Previously, I discussed how user adoption impacts the business value of Microsoft Office 365 (O365). In this blog I decipher how O365 promises business value.
The decision to use O365 is made for a number of reasons. According to Gartner research, approximately 70% of survey respondents indicated “licensing or costs” and “shifting workloads to the cloud” as the primary reasons for deciding to use O365.
It is interesting to note, however, that for this write-in item on the survey, only 19% of respondents identified “new ways of working” as a primary or secondary reason for using O365. The remaining 81% of responses would not be categorized as reasons related to enabling digital transformation. It should be noted that this is just data from one survey, and it is difficult to speculate to the reasons for the few selections of “new ways of working.”
Gartner suggested that a significant number of companies base their decisions to use O365 for an abundance of reasons that seem to be related to IT cost reduction, but not enough companies are basing their decisions on business value. Gartner concluded, “In addition, business cases should not underplay the importance of delivering a better service, enabling new ways of working (through mobile support and better collaboration), and benefiting from Microsoft’s product development focus on O365.”
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Much of the data regarding the use and business value of O365 is survey data. This data can provide some valuable information but often fails to answer the question, “What is the business value of O365?” Attempts to quantify business value sometimes take the form of various versions of a return on investment (ROI) analysis. This type of analysis compares the costs (or investment) to returns over time, discounted by a risk-adjusted rate that takes into account the value of money over time.
The most notable and comprehensive of these O365 ROI analyses are Forrester’s “Total Economic ImpactTM” series of articles published in 2011, 2014, and 2017. In the 2014 ROI analysis, for example, Forrester reveals an ROI of 162% and a comprehensive cost/benefit analysis of a “composite” organization yielding total benefits of $8.8 million versus total costs of $3.2 million, resulting in a net present value (NPV) of $5.6 million.
Although the analysis is comprehensive and compelling, it was based on a “composite” organization, which was fundamentally hypothetical. For some, this analysis may have been discounted or marginalized because the organization used for the ROI was not “real.”
Forrester applied the same type of ROI analysis to a real organization (Advocate Health Care), which is a Chicago network of hospitals with multiple years of experience using O365. Based on Advocate’s data for a three-year period, Forrester’s analysis found an ROI of 63% with annual savings/benefits of approximately $26 million versus annual costs of about $10 million, resulting in a net present value (NPV) of $20.7 million.
Relative to Microsoft’s positioning of Office 365 as a solution for “reinventing productivity for digital transformation,” Forrester summarized the transformative benefits of O365 across four categories: Collaboration, Mobility, Intelligence, and Trust.6
The Forrester research with Advocate Health Care points to some real examples of how O365 applications can directly provide business benefits. It is worth noting, however, that the cumulative benefits did not begin accruing until year two, with a payback period of 15 months, which is fairly typical of these types of ROI studies. Astute questioners of technology business value may ask questions like: Why is the payback period so long? Can the payback period be shortened and by how much? What are the most significant levers for shortening the payback period?
To learn more about how Office 365 solutions deliver business value, corrects misleading assumptions between the promise and potential of O365, and offers suggestions on how you can achieve high user adoption levels, you can click here or submit the form below.