The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

A Forrester Total Economic Impact™

Study Commissioned By Microsoft

August 2019

Updated March 2020

The Total Economic

Impact

™

Of Microsoft

365 Apps for enterprise

Cost Savings And Business Benefits

Enabled By Microsoft 365 Apps

Table Of Contents

Executive Summary 1

Key Findings 2

TEI Framework And Methodology 4

The Microsoft 365 Apps Customer Journey 5

Interviewed Organizations 5

Key Challenges 5

Key Results 6

Composite Organization 6

Analysis Of Benefits 8

Time Savings From Collaboration Tools 8

Improved Productivity From Mobile And Web Access 10

Cost Savings From Microsoft 365 Apps Licensing 11

Total Trip Costs Avoided 12

Reduced TCO — Technology Infrastructure Cost Savings 13

Unquantified Benefits 14

Flexibility 14

Analysis Of Costs 16

License Costs 16

Planning, Implementation, And Deployment Costs 16

Financial Summary 18

Microsoft 365 Apps: Overview 19

Appendix A: Total Economic Impact 20

Appendix B: Supplemental Material 21

Project Director:

Corey McNair

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1 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Executive Summary

Businesses that have been content with using Microsoft Office 2010 will

have to consider upgrading their software soon as the product’s support

will reach end of life in October 2020.

Many businesses have yet to upgrade due to familiarity with Microsoft

Office products that have worked well for them thus far. Businesses would

rather wait until end of service to continue on with their current work

environments. Meanwhile, businesses that have yet to adopt cloud storage

systems for Office’s cloud features are hesitant due to the cost and risk

related to migrating on-prem storage to a cloud or hybrid system.

Microsoft 365 Apps for enterprise* introduces new features to Outlook,

OneDrive for Business, Word, Excel, PowerPoint, and Microsoft Teams

aimed at improving productivity, collaboration, and security, including:

• Real-time document coauthoring and collaboration.

• AI-powered creativity features like Designer and 3D animation

tools for visualization in PowerPoint, and intelligent insights and

data analytics in Excel.

• Cloud storage through OneDrive for Business.

• App access across mobile, PC, and Mac devices and on the

web.

Most critically, businesses adopting Microsoft 365 Apps will no longer have

to pay on a “per-device” model, but on a “per-user” basis, enabling

multidevice access per user. Microsoft 365 Apps stays always up to date

as well with new feature updates pushed onto devices. As a result,

organizations no longer have to interrupt users while going through a wave

of updates with the latest Office releases.

Microsoft commissioned Forrester Consulting to conduct a Total Economic

Impact™ (TEI) study and examine the potential return on investment (ROI)

enterprises may realize by deploying Microsoft 365 Apps. The purpose of

this study is to provide readers with a framework to evaluate the potential

financial impact of Microsoft 365 Apps on their organizations.

To better understand the benefits, costs, and risks associated with this

investment, Forrester interviewed eight customers with years of

experience using Microsoft 365 Apps.

The interviewed organizations upgraded to Microsoft 365 Apps after

primarily using Office 2010 for several years. Since upgrading, they have

noticed a direct benefit toward employee time savings from collaboration,

communication, and service-connected AI features added to Word, Excel,

and other applications. Specifically, employees have reduced time spent

on the back-and-forth of emails reviewing documents, designing and

building presentations or spreadsheets, and waiting for feedback.

Although it took some time and money for businesses to integrate cloud

storage to their systems to use OneDrive for Business, they have justified

their investments thus far by making employees more mobile. Microsoft

365 Apps’ flexibility for device usage has provided employees with full

access to Office applications and documents on secondary mobile devices

while on the go. Meanwhile, the Click-to-Run feature has allowed IT to

minimize downtime for users by downloading recent updates in the

background to Office-enabled devices.

For further analysis of the AI features offered and Microsoft Teams, please

see the studies, “New Tech TEI: The Total Economic Impact Of Microsoft

Benefits And Costs

Cost savings from Microsoft 365

Apps licensing change:

$144 saved from

second device license

avoided per user

Time savings from collaboration,

communication, and file-sharing

tools:

1.5 hours per week

per FTE

License costs:

$1,880,060

2 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

365 AI For Knowledge Workers” and “The Total Economic Impact of

Microsoft Teams.” This study only includes benefits related to office

productivity tools found in Microsoft 365 Apps and excludes broader

collaboration and productivity tech (e.g., Exchange and SharePoint) found

in Microsoft 365 Business.

*March 2020 Update: All references to Office 365 ProPlus in this

document, including quotes, have been updated to appear as its current

name Microsoft 365 Apps.

Key Findings

Quantified benefits. The following risk-adjusted present value (PV)

quantified benefits are representative of those experienced by the

companies interviewed:

›

Microsoft 365 Apps’ collaboration, communication, design, and file-

sharing tools have helped employees to create time savings of 1.5 hours

per week. Employees have used OneDrive for Business to coauthor and

share links to files, reducing the amount of time spent reviewing

documents individually and then chains of emails going over feedback.

Workers have become more active at using new design tools and

sharing feedback in real time to move projects along and save time.

›

Regular access to Microsoft 365 Apps via the mobile app and the web

while on the go has improved mobile worker productivity by 2.5 hours.

