In 2020, at the request of Microsoft, Forrester Consulting conducted a Total Economic Impact™ (TEI) study to assess the potential return on investment (ROI), that businesses can achieve through Dynamics 365 Business Central. Let's take a look at its results.
How was the study conducted?
To better understand the challenges and needs of Business Central users, Forrester conducted a survey among five companies using the system. Based on received from them information, a composite organization was created. Using the TEI methodology, a representative financial model was developed, taking into account the risks arising from the concerns and issues of the surveyed companies. Four pillars of the TEI methodology were used for modeling the impact of investments: benefits, costs, flexibility, and risk.
What challenges did companies face before implementing Business Central?
Among the major issues faced before implementation, the surveyed companies most often pointed to:
- Use of various IT tools: the programs in use were unable to fully meet the company's needs, necessitating the addition of more systems. The problem turned out to be their integration and data flow. Missing functionalities required additional system modifications. All of this led to significant problems in daily use and generated unnecessary costs.
- Difficulty scaling existing ERP tools: adapting outdated on-premises solutions to the constantly growing needs of the organization often proved technically impossible due to their limitations and financially unfeasible. At the same time, when searching for a new system, respondents often encountered platforms that, from their perspective, were too advanced for smaller organizations.
- Difficulty maintaining current versions of existing systems: IT department employees often lacked the ability to continuously update existing solutions. This affected both security and functionality.
Benefits of implementing Business Central
The surveyed companies highlighted the following benefits of implementing Dynamics 365 Business Central:
- Improved functionality in the finance and operations area: this results from the automation of key processes, better access to the system from various devices, and increased transparency throughout the financial area.
- Reduction in financial expenditure on ERP tools: by transitioning to the cloud-based Business Central system, companies eliminated expenses for additional licenses, maintenance and service of their own infrastructure.
- Greater scalability of ERP solutions: transitioning to the cloud provides scalability that is unattainable for on-premises solutions. This is particularly important for small and medium-sized enterprises (SMEs) as their growth requires flexibility in adapting to changing needs.
Implementation of Business Central in the composite organization – effects
The composite organization created for the study is a local manufacturing company that sells its products through various channels. Its value was estimated at $15 million, employing 250 people and achieving an annual growth rate of 10%. It had previously used various on-premises tools and is now migrating to Dynamics 365 Business Central. Due to technical reasons, the implementation was planned in stages over the next three years, with 50% to be completed in the first year. The agreement includes 15 Business Central Enterprise licenses for personnel in the finance and operations areas. In the study, Forrester highlights the following effects of implementing the new system:
- Reduced need to increase staffing in finance departments: previously, with the company's growth, it was necessary to increase staff in the finance and operations areas. With a ten percent growth rate for the model organization, the need for employment was reduced by one full-time and one part-time position.
- Increased employee efficiency due to improved workflow: fifteen users with Business Central licenses save 8% of their working time devoted to current tasks.
- Avoidance of costs for third-party reports: previously, the company used third-party companies to prepare quarterly reports. The cost of each report was estimated at $5,000.
- Avoidance of maintance costs for previous solutions: composite organization saves $15,000 annually on licenses and infrastructure maintenance. Savings also include IT specialists' working hours – the demand for their services has decreased by 16 hours per month.
Forrester also highlights benefits that are difficult to quantify. These include an improved user experience, easy integration with other Microsoft products, ease of decision-making due to always up-to-date data, and the system's high flexibility.
Return on investment in Dynamics 365 Business Central
The study calculated the exact costs and savings resulting from the implementation of Business Central over three years. It also calculated the percentage return on investment and the time at which the system will pay off. For the model organization, the ROI is as high as 162%! This means that the expenses for implementing Dynamics 365 Business Central will be recouped in less than a year.
Source: The Total Economic Impact™ Of Microsoft Dynamics 365 Business Central