Forrester Total Economic Impact Study

Forrester TEI Study
Paul Hampton
Director of Product Marketing

Maidenhead, UK Global Headquarters
Atlanta, US Headquarters

Alfresco is now the largest open source
content management company in the world.

Founded in 2005, with ofﬁces in London & Atlanta
Over 3.5 million community downloads
250+ global channel partners
2,500 customers in 55 countries, including…

The Document Management
Alfresco

Platform Records Management

Web Content Services

Enterprise Collaboration

Open Source Platform

Government
Finance
Media & Entertainment

Software
Retail

Travel & Logistics
Manufacturing
Education

The Total Economic Impact™ of Alfresco
Enterprise Content Management Solution

Stephen Powers – Principal Analyst & Research Director
Sebastian Selhorst –TEI Consultant
1st of February 2012

5 © 2011 Forrester Research, Inc. Reproduction Prohibited Research, Inc. Reproduction Prohibited
© 2009 Forrester

Agenda

§  ECM Market Overview
§  What Is Total Economic Impact (TEI)?

§  Study overview

§  Key findings from the case study
–  Costs
–  Benefits
–  Risk adjustments

§  Conclusions and ROI

6 © 2011 Forrester Research, Inc. Reproduction Prohibited

What is ECM?
Software used by an enterprise to manage, retain,
and put to use unstructured information such as
office documents, document images, Web content,
rich media, corporate records, and computer output


Organizations without ECM


Organizations recognize the importance of ECM, and
continue to invest
“Over the next 12 months, how will your deployments or usage of
ECM change? Will the number of deployments or usage . . . ?”

Remain the
same
20%

Be scaled
back
4%
Don't know
5%

Increase
71%

Base: 252 ECM decision-makers
Source: Forrester’s October 2011 Global Enterprise Content Management Online Survey

ECM can help organize your content throughout it’s
lifecycle

Create Publish

Workflow
Content
Collaboration Repository
Promote
Review/ (Records
Approve Management)

Version Archive
Approve
Workflow

Revise Destroy


Drivers for ECM selection

§  Compliance needs
§  Archiving

§  Better content search

§  Policy instrumentation and management across
multiple repositories

§  eDiscovery support, proactive support models

§  Moving employees off of file systems and sharing
documents through email

§  Collaboration and Social


Content comes in three “flavors”

Source: “Plan Your ECM Strategy For Business, Persuasive, Transactional, And Foundational Needs”

ECM technologies support each part of the content
spectrum


ECM suites are still an ideal; multiple systems
support different content types
“How many enterprise content management solutions
are currently utilized by your firm?”
Two
21%

Three or more
42%

One
31%
Zero
6%

Content-centric technologies within the ECM
functionality sets


Content-centric technologies within the ECM
functionality sets (cont.)


What’s changing the ECM market?

§  Proliferation of “SharePoint for the masses” that merges a powerful
collaboration platform with ECM.

§  Application-specific strategies

§  Content-focused solutions offer an alternative to the once highly-touted
ECM suite ideal

§  Cloud deployments

§  Industry-specific solutions


Snapshot of the ECM market
Traditional ECM suite vendors
•  End-to-end ECM offerings that manage all four content types on a single
platform.

Open source solutions
•  Open source solutions that tend to focus on a subset of content types.

Content-focused vendors
•  Focus on specific content technologies instead of trying to be one-size-fits-all
solutions.

Cloud vendors
•  Cloud-based solutions that tend to reduce initial startup costs and streamline
implementations

Industry-specific players
•  Vendors who focus on ECM for specific verticals (e.g. healthcare, legal, and
higher education).

European vendors
•  Some vendors focus on regional markets.


But implementing ECM isn't as it may seem
“What are the biggest challenges facing ECM in your
organization today? Select all that apply.”



Where to start? Define ECM strategy

Do you have an ECM strategy that balances IT, risk, and business needs?

Have you categorized which types of content you will be supporting?

Have you considered all the ECM components that you may or may not
need?

Have you considered how online content fits into the overall customer
experience management ecosystem?


