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8/13/2019 The Total Economic Impact of Windows Embedded Intelligent Systems in Retail
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8/13/2019 The Total Economic Impact of Windows Embedded Intelligent Systems in Retail
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TABLE OF CONTENTS
Executive Summary .............................................................................................................................................................. 2
Windows Embedded Simplifies The Implementation, Management, And Support Of Enterprise Retail Devices ...... 2
Factors Affecting Benefits And Costs ............................................................................................................................. 5
Disclosures........................................................................................................................................................................ 6
TEI Framework And Methodology ...................................................................................................................................... 7
Analysis ................................................................................................................................................................................. 9
Key Interview Findings .................................................................................................................................................... 9
Costs ............................................................................................................................................................................... 11
Benefits ........................................................................................................................................................................... 14
Flexibility ........................................................................................................................................................................ 18
Risk ................................................................................................................................................................................. 18
Financial Summary ............................................................................................................................................................. 21
Windows Embedded: Overview ......................................................................................................................................... 23
Appendix A: Composite Organization Description ........................................................................................................... 24
Appendix B: Total Economic Impact Overview ............................................................................................................ 24
Appendix C: Glossary ......................................................................................................................................................... 25
2012, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources.
Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total
Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional
information, go to www.forrester.com.
http://www.forrester.com/consulting8/13/2019 The Total Economic Impact of Windows Embedded Intelligent Systems in Retail
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In January 2012, Microsoft commissioned Forrester Consulting to examine the total economic impact and potential
return on investment (ROI) that enterprise retailers may realize by deploying Windows Embedded operating systems in
their front-of-store retail devices as well as their back-of-store operations and management devices. These might
include point-of-sale systems, point-of-service systems, informational kiosks, self-service checkouts, digital signage,
handheld terminals, gift registries, or other related retail-specific devices or systems.
The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of using
Windows Embedded for their intelligent systems and embedded device requirements within their organization. The
study is based on a financial model of an organizations typical experience with Windows Embedded over a three-year
period, examining the costs, benefits, risks, and flexibility provided by using the operating systems for embedded
devices in a retail environment. This model was constructed based on input from seven Microsoft enterprise retail
customers. Additionally, the study discusses the experiences of the interviewed customers to provide additional
background and clarity. Overall, the study finds that the investment in Windows Embedded provides a positive ROI of
48 percent, with a payback in approximately 17 months.
Windows Embedded is a leading provider of intelligent systems and offers a portfolio of retail-purposed operating
systems to enable enterprise retailers to deliver shopping experiences that are personal, seamless, and differentiated. In
one-on-one personal interviews with Microsoft, Forrester learned that Microsofts point of view in retail is grounded in
delivering intelligent systems to deliver shopping experiences that are personal to each shopper, seamless across every
point of interaction, and differentiated in a way that increases a retailers uniquebrand value. By providing a single
platform of reliable, highly secure, and flexible technologies, the Windows Embedded portfolio of products equips
retailers to quickly adapt business models to changing business climates, productively absorb disruptions in technology,accommodate individual customer preferences, identify and exploit new opportunities, and address regulatory pressures
as they arise (e.g. payment card industry) from a position that is informed by actionable intelligence.
For enterprise retailers, the inherent value of an intelligent system that uses Windows Embedded technology is that it
can capture, track, and manage the data that is collected on the devices; they can then use that data to make better
decisions as well as to glean deep insight and business intelligence. Intelligent systems represent what many expect will
be the future of business.
To understand the financial impact of using Windows Embedded, Forrester interviewed seven companies of varied
environments and needs. Some of these were large retailers, including grocery and department store chains, while some
were specialty retailers with boutique stores. These organizations used different versions of Windows Embedded
some used earlier versions, while others had deployed or planned to deploy new versions. However, all of the retailers
interviewed were able to articulate the impact that Windows Embedded had on their organizations, and many could
discuss either the current or the projected impact of the operating system on their organizations. We have synthesized
these responses into a single financial model to understand the total economic impact of a Windows Embedded
deployment on a sample organization.
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Based on the interviews with the seven existing customers, Forrester constructed a Total Economic Impact (TEI)
framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The
composite organization that Forrester synthesized from these results represents a large retailer, with approximately
50,000 employees and 1,000 stores. We assume that each store uses Windows Embedded for cash registers, point-of-
service systems, point-of-sale systems, self-service checkouts, informational kiosks, digital signage, handheld
terminals, and other retail-specific devices.