Through OneDrive for Business cloud storage and Microsoft’s licensing

change to access on a per-user basis, workers have become capable of

picking up where they left off on their work PC by using compatible

mobile devices to continue being productive.

›

Organizations have saved on average $144 annually for every

user’s secondary device with Office access. Since the licensing

change, organizations no longer have to pay for every device that

employees use to access Office applications.

›

Organizations have avoided paying for 100 business trips traveled

in a year. Although organizations already had video and phone

conferencing solutions, the usage of Microsoft Teams with coauthoring

tools has improved productivity in meetings. As a result, organizations

have been able to scale back some business travel costs.

Costs.

The interviewed organizations experienced the following risk-

adjusted PV costs:

›

Subscription licensing for Microsoft 365 Apps. Organizations pay

$144 per user on average annually for the Microsoft 365 Apps license.

Organizations can reassign licenses among users every three months.

›

Planning, implementation, and deployment costs for Microsoft 365

Apps. Interviewed organizations varied in their adoption of Microsoft 365

Apps. On average, adoption took place over two years, and one FTE

was needed for ongoing administration and management.

Forrester’s interviews with eight existing customers and subsequent

financial analysis found that an organization based on these interviewed

organizations experiences benefits of $15,205,826 over three years versus

costs of $6,693,234, adding up to a net present value (NPV) of $8,512,592

and an ROI of 127%.

ROI

127%

Benefits PV

$15.2 million

NPV

$8.5 million

Payback

16.0 months

3 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Total benefits

PV, $15.2M

Total

costs PV,

$6.7M

Initial Year 1 Year 2 Year 3

Financial Summary

Payback period:

16 months

$6.4M

$290.1K

$104.8K

$2.0M

Time savings

from

collaboration

tools

Improved

productivity

from mobile and

web access

Cost savings

from licensing

Total trip costs

avoided

Reduced TCO

— Technology

Infrastructure

Cost Savings

Benefits (Three-Year)

4 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

TEI Framework And Methodology

From the information provided in the interviews, Forrester has constructed

a Total Economic Impact™ (TEI) framework for those organizations

considering implementing Microsoft 365 Apps.

The objective of the framework is to identify the cost, benefit, flexibility, and

risk factors that affect the investment decision. Forrester took a multistep

approach to evaluate the impact that Microsoft 365 Apps can have on an

organization:

DUE DILIGENCE

Interviewed Microsoft stakeholders and Forrester analysts to gather data

relative to Microsoft 365 Apps.

CUSTOMER INTERVIEWS

Interviewed eight organizations using Microsoft 365 Apps to obtain data

with respect to costs, benefits, and risks.

COMPOSITE ORGANIZATION

Designed a composite organization based on characteristics of the

interviewed organizations.

FINANCIAL MODEL FRAMEWORK

Constructed a financial model representative of the interviews using the

TEI methodology and risk-adjusted the financial model based on issues

and concerns of the interviewed organizations.

CASE STUDY

Employed four fundamental elements of TEI in modeling the impact of

Microsoft 365 Apps: benefits, costs, flexibility, and risks. Given the

increasing sophistication that enterprises have regarding ROI analyses

related to IT investments, Forrester’s TEI methodology serves to provide a

complete picture of the total economic impact of purchase decisions.

Please see Appendix A for additional information on the TEI methodology.

The TEI methodology

helps companies

demonstrate, justify,

and realize the

tangible value of IT

initiatives to both

senior management

and other key

business

stakeholders.

DISCLOSURES

Readers should be aware of the following:

This study is commissioned by Microsoft and delivered by Forrester Consulting.

It is not meant to be used as a competitive analysis.

Forrester makes no assumptions as to the potential ROI that other

organizations will receive. Forrester strongly advises that readers use their own

estimates within the framework provided in the report to determine the

appropriateness of an investment in Microsoft 365 Apps.

Microsoft reviewed and provided feedback to Forrester, but Forrester maintains

editorial control over the study and its findings and does not accept changes to

the study that contradict Forrester’s findings or obscure the meaning of the

study.

Microsoft provided the customer names for the interviews but did not participate

in the interviews.

5 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

The Microsoft 365 Apps Customer Journey

BEFORE AND AFTER THE MICROSOFT 365 APPS INVESTMENT

Interviewed Organizations

For this study, Forrester conducted eight interviews with Microsoft 365

Apps customers. Interviewed customers include the following:

Key Challenges

The interviewed organizations shared several challenges they faced prior

to adopting Microsoft 365 Apps:

›

Outdated collaboration tools for workforce. The interviewees

recognized that their organizations might have been losing an edge on

having the most up-to-date office technology when compared to

competitors. A few interviewees referenced internal feedback from

employees who had worked at other companies with new third-party

tools encouraging collaboration. “Sending documents by email, waiting

for changes, and then sending back was time-consuming. Especially

when dealing with offices in different time zones, which would

sometimes delay progress until the next morning,” said the director of

business management at a European IT organization.

For the IT company that used a non-Office service, the interviewee

said: “Millennials’ concerns at our company tagged us as stagnant to

collaboration. They wanted something where they could work together

and not just send each other notes on.” The head of unified

communication and messaging at an IT organization echoed the

sentiments, “There was a perception among users that they were just

using an older product [Office 2010], and there was an increasing

familiarity with new tools from employees’ previous experiences at

other companies.”