Use best practices to guide ECM implementations

§  Engage stakeholders throughout the project lifecycle
§  Have strong governance policies and establish a governance board

§  Take a multichannel and customer view

§  Empower business users

§  Agility will be the new mantra

§  Build high octane taxonomies

§  Assess metadata concerns at every phase


Agenda



–  Costs
–  Benefits



What is Total Economic Impact?
§  Forrester’s TEI is the “Language of Value”
§  TEI ≠ TCO
–  TEI provides a complete economic picture of tech purchase decisions
§  Captures and quantifies the voice of the customer relative to technology
investments
–  Based on existing customer experience with the product/service
§  Third-party, objective case study
§  The four fundamental elements of TEI:


Agenda



–  Costs
–  Benefits



Study Overview - The TEI Process

Conduct Construct financial
Perform due Design composite Write case
customer model using TEI
diligence organization study
interviews framework

§  Customers for the interviews were provided by Alfresco:
–  A large financial service organization

–  A large provider of quality information serving with more than 15,000 employees

–  A large US health insurer with more than 8,000 employees

–  A global pharmaceutical and chemical company with around 40,000 employees

§  All of the interviewed organizations have used Alfresco in production
for more than ten months


Study Overview – Interview Highlights

§  All of the interviewed organizations already had experience with ECM
solutions from other vendors

§  Alfresco platform was deployed as part of a new initiative within the company

§  The common business objectives for deploying Alfresco were to:
–  Achieve a well-integrated and flexible document management environment

–  Give access to document management capabilities to a large number of users

–  Contain the software licenses and maintenance costs

§  Overall integration took between 2 to 6 months

§  Number of end users: between 300 and 35,000

§  Number of documents managed by Alfresco: between 100,000 and 3.5 million


Study Overview – Interview Highlights (continued)
§  Alfresco's commercial open source model well accepted
–  Cost-effective and managed solution
–  High degree of innovation
–  Increased developer productivity and control over the ECM
environment

§  Three out of four interviewees were participating in Alfresco’s open
source community.
§  Common integration challenge: efforts for rollouts were often
underestimated. A way to mitigate these implementation risks was
to hire or contract with highly experienced consultants and Java
developers.


Study Overview – The Composite Organization

§  The composite organization that has been created for this study
has following characteristics:
–  A large financial services company based in the US

–  About 10,000 employees in 15 countries

–  Huge volume of unstructured content stored in different point content
management solutions and on local shared drives

–  Objective: create a new knowledge-sharing and collaboration platform
accessible by all employees


Agenda



–  Costs
–  Benefits



Costs: Total costs (non-risk-adjusted)

26% 29% §  Alfresco subscription

§  Integration costs

9% §  Hardware investment

§  Training costs
36%

Initial Year 1 Year 2 Year 3 Total PV*

Total costs ($578,000) ($106,000) ($106,000) ($106,000) ($896,000) ($841,606)
* Present Value


Benefits: Avoided Software License Costs

§  Avoid software licenses and maintenance costs for an alternative
commercial ECM solution

§  Assumptions
–  Avoided upfront license fee including first-year maintenance: $800,000
–  Annual software maintenance costs as percentage of upfront license fee: 18%

§  3 -year non-risk adjusted benefit (present value) of $ 954,470

Year 1 Year 2 Year 3 Total PV*
Avoided Software License
$800,000 $144,000 $144,000 $1,088,000 $954,470
Costs
* Present Value

Source: Forrester Research, Inc.

Benefits: IT Maintenance Cost Savings

§  Composite organization gets rid of several point content management
solutions at departmental level and part of their local shared drives

§  Resulting in a reduction of efforts regarding administration, maintenance,
upgrades, and governance

–  Composite organization was able to re-assign the equivalent of 1 full-time
resources to other tasks
–  average annual fully loaded compensation of $100,000

§  3 -year non-risk adjusted benefit (present value) of $248,685

Total IT Maintenance Cost
$100,000 $100,000 $100,000 $300,000 $248,685
Savings
* Present Value


Benefits: Use Of Less Expensive Developer Resources

§  The interviewed organizations reported that it was easier and more cost-
efficient to find and hire skilled Java developers than developers with
special knowledge about a commercial ECM solution

–  Composite organization hires two more Java developers at an average fully
loaded annual salary of $100,000 instead of two specialized ECM developers
at a 40% higher rate.