In developing the financial model to capture the experiences of the various organizations, Forrester observed several
trends. Although the lower overall cost of using the Windows Embedded operating system with existing Microsoft
products, services, and technologies was a factor, interviewees commented that It wasnt just a cost decision . . . it was
about functionality and value. Retailers indicated that key features included the stability of the operating system, the
familiarity of the user interface for both developers and users, and the ability to use and connect Windows Embedded to
a variety of retail industryspecific devices
As the interviewed organizations included a variety of retailersfrom boutique department stores to general
merchandisers and large grocery, food, and beverage retailersnot every benefit described in the interviews isrelevant to this composite organization. This study includes customer-driven qualitative benefits and examples as well
as economic benefits as included in the financial model.
Through confidential interviews conducted by Forrester with the Windows Embedded retail customers and our TEI
financial analysis, we found that a composite organization, based on the interviews and modeled on a large enterprise
retailer, experienced the risk-adjusted ROI, payback period, total benefits and costs of present value (PV), and net
present value (NPV) shown in Table 1.
In Table 1 and subsequent tables, the NPV is calculated in order to incorporate the time value of money over the three-
year period of the analysis. While this study looks at a three-year period, as per our TEI methodology, most enterprise
retailers look at a longer period of time. In situations where the period is longer than three years, the total economic
return and benefits for Windows Embedded customers would be greater.
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Benefits.The composite organization experienced the following benefits:
o Significant reduction in training time.As a result of the use of a familiar interface, the composite
organization is able to reduce its new employee training needs by two-thirds, down from three hours to less
than a single hour. With an average of 10,000 employees requiring system training each year, this yields a
three-year risk-adjusted PV of $738,595.
o Software failure rates cut in half.With the more stable operating environment provided by Windows
Embedded, the composite organization can be expected to reduce its service tickets for point-of-service and
other retail enterprise devices by 50 percent, leading to a three-year risk-adjusted net present value of
$168,310.
o Lower systems management and server costs.By centralizing servers in the data center rather than having
them distributed in stores, the composite organization was able to consolidate its upfront software spend and
save $300,000. The three-year risk-adjusted net present value of the cost avoidance is $270,000.
o Elimination of redundant administration costs.With the ability to manage and roll out a single golden
image, the composite organization was able to avoid an additional administration resource. The three-year
risk-adjusted net present value of the savings to the organization is $246,198.
o Reduction in the number of development resources.The use of Windows Embedded offers a familiar
interface and toolset for developers. Taking advantage of the features and drivers included with the retail-
specific version of Windows Embedded allows the composite organization to avoid an additional five
development resources. The total three-year risk-adjusted impact is a savings of $1,519,467.
Costs.The composite organization experienced the following costs:
1Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more
information on risk, please see the section on risk later in this document.
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o Licenses.The composite organization required a total of 15,000 point-of-service licenses at a three-year
risk-adjusted present value of $1,481,250.
o Servers.The composite organization put in centralized servers in a data center at a total three-year risk-
adjusted present value of $108,000.
o Microsoft support.The composite organization has an annual support contract with Microsoft, of which we
attribute 50 percent to the support of Windows Embedded. This yields a total three-year risk-adjusted
present value of $402,870.
Figure 1 illustrates the risk-adjusted financial results that were achieved by the composite organization. As evidenced
by the graph, the initial investment and ongoing costs are outweighed by the benefits achieved, with payback achieved
after approximately 17 months. The risk-adjusted values take into account any potential uncertainty or variance that
exists in estimating the costs and benefits, which produces more conservative estimates. The following factors may
affect the financial results that an organization could experience:
The use of Windows Embedded will vary based on the type of company. Although the composite organization is
a large retailer, the interviews included in this case study included boutique retailers and large food and grocery
($2,000,000)
($1,500,000)
($1,000,000)
($500,000)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
($2,000,000)
($1,500,000)
($1,000,000)
($500,000)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
Initial Year 1 Year 2 Year 3CashFlow
Total Costs Total Benefits Running Total
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store chains, among others. The ROI will vary depending on how Windows Embedded is used in the
environment.
The return in this case study is driven in part by the ability of the composite organization to move from servers in
retail locations to a centralized cluster, which was enabled in part by the use of Windows Embedded. This will
vary depending on the needs and technology state of the company.
