal IT develpment team. Prir t deplying the 2012 Micrsft slutin, the 2010 versin was being used fr surce cntrl, and internally develped tls and manual prcesses were being used fr ther functins. In ttal, there are nw mre than 100 users, which has allwed them t speed up delivery and adpt mre Agile develpment methds. Page 11

13 The six interviews uncvered the fllwing salient pints: The need t supprt grwth and mre Agile ways f cmpleting sftware develpment were the main reasns given fr implementing/upgrading t Micrsft ALM 2012 slutins: We are a grwth cmpany. The dev team has gne frm six t 75 peple, and we are trying t duble that in the next tw years. We need the Micrsft slutin t supprt rapid grwth, autmate testing, and imprve prject management. The ability fr greater custmizatin f existing sftware slutins was very imprtant t us. We nw have full traceability thrughut the applicatin life cycle, which makes this easier. Everything is in ne database, s managing requests and changes is much mre efficient and allws fr Agile methdlgies. Our rganizatin demnstrates thught leadership n technlgy, bth internally and externally. Adpting Micrsft ALM was a way fr us t get ahead f the curve and demnstrate that leadership. The use f hetergeneus slutins fr applicatin life-cycle management caused many difficulties: We were using varius tls fr surce cntrl, bug tracking, etc. This caused all srts f headaches and slwed the team dwn cnsiderably. With an integrated slutin, these prblems have gne away. Using Micrsft as a single truth repsitry means the team n lnger needs t search fr infrmatin acrss multiple systems. This has greatly increased prductivity. We replaced five different systems with Micrsft. We nw have twice as much functinality and can custmize ur prcesses and reprts mre easily. Our previus slutins did nt integrate with each ther prperly. With Micrsft ALM, everything wrked right ut f the bx. In additin t prblems arising frm hetergeneity, interviewees described many ther prblems with their previus, nn-micrsft slutins: Our previus tls culd nt supprt Agile methdlgies at all. When we expanded the develpment team, we knew this is smething we had t crrect. The hme-grwn tls we used t use were temperamental and ften dwn. This was nt acceptable fr an IT rganizatin trying t deliver value t the business. Our previus slutin was t cstly, and the user interface was very pr. Micrsft ALM slutins were chsen fr ease f use and t take advantage f existing team knwledge f Micrsft prducts: Page 12

14 We have multiple challenges in delivering high-quality slutins t ur internal custmers. One f the ways t accmplish that is t pick a strategic vendr and stay clse t them. Fr us, Micrsft was the right chice. The supprt we get frm Micrsft and ur ability t influence their future prducts made them a much better chice than sme f the cmpeting slutins. The multi-platfrm supprt and Agile planning tls were very imprtant t us. We chse Micrsft because the integratin between the varius slutin cmpnents was seamless. Als, almst n training was required. Sme f the cmmnly cited mst useful features/capabilities included: Cmmunicatin with external cluds was very imprtant. Our prductin envirnment is a public clud, and ur testing in an internal, private clud. Aut-deply, alng with cde analysis and review, have been hugely beneficial t us. Cde checkut and review and the prject management functinality are very useful. Cmpsite Organizatin Based n the interviews with the six existing custmers prvided by Micrsft, 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 US-based cmpany, Acme Apparel Cmpany (Acme), which designs and sells lwer-cst fashins targeted at the yuth market. The cmpany sells thrugh department stres, its wn stres (a grwing channel), its wn website, and third-party ecmmerce sites. The cmpany is headquartered in the United States, with mst custmers in the US and Eurpe. The cmpany is als expanding int Asia. Acme has a ttal f 2,000 emplyees. The internal IT develpment rganizatin has 120 team members develpers, technical team leads, testers, and architects. There are als five prject managers wrking n internal IT prjects and eight business applicatin wners. The cmpany supplements its internal IT staff with cntractrs n an as-needed basis. Acme deplyed Micrsft ALM fr the IT develpment team in tw phases. Phase 1 was a limited rllut fr tw prjects t validate the slutin and learn hw it wrks. This cvered apprximately 25% f the verall team. Phase 2 fllwed shrtly thereafter and cvered the remaining 75% f the team. Micrsft ALM is als used by the business slutin wners fr prjects/technlgies managed with Micrsft ALM. Framewrk Assumptins Table 2 prvides the mdel assumptins that Frrester used in this analysis. Page 13