INDUSTRY

REGION

INTERVIEWEE

PREVIOUS OFFICE

SOFTWARE USED

IT services

Western Europe, global

presence

Head of unified

communication and

messaging

Office 2010

IT services

Western Europe, global

presence

Director, business

management

Office 2010

IT services

North America, global

presence

IT operations manager

Non-Office service

Financial services

North America, global

presence

Senior VP of customer-

facing technology

Office 2016

Utilities

North America

Capability owner

Office 2013

Healthcare

North America

Enterprise IT architect

Office 2010

Financial services

Worldwide

Operations and technology

manager

Office 2010

Utilities

North America, global

presence

End user computing design

lead

Office 2010

“We definitely were afflicted by

some of the classic Office

licenses’ inefficiencies. We

had people onboarding and

offboarding at our company,

and there was no way to

routinely vanish those device

licenses.”

Senior VP of customer-facing

technology, financial services

6 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

›

Inability to work effectively while on the go. Business

administrators noted that workers were limited by previous business

solutions that didn’t enable mobile functionality beyond checking email.

With employees increasingly seeking to work remote and when

traveling, organizations needed a new solution.

›

Increasingly expensive Office licensing. A majority of the business

administrators reported that they renewed their Office licensing every

three to five years, coinciding with the release of a new version of

Office. The licensing was on a per-device basis, which had become

more expensive for interviewees as more employees worked remote.

“From a cost-control perspective, we have an increasing number of

mobile users and home small-office users. We needed to bring those

costs to a more manageable rate,” said the operations and technology

manager at a financial services company.

Key Results

The interviews revealed that key results from the Microsoft 365 Apps

investment include:

›

Greater efficiency in sharing and receiving updated documents.

Employees began using links to documents in OneDrive for Business

in place of attaching documents to emails. By having the same shared

link, employees could make edits to the same document that

automatically saved to the project folder. As a result, workers no longer

had to wait for the updated document to be sent back to them.

›

Greater productivity from employees having more flexibility by

accessing Office via the web or on mobile devices. Microsoft 365

Apps’ licensing model change from a per-device basis to per-user has

enabled employees to work on additional compatible devices at no

extra cost to their organizations. Tablet usage of Word and PowerPoint

has increased; employees also use tablets to view documents that

aren’t accessible over email.

›

Cost savings from per-user Microsoft 365 Apps licensing instead

of per-device licensing. Organizations have reduced their annual

spending on Office because they no longer have to pay an additional

fee for employees using a secondary device for Office-related

activities. These savings are especially beneficial for organizations with

a highly mobile workforce.

›

Cost savings in business trips avoided. Organizations have slightly

reduced their spending toward business travel because of increasing

collaboration over applications like OneDrive for Business and

Microsoft Teams. Workers can stay in better alignment on the status of

projects, reducing the need to meet in person to catch up.

›

Tools that enabled businesses to decommission usage of third-

party tools. Specifically, organizations were able to use OneDrive for

Business to decommission some third-party storage services, and

Microsoft Teams to retire conferencing applications.

Composite Organization

Based on the interviews, Forrester constructed a TEI framework, a

composite company, and an associated ROI analysis that illustrates the

areas financially affected. The composite organization is representative

of the eight companies that Forrester interviewed and is used to present

“The people in the field are

really benefitting from these

collaboration tools. They don’t

have time for back-and-forth

and want documents readily

available, which [Microsoft 365

Apps] has helped with.”

Head of unified communication

and messaging, IT services

“I think that Microsoft Teams

can replace hosting some

video bridges. Especially if it’s

a collaboration effort between

a smaller group between two

to eight people.”

IT operations manager, IT

services

7 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

the aggregate financial analysis in the next section. The composite

organization that Forrester synthesized from the customer interviews has

the following characteristics:

Description of composite.

The composite organization is a global

organization with most of its business operations in North America and

Europe. The organization has 5,000 knowledge workers who use

Microsoft 365 Apps.

Deployment characteristics.

The organization typically upgrades its

Office suite with the release of a new iteration every five years. The

organization upgrades from Office 2010 by deploying Microsoft 365 Apps

to all users over the first 12 months. Microsoft 365 Apps is deployed and

provides immediate access to Outlook, Word, Excel and PowerPoint.

OneDrive for Business is not completely available in Year 1 as the

organization migrates from on-premise to cloud storage. The

organization completes its migration in Year 2. Microsoft Teams is added

for usage in Year 2 as well.

Key assumptions

5,000 Microsoft 365 Apps

users

Previously used Office 2010

Rollout over 12 months

8 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

The table above shows the total of all

benefits across the areas listed below,

as well as present values (PVs)

discounted at 10%. Over three years,

the composite organization expects

risk-adjusted total benefits to be a PV

of more than $15.2 million.

Analysis Of Benefits

QUANTIFIED BENEFIT DATA AS APPLIED TO THE COMPOSITE

Time Savings From Collaboration Tools

Among Microsoft 365 Apps’ collection of products, interviewed business

administrators said workers were most taking advantage of OneDrive for

Business and its feature for coauthoring documents. Under previous

versions of Office, workers would email each other documents to refine

and edit. Time spent waiting for a colleague to send over their feedback

on documents would often stall project workflow and delay final delivery.