Forrester has included a discrete license cost for Windows Embedded. However, some of the retailers
interviewed cited a bundled cost with their chosen software, so would not consider a discrete license cost for the
operating system software. For the purposes of this analysis, Forrester has not included the cost of the devices
themselves, as this is considered to be constant regardless of operating system.
The reader should be aware of the following:
The study is commissioned by Microsoft and delivered by the Forrester Consulting group.
Forrester makes no assumptions as to the potential ROI that other organizations will realize. Forrester strongly
advises that readers should use their own estimates within the framework provided in the report to determine the
appropriateness of an investment in Windows Embedded.
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 Forresters findings or obscure the
meaning of the study.
The customer names for the interviews were provided by Microsoft.
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From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI)framework for those organizations considering implementing Windows Embedded in a retail setting. 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 Windows Embedded can have on an organization (see
Figure 2). Specifically, we:
Interviewed seven large retailers currently using Windows Embedded to obtain fact-based metrics as well as
qualitative customer data with respect to costs, benefits, risks, and flexibility.
Designed a composite organization based on characteristics of the interviewed retail organizations (see AppendixA).
Constructed a financial model representative of the interviews using the TEI methodology. The financial model
is populated with the cost and benefit data obtained from the interviews as applied to the composite organization.
Interviewed key Forrester industry analysts to gather data relative to Windows Embedded and the marketplace
for Windows Embedded, specifically in the retail enterprise space.
Interviewed members of the Windows Embedded leadership team as well as solution sales specialists. In addition
to interviewing the Windows Embedded team, Forrester interviewed members in the Original Equipment
Manufacturer (OEM) group as well as in the Microsoft Enterprise Retail Industry leadership team.
Forrester employed four fundamental elements of total economic impact in modeling the impact of Windows
Embedded on retail organizations:
1. Costs.
2. Benefits to the entire organization.
Design composite
organization
Construct financial
model using TEIframework
Write case
study
Perform due
diligence
Conduct
customerinterviews
8/13/2019 The Total Economic Impact of Windows Embedded Intelligent Systems in Retail
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3. Flexibility.
4. Risk.
Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, ForrestersTEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase
decisions. Please see Appendix B for additional information on the TEI methodology.
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Forrester uncovered key findings on the impact of Windows Embedded during the confidential customer interviews,
including the following:
Many of the retailers cited the functionality of Windows Embedded as a driving factor in its selection. One
observed, There are no unnecessary components . . . its the best option.
Although some retailers cited the lower overall cost of using the Windows Embedded operating system with
existing Microsoft products, services, and technologies as a factor in selecting it, others commented, It wasnt
just a cost decision . . . it was about functionality and value. Retailers indicated that key features included the
stability of the operating system, the familiarity of the user interface for both developers and users, and the ability
to use and connect Windows Embedded to a variety of retail industryspecific devices.
Nearly every retailer interviewed cited the ability to gain leverage from and take advantage of Microsoftslarge
ecosystem of partners for hardware, line-of-business applications, vertical industry expertise, and more. One
retailer said, Microsofts global partner ecosystemprovided a major advantage for us as we could easily
identify and partner with a certified Microsoft and Windows Embedded partner for both our front-of-store and
back-of-store operations.
Several retailers mentioned the benefit of an improved ability to hire developers. They felt that the available pool
of developer talent was much wider with Windows Embedded and therefore that it was much easier to staff their
organization with developers who have the requisite skills, without requiring additional training.
Forrester conducted confidential interviews with Windows Embedded retail customers who are based in the United
States, the United Kingdom, and continental Europe. This study uses a total of seven retailers. Profiles of the enterprise
retailers who were interviewed are below.
1. A retail corporationbased in the United Kingdom that is one of the largest global grocery retailers, as well as
a large convenience store operator and a major financial services provider. The group operates close to 5,000
retail trading outlets, employs more than 100,000 people, and has annual revenue of more than 10 billion.
2. A retail corporationthat owns and operates department stores in Germany and Belgium, offering fashion
and lifestyle products. The corporation has more than 100 stores and is held by a parent company that also
includes sports centers, specialty stores, and restaurants.
3. A retail enterprise organizationthat provides content-rich entertainment and gaming solutions to more than
125,000 bars, restaurants, and retailers around the globe. Through its various brands, the company offers
touchscreen gaming and entertainment for a variety of venues and platforms.
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4. Alarge retail womens clothing chainthat currently operates more than 1,000 womens clothing stores,
including stores in 48 states, Washington D.C., the US Virgin Islands, and Puerto Rico.