15 Table 2 Mdel Assumptins Ref. Metric Calculatin Value A1 Annual blended fully burdened cst* affected IT emplyees $110,000 A2 Fully burdened cst* affected business applicatin wners $100,000 *Fully burdened cst includes insurance, paid vacatin, and any ther cst brne by the rganizatin. 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. Sme dllar values presented in this study have been runded t the nearest whle cent r dllar. Therefre, sme f the calculatin results in the subsequent tables may nt exactly match the results if the reader fllws the frmulas and values presented. In additin t the assumptins in Table 2, the fllwing user adptin assumptins were used in the study: Table 3 User Adptin Assumptins Ref. Metric Initial Year 1 Year 2 Year 3 B1 Number f prject managers added 2 3 B2 Number f prduct/applicatin wners added 2 6 B3 Number f senir develpers/ttls added 5 15 B4 Number f develpers added B5 Number f sftware develpment engineers in test (SDET) added 4 11 B6 Number f sftware test engineers (STE) added 9 26 Bt Cumulative number f users Page 14

16 While additinal users are likely t be added in years 2 and 3, the csts and benefits have been calculated n just the first tw phases f implementatin. This was dne t prvide a mre universal mdel, since future phases can vary widely frm ne rganizatin t the next. Csts This sectin describes the csts assciated with implementatin and nging management f Micrsft ALM slutins. Implementatin Internal Labr Deplying Micrsft ALM was very easy. The majrity f the time was spent n defining wrkflws and ther cnfiguratins t best meet Acme s needs. The initial deplyment was cmpleted as a cmbinatin prf-fcncept and limited rllut acrss tw prjects t demnstrate business value. This cvered apprximately 25% f the IT team and lasted three mnths. The secnd deplyment was a brader rllut, with an increased number f applicatins and prjects being managed within the Micrsft ALM framewrk. The result f this was that the entire 122-persn IT develpment rganizatin was brught int the platfrm. This phase lasted three mnths as well. Fr the initial deplyment, six IT resurces wrked n the prject 25% f their time fr three mnths, fr a ttal cst f $41,250 fr the initial phase. Table 4 belw represents the ttal csts incurred by the cmpsite rganizatin fr implementatin internal labr. Table 4 Implementatin Internal Labr Ref. Metric Calculatin Initial Year 1 C1 Number f resurces 6 4 C2 % f time n prject 25% 25% C3 Number f mnths 3 3 C4 Mnthly fully burdened cst A1/12 mnths $9,167 $9,167 Ct Implementatin internal labr C1*C2*C3*C4 $41,250 $27,500 Prfessinal Services In additin t the internal labr, Acme used a limited amunt f prfessinal services during the tw deplyments. These cnsultants brught their expertise t help with the initial slutin cnfiguratin and Page 15

17 setting up the required wrkflws, data repsitries, etc. Onging management and updates t the slutin are managed entirely in-huse. Table 5 belw represents the ttal csts incurred by the cmpsite rganizatin fr prfessinal services. Table 5 Prfessinal Services Ref. Metric Calculatin Initial Year 1 D1 Number f cnsultant FTEs D2 Number f mnths =C3 3 3 D3 Mnthly rate $1,400*22 wrkdays $30,800 $30,800 Dt Prfessinal services D1*D2*D3 $138,600 $138,600 Hardware Acme s deplyment was typical in that ne physical server was required t hst the Micrsft ALM sftware. The server was virtualized, prviding the required number f individual servers fr applicatins and data. Annual maintenance is 20% f the purchase price. Table 6 belw represents the ttal csts incurred by the cmpsite rganizatin fr hardware. Table 6 Hardware Ref. Metric Calculatin Initial Year 1 Year 2 Year 3 E1 Number f physical servers 1 E2 Cst per server $15,000 E3 Onging maintenance E1*E2*20% $3,000 $3,000 $3,000 Et Hardware E1*E2+E3 $15,000 $3,000 $3,000 $3,000 Page 16