“The emailing back and forth of a document between people became a

nuisance when the changes to the document were small. It was adding

unnecessary wait time to projects,” said the IT operations manager at an

IT services company.

OneDrive for Business enables workers to click a shared link to a

document, make any changes needed, and then exit. “It changes the

mode of work; it changes what teams expect the turnaround time to be,”

said the senior VP of customer-facing technology at a financial services

company. “It’s probably safe to say there’s a 50% faster turnaround on

file collaboration.”

Several interviewees noted that users being able to enter and edit a

document at the same time was not possible at all previously. The

operations and technology manager at a financial services company

explained: “If we’re looking at traders making changes to a pricing sheet

in Excel, the pricing may change, or they feel the risk factor has to be

updated. They can have multiple people providing different views into

what needs to be done in real time. I’m seeing 20% in time savings from

that real-time collaboration alone.”

Most interviewed organizations had not yet used Microsoft Teams, as at

the time of the interviews, the application was not officially included with

the software. The product became available to Microsoft 365 Apps users

in July 2019. The interviewees whose companies had access to

Total Benefits

REF.

BENEFIT

INITIAL

YEAR 1

YEAR 2

YEAR 3

TOTAL

PRESENT

VALUE

Atr

Time savings from

collaboration tools

$1,334,678

$2,669,355

$4,004,033

$8,008,065

$6,427,711

Btr

Improved productivity from

mobile and web access

$1,441,452

$2,882,903

$3,603,629

$7,927,984

$6,400,435

Ctr

Cost savings from

licensing

$116,640

$349,920

$290,066

Dtr

Total trip costs avoided

$45,000

$90,000

$135,000

$104,808

Etr

Reduced TCO —

technology infrastructure

cost savings

$315,000

$585,000

$720,000

$2,340,000

$1,982,806

Total benefits (risk-

adjusted)

$315,000

$3,477,769

$6,433,898

$8,534,302

$18,760,969

$15,205,826

9 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Impact risk is the risk that the business

or technology needs of the

organization may not be met by the

investment, resulting in lower overall

total benefits. The greater the

uncertainty, the wider the potential

range of outcomes for benefit

estimates.

Microsoft Teams through their other licensing agreements noted that it

was an improvement over Skype in that they could create group chats for

projects and save their conversations for later reference. “Our previous

messaging platform didn’t allow you to save conversations in the way

Teams does. This is particularly helpful since [Microsoft 365 Apps]

doesn’t have SharePoint, and Teams kind of creates a place where

colleagues can address what they’re doing,” said an IT operations

manager.

Other features that some interviewees have taken advantage of are:

@mentions, for tagging colleagues in emails or messages; PowerPoint

Designer, which provides automatically generated slide deck designs;

and 3D Builder, for adding animations to presentations. However, these

features are still early in the adoption life cycle at the companies.

For the composite organization, Forrester assumes that:

›

Among the 5,000 Microsoft 365 Apps users, the collaboration tools

assist workers in creating a half hour of weekly time savings in Year 1,

1 hour in Year 2, and 1.5 hours in Year 3. The time savings increase is

based on workers becoming more familiarized with Microsoft 365

Apps’ new features like @mentions and PowerPoint Designer.

›

Workers recapture 25% of time saved from Microsoft 365 Apps’

collaboration features to rededicate toward labor activities. They

spend the remaining time saved on nonwork activities like socializing

or breaks from the office.

›

The average knowledge worker fully burdened cost (including all

benefits and taxes) is $45.63 per hour, or $94,940 annually.

The following risks can affect this benefit estimate:

›

Worker time savings from Microsoft 365 Apps collaboration tools will

vary based on the previous state of the organization. Businesses that

already use third-party office communication tools or file-sharing

services may not realize as dramatic of an improvement in time

savings than one not currently using third-party services.

›

Given the variety of new features that are regularly introduced as part

of Microsoft 365 Apps, organizations may have to educate employees

on their benefits for them to understand the potential value of the

collaboration tools.

›

Time savings for organizations will vary depending on the office culture

and whether work tasks are more siloed than collaborative.

To account for these risks, Forrester adjusted this benefit downward by

10%, yielding a three-year risk-adjusted total PV of $6,427,711.

Time savings increase

from 0.5 hours to 1.5

hours a week per

employee over the three-

year period.

10 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Improved productivity

from mobile and web

access: 42% of total

benefits

Improved Productivity From Mobile And Web

Access

The change in Microsoft’s licensing structure for Office from payment per

device to per user helped the interviewed organizations to improve

productivity among mobile workers. Office applications that were

previously unavailable on mobile devices to many employees at a

company are now available. “Our workers are more effective by using

the mobile and web versions of [Microsoft 365 Apps]. They feel like they

are not as disrupted as much and can leave the office and pick up their

mobile device to keep going,” said the operations and technology

manager at a financial services company.

The benefit of remote access is supported by OneDrive for Business,

which makes documents available for access from the cloud on any

device. In addition, the Microsoft Click-to-Run service is an alternative to

Windows Installer, enabling IT to stream Office applications to users,

reducing downtime. “The mobility of documents and applications makes

a big difference for us in being able to pop up a document on any device.