Use Of Less Expensive
$80,000 $80,000 $80,000 $240,000 $198,948
Developer Resources
* Present Value


Benefits: IT Cost Avoidance Due To Use Of Open
Source Stack

§  The Alfresco platform supports the full open source stack. Some of the
interviewed organizations actually took advantage of it and decided to use
an open source database instead of a commercial database

–  Avoided commercial database license cost: $30,000
–  Avoided annual database maintenance costs: $6,000


IT Cost Avoidance Due To
$36,000 $6,000 $6,000 $48,000 $42,194
Use Of Open Source Stack
* Present Value


Benefits: Integration And Development Efficiencies

§  The interviewed companies that had experience with the integration
between Alfresco and different enterprise tools reported productivity gains
for their IT staff mainly due to the access to the source code, the use of a
common programmer language, and the support of the open source
community

–  Composite organization integrates Alfresco ECM with its CRM system
–  One-time cost savings of $50,000


Integration And Development
$50,000 $0 $0 $50,000 $45,455
Efficiencies
* Present Value


Benefits: Total benefits (non-risk-adjusted)
Avoided software license costs $800,000 $144,000 $144,000 $1,088,000 $954,470

IT maintenance cost savings $100,000 $100,000 $100,000 $300,000 $248,685

Use of less expensive developer
$80,000 $80,000 $80,000 $240,000 $198,948
resources
IT cost avoidance due to use of
$36,000 $6,000 $6,000 $48,000 $42,194
open source stack
Integration and development
$50,000 $0 $0 $50,000 $45,455
efficiencies

Total benefits $1,066,000 $330,000 $330,000 $1,726,000 $1,489,752
3% 3%
Avoided software license costs

13% IT maintenance cost savings

Use of less expensive developer resources
17%
64% IT cost avoidance due to use of open source stack

Integration and development efficiencies
* Present Value

Future potential flexibility options

By introducing Alfresco ECM, the composite organization also
created options for realizing more benefits in the future in a variety of
ways:

§  Replacement of other commercial enterprise document management
solutions

§  Integration with other enterprise tools

§  Powering a company intranet


Risk-adjustment factors
The risk component in the TEI methodology is used as a filter to capture the uncertainty
surrounding different cost and benefit estimates.

If a risk-adjusted ROI still demonstrates a compelling business case, it raises
confidence that the investment is likely to succeed.
Low Original High Mean

Alfresco subscription 98% 100% 105% 101%

Integration costs 100% 100% 115% 105%
Costs
Hardware investment 98% 100% 105% 101%

Training costs 98% 100% 105% 101%

Avoided software license costs 50% 100% 100% 83%

IT maintenance cost savings 90% 100% 105% 98%

Benefits Use of less expensive developer resources 90% 100% 105% 98%

IT cost avoidance due to use of open source stack 90% 100% 105% 98%

Integration and development efficiencies 90% 100% 105% 98%


Agenda



–  Costs
–  Benefits



Financial summary, ROI, and payback period
Through interviews with 4 Alfresco customers, Forrester found that these
organizations benefit from the deployment of Alfresco’s ECM solution in the
form of:
–  Avoided software license and maintenance fees
–  IT maintenance cost savings
–  Use of less expensive developer resources
–  IT cost avoidance due to use of open source stack
–  Integration and development efficiencies
3 year risk-adjusted estimate

ROI 53%
Payback period (months) 10 months after go live
Total costs (present value) ($862,022)
Total benefits (present value) $1,316,786
Net present value $454,764


Factors affecting benefits and costs

§  Technology supported by the company

§  Prior experience with open source products

§  Prior experience with enterprise-wide ECM deployments

§  Scope and functional requirements

§  Control of customizations


Questions?
•  Download the Forrester TEI study
–  http://bit.ly/alf-tei

•  Download Alfresco Enterprise
–  http://bit.ly/alf-try

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