18 Sftware Licenses And Assurance There are different versins f Visual Studi (VS) depending n the feature set required by rle. Team Fundatin Server (TFS) is bundled in with each f these: Prject managers, business applicatin wners, and manual testers (SET) typically use Visual Studi Test Prfessinal with MSDN. Develpers and testers wh write cde (SDET) typically use Visual Studi Premium with MSDN. Senir develpers, technical team leads, and ther pwer users typically use Visual Studi Ultimate with MSDN. License fees depend n the number f seats, bundling with ther Micrsft prducts, enterprise agreements versus per seat licenses, etc. Because f the cmplexity, readers are encuraged t wrk with their Micrsft accunt manager t understand what the specific license csts wuld be. Fr the cmpsite rganizatin, licenses were purchased as part f an enterprise agreement. All licenses were purchased in the initial perid, even thugh sme were nt used until the secnd phase deplyment that fllwed. The license csts are spread ut ver three years and include all maintenance and supprt. The prices shwn in this study are based n typical discunts fr a deplyment f this size. Page 17

19 Table 7 belw represents the ttal csts incurred by the cmpsite rganizatin fr sftware licenses and assurance. Table 7 Sftware Licenses And Assurance Ref. Metric Calculatin Initial Year 1 Year 2 Year 3 F1 Number f VS Test Prfessinal with MSDN licenses added B1+B2+B6 [Initial and year 1] 48 F2 Cst per VS Test Prfessinal license Initial and renewal license price $1,008 $1,008 $1,008 F3 Number f VS Premium with MSDN licenses added B4+B5 [Initial and year 1] 62 F4 Cst per VS Premium license Initial and renewal license price $2,801 $2,801 $2,801 F5 Number f VS Ultimate with MSDN licenses added B3 [Initial and year 1] 20 F6 Cst per VS Ultimate license Initial & renewal license price $6,110 $6,110 $6,110 Ft Sftware licenses and assurance F1*F2+F3*F4+F5*F6 $344,246 $344,246 $344,246 Training All training was cnducted by in-huse resurces wh studied t becme trainers. During the tw rllut perids, these individuals custmized training materials and cnducted training. Each user, n average, received 3 hurs f training. Beginning in Year 2,.25 f an FTE spent time prviding updated training t users n new features, changes, etc. Table 8 belw represents the ttal csts incurred by the cmpsite rganizatin fr training. Page 18

20 Table 8 Training Ref. Metric Calculatin Initial Year 1 Year 2 Year 3 G1 Number f trainer FTEs G2 Number f mnths G3 Mnthly fully burdened cst =C4 $9,167 $9,167 $9,167 $9,167 Gt Training G1*G2*G3 $27,500 $27,500 $27,500 $27,500 Onging Administratin Onging administratin f Micrsft ALM is cmpleted by the IT peratins team. They are respnsible fr keeping the slutin up and running and applying updates. There is als activity n the part f the applicatin develpment team t expand Micrsft ALM t ther sftware develpment prjects, such as creating new wrkflws and tls. Altgether, 1.25 FTEs are required t maintain and expand the slutin. Table 9 belw represents the ttal csts incurred by the cmpsite rganizatin fr nging in-huse administratin. Table 9 Onging Administratin Ref. Metric Calculatin Initial Year 1 Year 2 Year 3 H1 Number f IT FTEs H2 Annual fully burdened cst =A1 $110,000 $110,000 $110,000 Ht Onging administratin H1*H2 $137,500 $137,500 $137,500 Page 19

21 Ttal Csts Table 10 belw represents the ttal csts incurred by the cmpsite rganizatin t deply and manage Micrsft ALM. Table 10 Ttal Csts (Nn-Risk-Adjusted) Ref. Csts Initial Year 1 Year 2 Year 3 Ttal Ct Implementatin internal labr ($41,250) ($27,500) ($68,750) Dt Prfessinal services ($138,600) ($138,600) ($277,200) Et Hardware ($15,000) ($3,000) ($3,000) ($3,000) ($24,000) Ft Sftware licenses and assurance ($344,246) ($344,246) ($344,246) ($1,032,738) Gt Training ($27,500) ($27,500) ($27,500) ($27,500) ($110,000) Ht Onging administratin ($137,500) ($137,500) ($137,500) ($412,500) Ttal ($566,596) ($334,100) ($512,246) ($512,246) ($1,925,188) Benefits The Benefits sectin f the study fcuses n hw the quantified benefits briefly described in the Executive Summary are calculated. The reader shuld lk back t the Executive Summary fr the brader picture f hw benefits are realized acrss the three majr benefit categries. Reduced Use Of IT Cntractrs Fur f the custmers interviewed use fewer external IT cntract resurces. Fr sme, it meant giving fewer prjects t IT cnsulting firms, and fr thers it meant less staff augmentatin with IT cntractrs. The cmpanies als cited significant cst advantages by keeping prjects in-huse. Prir t implementing Micrsft ALM, Acme wuld use significant IT cntractr resurces t cmplete prjects n time. In additin t the IT department using cntractrs, sme business areas wuld directly hire IT cntractrs fr prjects. Nw, all business areas give their prjects slely t the central IT rganizatin. The IT rganizatin uses cntractrs when special skills are needed, but rarely uses cntractrs because f resurce cnstraints. Using in-huse resurces has a 35% cst advantage cmpared with using external cntractrs. Page 20