If you got a care provider moving from workstation to workstation all day,

you’re eventually saving 5 to 10 minutes a day from having the same

tools readily available on all your machines,” said the enterprise IT

architect for a healthcare services company.

For the composite organization, Forrester assumes that:

›

Among the composite’s 5,000 Microsoft 365 Apps users, 900 workers

use Microsoft 365 Apps from mobile devices.

›

Mobile workers at the composite earn 1 hour in time savings per week

in Year 1, 2 hours in Year 2, and 2.5 hours in Year 3.

›

Mobile users recapture 75% of their time spent on mobile devices for

work activities. This high rate is due to end users having access to

their work tools from their mobile devices and on the web, thus

allowing them to work outside of their offices when they otherwise

couldn’t. Therefore, this productivity is mostly net new.

›

The average knowledge worker fully burdened cost (including all

benefits and taxes) is $45.63 per hour, or $94,940 annually.

The following risks can affect this benefit estimate:

Time Savings From Collaboration Tools: Calculation Table

REF.

METRIC

CALC.

YEAR 1

YEAR 2

YEAR 3

Number of Microsoft 365 Apps users

5,000

Weekly time savings (hours)

Interviews

0.5

1.0

1.5

Productivity capture

Assumptions

25%

User fully loaded hourly compensation

$45.63

Time savings from collaboration tools

A1*A2*52

weeks*A3*A4

$1,482,975

$2,965,950

$4,448,925

Risk adjustment

↓10%

Atr

Time savings from collaboration tools (risk-

adjusted)

$1,334,678

$2,669,355

$4,004,033

three-year

benefit PV

$6.4 million

11 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Cost savings from

Microsoft 365 Apps

licensing: 2% of total

benefits

›

A few of the interviewed organizations noted the potential security risks

attached with making documents available on multiple devices. “Our

compliance had concerns about having data sitting in the cloud,

especially in light of GDPR (General Data Protection Regulation). But

it’s a short conversation over what data we plan to have sit on the

cloud and what we don’t,” said one interviewee.

›

A couple of the business administrators said young employees have

embraced mobility more in the office. “There’s still an older group of

people who prefer to have their data miles away from them when

they’re away from work, while others want to keep it close to them,”

said an interviewee.

›

The productivity capture rate may be affected by workers relying on

smartphone and tablet devices for work, while also using these devices

for leisure activities like watching video or checking social media.

To account for these risks, Forrester adjusted this benefit downward by

10%, yielding a three-year risk-adjusted total PV of $6,400,435.

Cost Savings From Microsoft 365 Apps Licensing

In addition to increased mobile productivity, Office’s licensing change to

payment per user helped organizations realize cost savings from not

having to pay for workers’ usage of additional devices. “Instead of having

multiple licenses, covering different types of users, they are now

consolidated, which is a relief from a license management standpoint. I

would say we’re seeing about a 10% to 15% in savings since the change

in licensing structure,” said a product manager.

Bringing employees with different work responsibilities into a license that

was the same across the board made sense to businesses. “While it’s

nice for some employees to have access to email or pop into a quick

Word document, it’s certainly not necessary to have the full license for

them. So, we’ve seen a major change in being able to right-size the

license against usage,” said another interviewee.

For the composite organization, Forrester assumes that:

›

For each mobile Office user, there’s at least one secondary device with

access to Office.

›

The average cost of Microsoft 365 Apps per user annually totals $144.

Improved Productivity From Mobile And Web Access: Calculation Table

REF.

METRIC

CALC.

YEAR 1

YEAR 2

YEAR 3

Number of mobile users

Interviews

900

Weekly time savings (hours)

Interviews

1.0

2.0

2.5

Productivity capture

75%

User fully loaded hourly compensation

$45.63

Improved productivity from mobile and web

access

B1*B2*52*B3*B4

$1,601,613

$3,203,226

$4,004,033

Risk adjustment

↓10%

Btr

Improved productivity from mobile and web

access (risk-adjusted)

$1,441,452

$2,882,903

$3,603,629

three-year

benefit PV

$290,066

12 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

›

Under the per-user licensing agreement, the organization does not

have to pay for 900 secondary devices among employees, saving a

risk-adjusted $116,640 per year.

The following risks can affect this benefit estimate:

›

If the organization does not have many mobile workers, the savings

from this benefit will be much more limited.

To account for these risks, Forrester adjusted this benefit downward by

10%, yielding a three-year risk-adjusted total PV of $290,066.

Total Trip Costs Avoided

A few of the interviewed organizations mentioned that employees were

able to avoid some travel through the use of Microsoft 365 Apps —

specifically, the usage of Microsoft Teams videoconferencing capabilities

and the availability of coauthoring tools. The capability owner at a utilities

organization said: “We had a group of one of our manufacturing

companies that would go out twice a year and do meetings with different

divisions around the world. Through Teams and OneDrive, we were able

to do that with virtual conference rooms and collaboration tools. We

saved like $200,000 or $300,000 in travel cost alone.” The interviewee

also reported minor time savings from not having to book flights and

manage travel.

For the composite organization, Forrester assumes that:

›

Employees avoid 50 trips in Year 2 once the organization has migrated

to OneDrive and begun rolling out Microsoft Teams to more users. By

Year 3, the total number of trips avoided by employees reaches 100.

›

Each trip has an average cost of $1,000.