5. A perfume, book, jewelry, and confection retailerthat owns more than 2,000 stores, primarily in Germany
as well as across Europe and the United States.
6. A retail enterprisethat specializes in the design and manufacture of licensed plush, collectible, and seasonal
toys and gifts, including retail stores, sales, marketing, finance, and operations as well as warehouse facilities,
customer service, credit, and merchandise control. The company operates approximately 100 specialty retail
outlets.
7. A food division of a large British retailer and worker co-operative. The supermarket chain has over 240
branches across the United Kingdom, including convenience stores, making it one of the ten largest grocery
retailers in the United Kingdom.
To create a financial representation of the total economic impact of using Windows Embedded intelligent systems,
Forrester first created a composite organization based on the interviewed companies, combining their characteristics to
obtain a generalized version to use as the basis of the analysis. The composite organization that Forrester synthesized
from these results represents a large retailer, with approximately 50,000 employees and 1,000 stores. We assume that
each store uses an average of 15 point-of-service devices, which are made up of cash registers, kiosks, digital signage,
and handheld devices.
As the interviewed organizations included a variety of user types, including boutique retailers and device manufacturers
as well as department and grocery stores, not every benefit described in the interviews is relevant to this composite
organization. Although they are not included in the quantitative calculations, we have included a qualitative description
of these benefits following the description of the benefit categories included in the financial model.
Table 2 provides the model assumptions that Forrester used in this analysis.
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The discount rate used in the present value (PV) and net present value (NPV) calculations is 10 percent, and we used a
three-year time horizon for the financial modeling. Organizations typically use discount rates between 8 percent and 16
percent based on their current environment.
For the purposes of this financial analysis, we include the costs that are relevant to the composite organizations use of
Windows Embedded. This consists of the operating system license costs, the server costs related to the operating
system and associated embedded devices, and the Microsoft support costs. We do not include any internal support or
administration costs, because we expect that this category of cost will be incurred regardless of what kind of operating
system is used. The following sections provide the details of each of the three categories of cost included in the
financial analysis.
While some of the interviewed organizations were able to provide costs for their Windows Embedded licenses, others
paid a bundled cost for the operating system with their hardware purchase. For the purposes of this financial model, we
use a license cost based on the organizations that were able to provide this information, extrapolating that the costs for
the operating system were similar for the bundled prices.
The composite organization has an average of 15 point-of-service devices per store, and a total of 1,000 stores, leading
to a total of 15,000 devices. At $79 per license, this is a total cost of $1, 185,000, as shown in Table 3.
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The systems management and server costs in this financial model reflect the server costs related to the devices running
Windows Embedded. Several of the interviewed organizations reported that they were able to move much of their
server costs out of their retail outlets into centralized data centers, since the operating system facilitated remote
management. Therefore, in this category, we capture the systems management and server costs in the data center
specific to the point-of-service devices. We estimate that for the composite organization, this systems management and
server cost is approximately $100,000, as listed in Table 4.
For many of the retailers, the need to support their devices over a five-, seven-, or even ten-year horizon was a key
element in their decision to use Windows Embedded intelligent systems in their front-of-store and back-of-store sales,
service, and operations.
A key differentiator for Microsoft is its long-term commitment to support its family of products and operating systems.
Every version of Windows Embedded is supported for ten years, which gives buyers the assurance that they can use
their devices for their useful lifetime.
Most of the interviewed organizations cited a cost for extended Microsoft support. These were commonly enterprise-
wide agreements, including other Microsoft products in addition to Windows Embedded intelligent systems. Therefore,
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we apply a portion of the total support cost in this financial model, representing the proportion of the support that is
relevant to the operating system. For the composite organization, we include a total annual contract cost of $300,000, of
which we attribute 50 percent to the support of the operating system, yielding a total cost of $150,000 annually. See
Table 5 for the details of this calculation.
Table 6 lists the total costs included in this financial model over the three-year analysis period. For additional detail on
these summary numbers, please see the previous sections.
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The following sections detail the benefits identified during customer interviews. It also discusses the projected impact
on the composite organization. We include benefits related to a reduction in costs and time for training, fewer service
tickets, lower software and server and systems management costs as well as lower IT administration and development
costs. Additionally, we describe non-quantified benefit categories, including lower energy usage, improved device and
systems management, peace of mind due to a reliable and secure platform, higher employee productivity, and the
ability to use and, access real-time business data to inform decision making.