22 Table 11 belw represents the cst benefits achieved thrugh reduced use f IT cntractrs. Table 11 Reduced Use Of IT Cntractrs Ref. Metric Calculatin Year 1 Year 2 Year 3 I1 Value f prjects kept in-huse $200,000 $500,000 $500,000 I2 Internal cst savings 35% 35% 35% It Reduced use f IT cntractrs I1*I2 $70,000 $175,000 $175,000 Incremental Revenue Several f the interviewed cmpanies spke abut being able t respnd t requests fr prpsal (RFPs) and ther sales pprtunities faster and better. This is because prjects cmpleted using Micrsft ALM included internal cllabratin tls, infrmatin retrieval applicatins, and ther systems that help in the sales prcess. Being mre agile, the IT rganizatin culd als quickly rll ut new external custmer-facing systems if needed, such as partner prtals. Imprved internal ability t crdinate sales effrts, alng with the ability t deliver external slutins t custmers, results in increased sales. Similar t the interviewed cmpanies, the cmpsite rganizatin clses additinal deals with retailers and distributrs because f slutins rlled ut using Micrsft ALM. This benefit is realized beginning in Year 2 f the study, and an assumptin was made that each incremental deal is wrth $75,000. Table 12 belw represents the cst benefits achieved thrugh incremental revenue. Table 12 Incremental Revenue Ref. Metric Calculatin Year 1 Year 2 Year 3 J1 Number f additinal sales wins J2 Annual value per cntract $75,000 $75,000 $75,000 Jt Incremental revenue J1*J2 $0 $150,000 $300,000 Page 21

23 Increased IT Team Prductivity The largest benefit mentined by all f the interviewed cmpanies was imprved IT team prductivity. This resulted in IT teams cmpleting mre prjects mre quickly, bviating the need t hire additinal resurces. Having all tls and infrmatin in ne place, alng with intuitive wrkflws and streamlined cllabratin, were majr cntributrs t this prductivity gain. Additinally, sme specific activities that were eliminated included building and maintaining internal tls nw cvered by Micrsft ALM, such as creating custm reprts and analysis and custm integratin between tls. One cmpany reprted that an applicatin supprt team was cut frm seven t fur FTEs. Anther cmpany has seen a 40% prductivity imprvement acrss the develpment team. One respndent explained that even nn-star develpers can perfrm much better using Micrsft ALM. The cmpsite rganizatin saw a prductivity imprvement right away. In the first year f the study, this was a 15% gain acrss all develpers, PMs, and testers. The Year 1 benefit was smaller than subsequent years t reflect the phased rllut and learning curve. Beginning in Year 2, the prductivity gain was 30%. Only 75% f this benefit was realized in the financial analysis because nt all prductivity gains translate int additinal wrk. Fr simplicity and because grwth plans vary greatly frm ne cmpany t anther, the size f the IT rganizatin was held cnstant thrughut the study. Table 13 belw represents the cst benefits achieved thrugh increased IT team prductivity. Table 13 Increased IT Team Prductivity Ref. Metric Calculatin Year 1 Year 2 Year 3 K1 Number f IT users B1+B3+B4+B5+B6 [Initial and year 1] K2 Annual fully burdened cst =A1 $110,000 $110,000 $110,000 K3 Prductivity imprvement 15% 30% 30% K4 Percent captured 75% 75% 75% Kt Increased IT team prductivity K1*K2*K3*K4 $1,509,750 $3,019,500 $3,019,500 Page 22