›

The cost savings come to $45,000 in Year 2 and increase to $90,000

in Year 3.

The following risks can affect this benefit estimate:

›

The amount of time saved will vary based on how much business trips

factor into business operations and if there have already been travel

reductions made for cost savings.

To account for these risks, Forrester adjusted this benefit downward by

10%, yielding a three-year risk-adjusted total PV of $104,808.

Cost Savings From Microsoft 365 Apps Licensing: Calculation Table

REF.

METRIC

CALC.

YEAR 1

YEAR 2

YEAR 3

Total number of additional devices per user

Interviews

900

Average Office license per user annually

$144

Cost savings from Microsoft 365 Apps licensing

C1*C2

$129,600

Risk adjustment

↓10%

Ctr

Cost savings from Microsoft 365 Apps licensing

(risk-adjusted)

$116,640

13 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Reduced TCO —

technology infrastructure

cost savings: 13% of

total benefits

Reduced TCO — Technology Infrastructure Cost

Savings

Several of the interviewed organizations said they were able to retire

some third-party conferencing and storage platforms because of

Microsoft 365 Apps. “We are retiring third-party conference providers as

we move to cloud voice across the organization, with Microsoft Teams

being a solution that is part of that shift,” said the end user computing

design lead at a utilities company.

According to the interviewees, while they retired on-premise servers for

storage, they could not retire third-party storage systems entirely.

“There’s valid business use for previous storage solutions, especially for

external sharing of files,” said the enterprise IT architect at a healthcare

company. “However, in the day-to-day for regular storage, OneDrive is

being used most often. We’ve saved several hundred thousand dollars a

year in reducing our reliance on those solutions.”

For the composite organization, Forrester assumes that:

›

The composite replaces three third-party tools with functionality in

Microsoft 365 Apps. On average, each third-party tool costs the

organization $30 per user per year in license and infrastructure costs.

The organization gets 66% of this benefit in Year 1 as it completes its

phased rollout.

›

The organization avoids $350,000 in on-premises infrastructure

purchases and resulting maintenance costs by migrating to the cloud in

Year 1.

›

By simplifying the overall environment, moving to the cloud, and

increasing automation, the organization reduces its IT administration

effort. In the previous environment, four FTEs maintained the platform.

In the new environment (in the cost section below), three FTEs are

needed, resulting in a savings of one FTE. The average IT fully

burdened compensation (including all benefits and taxes) is $143,000

annually.

The following risks can affect this benefit estimate:

›

This benefit will vary based on the previous third-party solutions that

can be replaced or pricing can be negotiated.

›

License and infrastructure costs will vary from organization to

organization based on company size and business use.

To account for these risks, Forrester adjusted this benefit downward by

10%, yielding a three-year risk-adjusted total PV of $1,982,806.

Total Trip Costs Avoided: Calculation Table

REF.

METRIC

CALC.

YEAR 1

YEAR 2

YEAR 3

Total number of avoided trips

100

Average cost per trip

$1,000

Total trip costs avoided

D1*D2

$50,000

$100,000

Risk adjustment

↓10%

Dtr

Total trip costs avoided (risk-adjusted)

$45,000

$90,000

three-year

benefit PV

$2.0 million

14 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Flexibility, as defined by TEI,

represents an investment in additional

capacity or capability that could be

turned into business benefit for a future

additional investment. This provides an

organization with the "right" or the

ability to engage in future initiatives but

not the obligation to do so.

Unquantified Benefits

›

OneDrive for Business and Microsoft 365 Apps’ updated licensing

structure is making the business environment more flexible. In

one case, company culture was changing around being able to work

on any desktop in the office. The senior VP of customer-facing

technology at a financial services company said: “I wouldn’t be

surprised if 50% of our office desktops are made available for anyone

to work on. I don’t want to comment on the pros and cons of that, but

an attitude is forming among employees where they don’t have an

attachment to their physical desktop and will instead grab whichever is

available to be closer to certain colleagues or teams.”

›

Productivity savings assist in improving the employee

experience. Improvements from collaboration, file sharing, and having

a full feature set in Office can potentially contribute to improved quality

of life at work. Due to improved file-sharing and collaboration tools,

employees may feel relief at not being included in another long email

chain. Meanwhile, PowerPoint Designer may drive creativity for

improved slide layouts. The director of business management at an IT

company stated: “The improvement to the visualizations of PowerPoint

are helping me to illustrate my points in new ways. Whereas previously

I’d sometimes scour for third-party templates, it’s nice to have it right

there.”

Flexibility

The value of flexibility is clearly unique to each customer, and the

measure of its value varies from organization to organization. There are

multiple scenarios in which a customer might choose to implement

Microsoft 365 Apps and later realize additional uses and business

opportunities, including:

Reduced TCO — Technology Infrastructure Cost Savings: Calculation Table

REF.

METRIC

CALC.