Many of the interviewed organizations mentioned that by using Windows Embedded intelligent systems, they were
able to offer a familiar interface for their end users, which resulted in an easier ramp-up process and lower training
needs. With relatively high turnover rates in staff, the savings in training time was significant, particularly for the larger
companies. For the composite organization, we estimate a turnover rate of 20 percent, meaning that approximately
10,000 new users require training annually. This turnover rate is a conservative one as, based on the interviews,
turnover can reach as high as 35 percent annually. With the familiar Windows interface, the composite organization isable to reduce its training time from three hours to less than a single hour per employee. We quantify this savings in
terms of the hourly cost for those employees and the total time saved in training annually. The details of this calculation
are shown in Table 7.
There was consensus among the interviewed organizations that use of the Windows Embedded operating systems to
power their retail business environment made them better able to predict, manage, and minimize software and service
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and support costs. One interviewee commented that, in general, the number of service tickets was reduced and
downtime was little to none.
According to several enterprise retailers, Windows Embedded provided superior reliability and stability as well as a
more natural user interface compared with alternative solutions. As a result, the retailers experienced productivity
gains. One retailer indicated that it was able to redeploy upwards of 1.5 of its full-time employees to higher value and
business impact tasks.
Additionally, the retailers cited the benefits of being able to consolidate systems, manage Windows Embedded devices
remotely, and access and take advantage of a common set of tools for IT development. These capabilities resulted in
significant gains in service and engineering productivity. Even more importantly for many of those interviewed, there
was less downtime because of fewer help desk tickets and fewer service and support requests.
For the composite organization, we estimate that prior to using Windows Embedded, on average, about 80 percent of
the endpoints generated a ticket over the course of a year related to OS software failure. As a result of the use of
Windows Embedded OS, the organization is able to reduce this number by half, cutting it to 40 percent and eliminating6,000 service calls. We use a cost of $12 per ticket to generate a benefit impact in this category of $72,000 in total
annual savings, as shown in Table 8.
The large retail organizations interviewed cited their ability to centralize the servers used to manage their point-of-
service and other retail-specific devices with Windows Embedded intelligent systems. They were able to move from
having in-store servers for managing the endpoints to remote management from data centers. This leads to an overall
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reduction in cost, as the centralized server costs are lower. The savings across the 1,000 stores for the composite
organization are $300,000, as shown in Table 9. These savings are a conservative estimate, as it is likely that there is
additional cost avoidance from reduced setup and administration as well.
With the improved facility to maintain and roll out a single image using Windows Embedded intelligent systems, the
administration needs of each interviewed organization were reduced as well. For the composite organization, we
estimate that one fewer resource is required in internal administration as a result of this simplification. The fully loaded
rate for this administrator is $100,000 annually. Table 10 shows the total savings to the organization.
Given the combination of familiarity with the platform and the available drivers and features, the compositeorganization is able to avoid hiring additional development resources. We estimate that an additional five developers
would be needed without Windows Embedded intelligent systems. At a fully loaded rate of $130,000, this is a total
annual savings of $650,000. The details of this calculation are provided in Table 11.
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In addition to the quantified benefits listed in the previous sections, the retailers cited several other categories of
benefits. While the retailers could not provide metrics to calculate the impact of these benefits, they recognized that the
benefits were valuable to their organizations.
Connectivity.The ability to connect the enterprise retailers intelligent devicesincluding their POS systems,
interactive screens, digital signage, and other retail-specific deviceswith their back-end and front-of-store
systems enables them to capture data to aid them in their decision making. The data can also be used to gain
insight into opportunities to improve how they market, sell to, and service their customers.
Manageability.Windows Embedded is built and optimized for enterprise retail industry devices. It includes
enterprise-grade security and management features such as server and system integration, data encryption,
application signing, and application lockdown, out of the box. Interviewed retailers indicated that they spent less
time and money on managing, tracking, and optimizing all of their retail devices in both the front and back-of-store operations.
Energy savings.The ability to quickly hibernate and wake up the operating systems led to significant energy
savings as devices were enabled to go to sleep immediately while not in use.
Security.Windows Embedded products are designed to meet enterprise security requirements. Customers noted
that Windows Embedded products met required data, personal identifiable information, and payment card
industry (PCI) compliance standards as well as other business and risk requirements. Multiple retailers mentioned
that they felt security was better with Windows Embedded than with alternative operating systems, most of
which were more common targets for attacks. One commented , Chances are, I am already safer with a smaller
target.