24 Increased Business Applicatin Owner Prductivity IT prjects undertaken using Micrsft ALM have a business applicatin wner frm the relevant part(s) f the business. The interviewed cmpanies nted that these individuals als see a time savings due t spending less time n requirements definitin, waiting n reprts and prject updates, and participating in UAT activities. Fr the cmpsite rganizatin, there are eight business applicatin wners. They save, n average, 3 hurs a week acrss the activities described abve. Ninety percent f the benefit is included in the financial analysis. Table 14 belw represents the cst benefits achieved thrugh increased business applicatin wner prductivity. Table 14 Increased Business Applicatin Owner Prductivity Ref. Metric Calculatin Year 1 Year 2 Year 3 L1 Number f business users L2 Hurly fully burdened cst A2/2,100 wrk hurs $47.62 $47.62 $47.62 L3 Hurs saved per week L4 Percent realized 90% 90% 90% Lt Increased business applicatin wner prductivity L1*L2*L3*52 weeks*l4 $53,486 $53,486 $53,486 Eliminatin Of Other Applicatin Life-Cycle Management Tls Micrsft ALM replaced the need fr a wide array f ther tls. The interviewed cmpanies avided adding ther tls and were able t eliminate sme existing tls. This study nly includes nging maintenance savings fr ther tls that were eliminated. Purchase cst fr ther slutins nt needed wuld be partially r fully ffset by the Micrsft ALM license csts. Table 15 belw represents the cst benefits achieved thrugh eliminatin f ther applicatin life-cycle management tls. Page 23

25 Table 15 Eliminatin Of Other Applicatin Life-Cycle Management Tls Ref. Metric Calculatin Year 1 Year 2 Year 3 M1 Avided nging maintenance $25,000 $25,000 $25,000 Mt Eliminatin f ther applicatin life-cycle management tls =M1 $25,000 $25,000 $25,000 Lwer IT Attritin Rates All f the cmpanies interviewed described hw the IT emplyees enjy their jbs mre because f Micrsft ALM. They appreciate using the latest tls and being able t fcus n the mre interesting parts f their jbs, such as cde writing, instead f respnding t inquiries. The increased cllabratin als fsters a team spirit and better wrking envirnment. This has resulted in lwer attritin rates. One cmpany has nt had a single develper leave in several years. Fr the cmpsite rganizatin, the attritin rate decreased frm 10% per year t 5% per year beginning in Year 2. It was assumed that the cst f hiring and making a new emplyee fully prductive was equal t ne year s salary and benefits recruiting csts, nbarding, training, lst prductivity, etc. Fifty percent f this benefit was attributed t Micrsft ALM, with ther factrs such as gd benefits packages and a weak labr market making up the rest. Table 16 belw represents the cst benefits achieved thrugh lwer IT attritin rates. Table 16 Lwer IT Attritin Rates Ref. Metric Calculatin Year 1 Year 2 Year 3 N1 Number f IT wrkers affected N2 Attritin rate reductin 10% dwn t 5% 0% 5% 5% N3 Annual fully burdened cst =A1 $110,000 $110,000 $110,000 N4 % attributable t Micrsft ALM 50% 50% 50% Nt Lwer IT attritin rates N1*N2*N3*N4 $0 $335,500 $335,500 Page 24

26 Ttal Benefits Table 17 shws the ttal quantified benefits frm adpting Micrsft ALM slutins. Table 17 Ttal Benefits Ref. Benefits Year 1 Year 2 Year 3 Ttal It Reduced use f IT cntractrs $70,000 $175,000 $175,000 $420,000 Jt Incremental revenue $150,000 $300,000 $450,000 Kt Increased IT team prductivity $1,509,750 $3,019,500 $3,019,500 $7,548,750 Lt Increased business applicatin wner prductivity $53,486 $53,486 $53,486 $160,457 Mt Eliminatin f ther applicatin life-cycle management tls $25,000 $25,000 $25,000 $75,000 Nt Lwer IT attritin rates $335,500 $335,500 $671,000 Ttal $1,658,236 $3,758,486 $3,908,486 $9,325,207 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 Micrsft ALM 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). Micrsft ALM makes IT rganizatins and the business inherently mre flexible. On the IT side, the interviewees explained hw IT staff can be mved between prjects because f a cmmn set f tls and prcesses. Additinally, the IT rganizatin as a whle is mre flexible in taking n added IT prjects because f Agile develpment methds supprted by Micrsft ALM. This als translates int increased prductivity acrss the business. Business users can mre quickly have access t new tls and prcesses bth fr internal use and fr wrking with external custmers. This allws them t be mre respnsive t changes in the marketplace. These flexibility benefits were included in the ROI analysis. Page 25