INITIAL

YEAR 1

YEAR 2

YEAR 3

Cost savings from replacing prior third-

party tools

3 tools replaced,

average $30 per

user per year per

tool

$300,000

$450,000

Eliminated on-premise costs

Assumption

$350,000

$70,000

Prior ongoing IT administration (FTEs)

Interviews

IT fully loaded annual compensation

Interviews

$70,000

Reduced TCO — technology

infrastructure cost savings

(E1+E2)+(E3*E4)

$350,000

$650,000

$800,000

Risk adjustment

↓10%

Etr

Reduced TCO — technology

infrastructure cost savings (risk-

adjusted)

$315,000

$585,000

$720,000

15 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

›

Upgrading Microsoft 365 Apps license for additional features. The

business administrators interviewed for this study had different service

tiers of Office running at their organizations, including Office 365 E3

and Office 365 E5 — which include Microsoft 365 Apps. Interviewees

that had Office 365 E1 and Office 365 E3 spoke to the benefits of

Exchange, which integrates business-class email with other

applications and services for improved scheduling and file sharing.

Meanwhile, SharePoint and Yammer helped users create hubs for

project collaboration. Office 365 E5 license users had full access to

security features like Cloud App Security, Threat Intelligence,

Customer Lockbox, Office Advanced Threat Protection, Advanced

Compliance, and Advanced Data Governance, which enabled them to

decommission third-party security applications. Here’s what some

business administrators considered when choosing their Office plan:

• “We went with E5 because we’re big users of SharePoint,

Exchange, and their servers. Previously, we had to install each

product separately, and now they’re all a part of [Microsoft 365

Apps]. That all of the new Microsoft security features can be

included with the license is a bonus.”

• “We went with E3. We were looking at E5 but have a lot to do

right now in terms of migrating SharePoint sites and making

sure all of our employees are on [Microsoft 365 Apps], then

seeing how things are running with the software.”

16 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

The table above shows the total of all

costs across the areas listed below, as

well as present values (PVs)

discounted at 10%. Over three years,

the composite organization expects

risk-adjusted total costs to be a PV of

nearly $6.7 million.

Implementation risk is the risk that a

proposed investment may deviate from

the original or expected requirements,

resulting in higher costs than

anticipated. The greater the

uncertainty, the wider the potential

range of outcomes for cost estimates.

Analysis Of Costs

QUANTIFIED COST DATA AS APPLIED TO THE COMPOSITE

License Costs

The composite organization purchases 5,000 Microsoft 365 Apps

licenses over the three-year period; the costs per user total $144

annually. Installations of 365 apps occur across the organization in Year

The following risk factors may affect costs incurred by organizations:

›

Microsoft 365 Apps licensing costs vary based on service plan type

and volume-related discounts.

To account for these risks, Forrester adjusted this cost upward by 5%,

yielding a three-year risk-adjusted total PV of $1,880,060.

Planning, Implementation, And Deployment Costs

Costs related to planning, implementation, and deployment vary

significantly based on the timeline for rollout, professional services used

for migration, types of solutions deployed, and the number of devices.

Organizations often use professional services to accelerate deployment

time and to assist with configurations and integrations.

Total Costs

REF.

COST

INITIAL

YEAR 1

YEAR 2

YEAR 3

TOTAL

PRESENT

VALUE

Ftr

License costs

$756,000

$2,268,000

$1,880,060

Gtr

Planning, implementation,

and deployment costs

$2,931,063

$1,695,100

$216,200

$5,058,563

$4,813,174

Total costs (risk-adjusted)

$2,931,063

$2,451,100

$972,200

$7,326,563

$6,693,234

License Costs: Calculation Table

REF.

METRIC

CALC.

INITIAL

YEAR 1

YEAR 2

YEAR 3

Number of Microsoft 365 Apps

users

5,000

Office license cost per user annually

$144

License costs

F1*F2

$720,000

Risk adjustment

↑5%

Ftr

License costs (risk-adjusted)

$756,000

17 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Planning,

implementation, and

deployment costs: 58%

of total costs

›

The composite has a 10-month initial deployment period. During this

time, the organization stands up the solutions and completes early

testing and deployments.

›

The composite uses $1.8 million in professional services during the

initial period and $1 million in professional services to complete the

rollout during Year 1.

›

The organization needs six FTEs for implementation and deployment

in Year 1. After completing testing, two FTEs oversee finalizing

integration in Year 2. The composite needs one FTE going forward for

management and administration of the systems.

›

The average IT fully burdened cost (including all benefits and taxes) is

$143,000 annually.

›

Additional technology costs for moving and backing up data total

$33,750 in Year 1 and $45,000 in Years 2 and 3.

The following risks can affect this cost estimate:

›

The organization may already have cloud storage or plan to create a

hybrid environment where it doesn’t fully decommission its on-premise

services.

›

Costs will vary based on the size and scope of the deployment, the

number of FTEs required, and the amount of professional services

support needed.

To account for these risks, Forrester adjusted this cost upward by 15%,

yielding a three-year risk-adjusted total PV of $4,813,174.

Planning, Implementation And Deployment Costs: Calculation Table

REF.

METRIC

CALC.

INITIAL

YEAR 1

YEAR 2

YEAR 3

Number of months

Interview

Internal FTEs for planning

and implementation

Interview

Professional service costs

Assumption

$1,800,000

$1,000,000

Additional technology spend

Assumption

$33,750

$45,000

Internal FTEs for ongoing

management and

administration

Interview

IT fully loaded annual

compensation

Assumption

$143,000

Planning, implementation

and deployment costs

((G1/12)*(G2+G5)*G6)

+G3+G4

$2,548,750

$1,474,000

$188,000

Risk adjustment

↑15%

Gtr

Planning, implementation

and deployment costs (risk-

adjusted)

$2,931,063

$1,695,100

$216,200

three-year

cost PV

$4.2 million

18 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

The financial results calculated in the

Benefits and Costs sections can be

used to determine the ROI, NPV, and

payback period for the composite

organization’s investment. Forrester

assumes a yearly discount rate of 10%

for this analysis.