Familiarity.Several retailers mentioned that they selected Windows Embedded based on past experience and
familiarity with Microsoft products and technologies, as well as the Microsoft developer and partner network and
communities.
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The total benefits included in the financial analysis are shown in Table 12.
Flexibility, as defined by the Total Economic Impact(TEI) framework, represents an investment in additional
capacity or capability that could be turned into business benefit for some future additional investment. This provides an
organization with the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios
in which a customer might choose to implement Windows Embedded in their retail storefront or back-of-store
operations and later realize additional uses and business opportunities. Flexibility would also be quantified when
evaluated as part of a specific project (described in more detail in Appendix B).
Although we have not quantified the impact of flexibility in this study, several of the retailers mentioned that they felt
that using Windows Embedded would allow them to be more flexible in their businesses in the future. One interviewee
described this by saying, We are selling an experience to our customers. Windows Embedded will help us support that
as we evolve.Another customer cited a positive change that enabled faster and easier delivery of software packages to
their hardware. Moving to the Windows Embedded platform enabled us to be agile and to change our business
model . . . Now, we are better informed and armed with the right data to identify and extend our business to new
business growth opportunities.
Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. Implementation
riskis the risk that a proposed investment in Windows Embedded may deviate from the original or expected
requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology
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needs of the organization may not be met by the investment in Windows Embedded, resulting in lower overall total
benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.
Quantitatively capturing and reflecting investment and impact risk in financial estimates results in more meaningful
and accurate estimates and a more accurate projection of the return on investment (ROI). In general, risks affect costs
by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers
should be taken as realistic expectationsbecause they represent the expected values considering risk.
The following implementation risk that affects costs is identified as part of this analysis:
The Microsoft support costs for an organization will vary widely depending on implementation specifics unique
to each organization.
The following impact risk that affects benefits is identified as part of this analysis:
The move from distributed servers to a centralized cluster drove a large part of the analysis, and the value of this
shift will vary depending on the organizations current situation.
To apply risk adjustments to the original estimates, the TEI model uses a triangular distribution method to calculate
risk-adjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values
that could occur within the current environment for each category of cost and benefit. The risk-adjusted value is the
mean of the distribution of those points. For each of the cost and benefit categories included in the financial model, the
original estimate (as described in the previous sections) is multiplied by the mean value shown in Table 13, derived
from the low, most likely, and high estimates of that variable.
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The financial results calculated in the Costs and Benefits sections can be used to determine the return on investment
(ROI), net present value (NPV), and payback period for the composite organizations investment in Windows
Embedded. These are shown in Table 14.
($1,285,000) ($150,000) ($150,000) ($150,000) ($1,735,000) ($1,658,028)
$1,422,000 $1,122,000 $1,122,000 $3,666,000 $3,062,975
($1,285,000) $1,272,000 $972,000 $972,000 $1,931,000 $1,404,947
Table 15 shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the
risk-adjustment values from Table 13 in the Risk section to the cost and benefits numbers in Tables 6 and 12. Ascompared with the previous table, these risk-adjusted numbers provide a more conservative and therefore more reliable
prediction of an organizations experience with Windows Embedded. As demonstrated in Table 15, the overall
investment profile is favorable, with a risk-adjusted rate of return of 48 percent over the three-year horizon of the
analysis, and a payback period of approximately a year and a half. While this financial summary reflects the favorable
nature of the investment in Windows Embedded, the interviewed customers cited a number of reasons, financial and
otherwise, for their choice of operating system. Windows Embedded offered the organizations advantages in their
ability to serve their customers, train and retain their staff, and develop applications for their devices. All of the
interviewed customers confirmed that Windows Embedded was a strong choice that had made a difference in their
environments and would position them well for the future.
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With Windows Embedded, Microsoft extends the power of Windows and the cloud to intelligent systems. Windows
Embedded encompasses operating systems, tools, systems, and services. Enterprise retailers benefit from its one
trusted platform to connect systems and devices across stores, distribution centers, manufacturing facilities, offices,
subsidiaries, division and Corporate / HQ systems. These systems use familiar, flexible, scalable, secure and cost-
effective solutions from the most comprehensive partner ecosystem. Microsoft also has a thriving and active developer
community. All of which can empower retailers to be smarter, faster, and more flexible. Microsoft entered the
embedded marketplace more than 15 years ago and continues to lead the evolution toward intelligent systems with an
extensive suite of technologies for enterprises across a variety of industries.