27 Risk Frrester defines tw types f risk assciated with this analysis: implementatin risk and impact risk. Implementatin risk is the risk that a prpsed investment in Micrsft ALM may deviate frm the riginal r expected requirements, resulting in higher csts than anticipated. Impact risk refers t the risk that the business r technlgy needs f the rganizatin may nt be met by the investment in Micrsft ALM, resulting in lwer verall ttal benefits. The greater the uncertainty, the wider the ptential range f utcmes fr cst and benefit estimates. Quantitatively capturing investment and impact 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 since they represent the expected values cnsidering risk. The fllwing implementatin risks that affect csts are identified as part f this analysis: The size f the deplyment can affect internal implementatin labr and prfessinal service csts. License csts can vary greatly depending n the versin f the Micrsft ALM slutins used, type f license agreement (per seat versus enterprise), number f seats, etc. The fllwing impact risks that affect benefits are identified as part f the analysis: Depending n hw applicatin life-cycle management was dne prir t implementing Micrsft ALM, sme f the benefits described in this study may have already been partially realized, especially IT prductivity gains. In that case, realizing incremental benefits will take mre effrt. The incremental revenue and decreased attritin benefits are highly dependent n external factrs such as the state f the ecnmy. Table 18 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. Page 26

28 Table 18 Cst And Benefit Risk Adjustments Csts Lw Mst likely High Mean Implementatin internal labr medium risk 100% 100% 115% 105% Prfessinal services medium risk 100% 100% 115% 105% Hardware medium risk 100% 100% 115% 105% Sftware licenses and assurance high risk 100% 100% 125% 108% Training lw risk 90% 100% 105% 101% Onging administratin medium risk 100% 100% 115% 105% Benefits Lw Mst likely High Mean Reduced use f IT cntractrs medium risk 100% 100% 115% 94% Incremental revenue high risk 100% 100% 125% 83% Increased IT team prductivity medium risk 100% 100% 115% 94% Increased business applicatin wner prductivity medium risk 100% 100% 115% 94% Eliminatin f ther applicatin life-cycle management tls medium risk 100% 100% 115% 94% Lwer IT attritin rates medium risk 100% 100% 115% 94% Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Page 27

29 Financial Summary The financial results calculated in the Csts and Benefits sectins can be used t determine the return n investment, net present value, and payback perid fr the rganizatin s investment in Micrsft Applicatin Lifecycle Management slutins. These are shwn in Table 19 belw. Table 19 Cash Flw Nn-Risk-Adjusted Cash flw riginal estimates Initial Year 1 Year 2 Year 3 Ttal Present value Csts ($566,596) ($334,100) ($512,246) ($512,246) ($1,925,188) ($1,678,525) Benefits $1,658,236 $3,758,486 $3,908,486 $9,325,207 $7,550,177 Net benefits ($566,596) $1,324,136 $3,246,240 $3,396,240 $7,400,019 $5,871,652 ROI 350% Payback perid 5 mnths Table 20 belw shws the risk-adjusted ROI, NPV, and payback perid values. These values are determined by applying the risk-adjustment values frm Table 18 in the Risk sectin t the cst and benefits numbers in tables 10 and 17. Table 20 Cash Flw Risk-Adjusted Cash flw risk-adjusted estimates Initial Year 1 Year 2 Year 3 Ttal Present value Csts ($604,153) ($349,705) ($547,086) ($547,086) ($2,048,030) ($1,785,237) Benefits $1,558,742 $3,516,477 $3,640,977 $8,716,195 $7,058,736 Net benefits ($604,153) $1,209,037 $2,969,391 $3,093,891 $6,668,165 $5,273,499 ROI 295% Payback perid 6 mnths Page 28