Financial Summary

CONSOLIDATED THREE-YEAR RISK-ADJUSTED METRICS

Cash Flow Chart (Risk-Adjusted)

-$4.0 M

-$2.0 M

$2.0 M

$4.0 M

$6.0 M

$8.0 M

$10.0 M

$12.0 M

$14.0 M

Initial Year 1 Year 2 Year 3

Cash

flows

Total costs

Total benefits

Cumulative net benefits

These risk-adjusted ROI,

NPV, and payback period

values are determined by

applying risk-adjustment

factors to the unadjusted

results in each Benefit and

Cost section.

Cash Flow Table (Risk-Adjusted)

INITIAL

YEAR 1

YEAR 2

YEAR 3

TOTAL

PRESENT

VALUE

Total costs

($2,931,063)

($2,451,100)

($972,200)

($7,326,563)

($6,693,234)

Total benefits

$315,000

$3,477,769

$6,433,898

$8,534,302

$18,760,969

$15,205,826

Net benefits

($2,616,063)

$1,026,669

$5,461,698

$7,562,102

$11,434,407

$8,512,592

ROI

127%

Payback period

16 months

19 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Microsoft 365 Apps: Overview

Microsoft 365 Apps is the always up-to-date suite of desktop apps that includes Word, PowerPoint, Excel,

Outlook, and Teams, available as a subscription. Microsoft 365 Apps includes exclusive intelligent capabilities

like Ideas in Excel and Researcher in Word, real-time collaboration, Microsoft Teams as the hub for teamwork,

and advanced security features. As a user-based license, you can deploy Office on up to five PCs or Macs, five

tablets, and five mobile devices. And with 1 TB of OneDrive cloud storage, you can access and collaborate on

your files from anywhere.

20 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Appendix A: Total Economic Impact

Total Economic Impact is a methodology developed by Forrester

Research that enhances a company’s technology decision-making

processes and assists vendors in communicating the value proposition

of their products and services to clients. The TEI methodology helps

companies demonstrate, justify, and realize the tangible value of IT

initiatives to both senior management and other key business

stakeholders.

Total Economic Impact Approach

Benefits represent the value delivered to the business by the

product. The TEI methodology places equal weight on the

measure of benefits and the measure of costs, allowing for a

full examination of the effect of the technology on the entire

organization.

Costs consider all expenses necessary to deliver the

proposed value, or benefits, of the product. The cost category

within TEI captures incremental costs over the existing

environment for ongoing costs associated with the solution.

Flexibility represents the strategic value that can be

obtained for some future additional investment building on

top of the initial investment already made. Having the ability

to capture that benefit has a PV that can be estimated.

Risks measure the uncertainty of benefit and cost estimates

given: 1) the likelihood that estimates will meet original

projections and 2) the likelihood that estimates will be

tracked over time. TEI risk factors are based on “triangular

distribution.”

The initial investment column contains costs incurred at “time 0” or at the

beginning of Year 1 that are not discounted. All other cash flows are discounted

using the discount rate at the end of the year. PV calculations are calculated for

each total cost and benefit estimate. NPV calculations in the summary tables are

the sum of the initial investment and the discounted cash flows in each year.

Sums and present value calculations of the Total Benefits, Total Costs, and

Cash Flow tables may not exactly add up, as some rounding may occur.

Present value (PV)

The present or current

value of (discounted) cost and

benefit estimates given at an

interest rate (the discount rate).

The PV of costs and benefits feed

into the total NPV of cash flows.

Net present

value (NPV)

The present or current value of

(discounted) future net cash flows

given an interest rate (the discount

rate). A positive project NPV

normally indicates that the

investment should be made, unless

other projects have higher NPVs.

Return on

investment (ROI)

A project’s expected return in

percentage terms. ROI is

calculated by dividing net benefits

(benefits less costs) by costs.

Discount

rate

The interest rate used in cash flow

analysis to take into account the

time value of money. Organizations

typically use discount rates

between 8% and 16%.

Payback

period

The breakeven point for an

investment. This is the point in time

at which net benefits (benefits

minus costs) equal initial

investment or cost.

21 | The Total Economic Impact™ Of Microsoft 365 Apps for enterprise

Appendix B: Supplemental Material

Related Forrester Research

“The Total Economic Impact Of Microsoft 365,” Forrester Consulting report prepared for Microsoft, July 2019

“The Total Economic Impact Of Microsoft Teams,” Forrester Consulting report prepared for Microsoft, April 2019

(https://www.microsoft.com/en-us/microsoft-365/blog/wp-content/uploads/sites/2/2019/04/Total-Economic-

Impact-Microsoft-Teams.pdf)

“New Tech TEI: The Total Economic Impact Of Microsoft 365 AI For Knowledge Workers,” Forrester Consulting

report prepared for Microsoft, February 2019

(https://query.prod.cms.rt.microsoft.com/cms/api/am/binary/RWrZsV)