Marked by rapid changes in demands and capabilities, the retail sector and enterprise business technology
environments are in a constant state of growth and evolution. Newly defined expectations in how an enterprise can
access, manage, and use data that is stored in embedded devices and back-office systems translate into an improved
ability to deliver personal, seamless, and differentiated shopping and brand experiences to customers. Furthermore,
retailers are using retail industry-specific solutions and technologies to deliver connected shopping experiences that aredesigned to deliver more personalized and relevant experiences; and more importantly, to deliver on the its brand
promise. Today shoppers and consumers today want the independence to shop and buy via the channel and the device
of their choice, whether it is interacting with digital signage in a specialty store, using a kiosk to learn more about a
product, purchasing groceries via a self-service checkout system, or shopping for a retailers products or services via
their retail mobile device while at home or in the store.
Microsoft positions Windows Embedded as a reliable, secure, and highly manageable platform for building enterprise
retail solutions with embedded devices in the marketplace. This family of operating systems enables diverse, innovative
solutions built on one trusted platform. When it comes to marketplace differentiation, both enterprise customers and
manufacturers of retail-specific devices choose the Windows Embedded platform for its enterprise-built capabilities
and the high value proposition around reliability, security, manageability, natural user interface, and long-term supportoptions that easily integrate into almost any business and IT environment.
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For this Total Economic Impact(TEI) study, Forrester has created a composite organization to illustrate the
quantifiable costs and benefits of implementing Windows Embedded intelligent systems for retail, hospitality, and
travel devices, including point-of-sale, self-service kiosks, digital signage, handheld terminals, and other industry-
specific devices in front-of-store and back-of-store operations. The composite company is intended to represent a large
retailer with 50,000 employees and is based on characteristics of the interviewed customers.
The composite company has approximately 1,000 stores with an average of 15 points of service in each, including both
registers and handheld devices. The internal software development team comprises 35 people.
In purchasing Windows Embedded products, the composite company has the following objectives:
Improved management of its front-of-store and back-of-store devices, including maintenance and rollout of the
standard image.
Ease of use and strong functionality for its devices.
The ability to develop and run applications on the operating system as needed.
Improved stability and uptime for its devices.
Total Economic Impact(TEI) is a methodology developed by Forrester Research that enhances a companys
technology decision-making processes and assists vendors in communicating the value proposition of its products and
services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of ITinitiatives to both senior management and other key business stakeholders.
The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility.
Benefits represent the value delivered to the user organizationIT and/or business unitsby the proposed product
or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to
analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model
place 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. Calculation of benefit estimates involves a clear dialogue with the user
organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear lineof accountability established between the measurement and justification of benefit estimates after the project has been
completed. This ensures that benefit estimates tie back directly to the bottom line.
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Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business
units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the
investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures
any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be
tied to the benefits that are created.
Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in
two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood
that the estimates will be measured and tracked over time. TEI applies a probability density function known as
triangular distribution to the values entered. At minimum, three values are calculated to estimate the underlying range
around each cost and benefit.
Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can
typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the
strategic value of an investment. Flexibility represents the value that can be obtained for some future additional
investment building on top of the initial investment already made. For instance, an investment in an enterprise-wide
upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce
licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated.
The collaboration can only be used with additional investment in training at some future point in time. However,
having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI
captures that value.
Discount rate:The interest rate used in cash flow analysis to take into account the time value of money. Although the
Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment
environment. Forrester assumes a yearly discount rate of 10 percent for this analysis. Organizations typically use
discount rates between 8 percent and 16 percent based on their current environment. Readers are urged to consult their
respective organizations to determine the most appropriate discount rate to use in their own environment.
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.
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 net present value of cash flows.
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Payback period:The breakeven point for an investment, which is the point in time at which net benefits (benefits
minus costs) equal initial investment or cost.
Return on investment (ROI):A measure of a projects expected returnin percentage terms. ROI is calculated by
dividing net benefits (benefits minus costs) by costs.
In the cash flow tables used in this study (such as the following example table), the initial investment column contains
costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1
through 3 are discounted using the discount rate (shown in the Framework Assumptions section) at the end of the year.
Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value (NPV)
calculations are not calculated until the summary tables and are the sum of the initial investment and the discounted
cash flows in each year.