30 Figure 3 Cmpsite Organizatin Three-Year Risk-Adjusted Cumulative Cash Flw $6,000,000 $5,273,499 $4,000,000 $2,000,000 $494,971 $2,949,013 Csts (PV) Benefits (PV) Cumulative Cash Flw (PV) $0 $(2,000,000) $(604,153) Initial Year 1 Year 2 Year 3 Page 29

31 Micrsft ALM: Overview Accrding t Micrsft, Micrsft ALM is an integrated slutin that emphasizes the reductin f cycle times, accelerating delivery and reduced csts acrss the sftware life cycle. Micrsft ALM delivers slutins that help teams develp and cntinuusly imprve the fllwing capabilities and maintain cntinuus value in their sftware investments: 1. Cntinuus feedback: capabilities enabling timely and actinable feedback t address delivery impediments at the earliest pssible phase f the sftware life cycle, yielding shrter cycle times and cst reductin benefits. 2. Cntinuus quality: capabilities enabling teams t accunt fr quality at every phase f the sftware life cycle. Minimizing late rewrk csts by fixing unmet business user expectatins earlier. 3. Cntinuus delivery: capabilities enabling last-mile velcity and reduced MTTR when perating sftware in prductin. Sme highlights f the Micrsft ALM slutin include: 1. An integrated slutin: full life-cycle capabilities in a single slutin. 2. Rle-tailred tls: user experiences integrated in tls that are familiar t the diverse functins that need t integrate in ideating, delivering, and perating sftware. 3. Hybrid IT capable: integrated slutin t address sftware develpment needs acrss n-premises and clud investments. 4. Crss-platfrm capable: integrated slutin fr crss-platfrm develpment teams (Micrsft platfrms, Web, Java, Andrid, and ios). 5. Custmizable: slutin custmizability t address rganizatin-specific prcess requirements. 6. Extensible: slutin extensibility t augment capabilities with partner and custm slutins. 7. Services partner ecsystem: a services partner ecsystem t supprt deplyment and training needs. 8. Slutin vendr ecsystem: an ecsystem f independent slutin vendrs. Page 30

32 Appendix A: Cmpsite Organizatin Descriptin Based n interviews with six custmers currently using the Micrsft ALM slutin suite, Frrester cnstructed a cmpsite rganizatin that encmpasses characteristics heard acrss the interviews. Frrester then created a TEI financial framewrk and an assciated ROI analysis fr this cmpsite cmpany. By aggregating the findings frm the custmer interviews and prtraying a cmpsite rganizatin that has benefited frm replacing disparate applicatin life-cycle management slutins with Micrsft ALM, this Frrester study illustrates the financial impact f using Micrsft ALM fr a typical enterprise custmer. Frrester named the cmpsite rganizatin Acme Apparel Cmpany (Acme). Acme designs and sells lwercst fashins targeted at the yuth market. The cmpany sells thrugh department stres, its wn stres (a grwing channel), its wn website, and third-party ecmmerce sites. The cmpany is headquartered in the United States, with mst custmers in the US and Eurpe. The cmpany is als expanding int Asia. Acme has a ttal f 2,000 emplyees. The internal IT develpment rganizatin has 117 team members develpers, technical team leads, testers, and architects. There are als five prject managers wrking n internal IT prjects and eight business applicatin wners whse slutins are built using Micrsft ALM. The cmpany supplements its internal IT staff with cntractrs n an as-needed basis. Acme decided t implement Micrsft ALM because the disparate slutins being used previusly were nt meeting its needs. Specifically, the prir slutins wuld nt supprt a mve t mre Agile develpment methdlgies, culd nt keep pace with an IT rganizatin that was grwing by 25% per year, and did nt prvide an end-t-end slutin t be shared acrss the IT rganizatin and business applicatin wners. Sme f the internal prjects undertaken with Micrsft ALM include sales cllabratin tls, prject management and time tracking, accunts payable, and client prject cllabratin tls. Acme deplyed Micrsft ALM fr the IT develpment team in tw phases. Phase 1 was a limited rllut fr tw prjects t validate the slutin and learn hw it wrks. This cvered apprximately 25% f the verall team. Phase 2 fllwed shrtly thereafter and cvered the remaining 75% f the team. Micrsft ALM is als used by the business slutin wners fr prjects/technlgies dependent n applicatin develpment. 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, Page 31

33 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, 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. Page 32