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 Alfresco Platform

Document Management Records Management Web Content Services Enterprise Collaboration Open Source Platform

Government Finance Media & Entertainment

Travel & Logistics Manufacturing

Software Retail

Education

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The Total Economic Impact™ of Alfresco Enterprise Content Management Solution

Stephen Powers – Principal Analyst & Research Director

Sebastian Selhorst –TEI Consultant

1st of February 2012

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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

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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

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Organizations without ECM

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Organizations recognize the importance of ECM, and continue to invest

Source: Forrester’s October 2011 Global Enterprise Content Management Online Survey

Base: 252 ECM decision-makers

Remain the same 20%

Be scaled back 4%

Don't know 5%

Increase 71%

“Over the next 12 months, how will your deployments or usage of ECM change? Will the number of deployments or usage . . . ?”

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ECM can help organize your content throughout it’s lifecycle

Archive

Approve

Revise

Create

Promote

Version

Publish

Destroy

Workflow

Workflow

Collaboration Review/ Approve

Content Repository (Records

Management)

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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

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Content comes in three “flavors”

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

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ECM technologies support each part of the content spectrum

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

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ECM suites are still an ideal; multiple systems support different content types

Source: Forrester’s October 2011 Global Enterprise Content Management Online Survey

Base: 252 ECM decision-makers

Two 21%

One 31%

Zero 6%

Three or more 42%

“How many enterprise content management solutions are currently utilized by your firm?”

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Content-centric technologies within the ECM functionality sets

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

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

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

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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

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Snapshot of the ECM market

•  End-to-end ECM offerings that manage all four content types on a single platform.

Traditional ECM suite vendors

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

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

Content-focused vendors

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

Cloud vendors

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

Industry-specific players

•  Some vendors focus on regional markets. European vendors

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But implementing ECM isn't as it may seem

Source: Forrester’s October 2011 Global Enterprise Content Management Online Survey

Base: 252 ECM decision-makers

“What are the biggest challenges facing ECM in your organization today? Select all that apply.”

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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?

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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

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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

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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:

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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

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§  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 - The TEI Process

Design composite organization

Construct financial model using TEI

framework

Write case study

Perform due diligence

Conduct customer interviews

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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

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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.

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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

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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

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Costs: Total costs (non-risk-adjusted)

29%

36%

9%

26% §  Alfresco subscription

§  Integration costs

§  Hardware investment

§  Training costs

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

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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

Source: Forrester Research, Inc.

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

* Present Value

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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

§  Assumptions –  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

Source: Forrester Research, Inc.

Year 1 Year 2 Year 3 Total PV* Total IT Maintenance Cost Savings $100,000 $100,000 $100,000 $300,000 $248,685

* Present Value

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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

§  Assumptions –  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.

§  3 -year non-risk adjusted benefit (present value) of $198,948

Source: Forrester Research, Inc.

Year 1 Year 2 Year 3 Total PV* Use Of Less Expensive Developer Resources $80,000 $80,000 $80,000 $240,000 $198,948

* Present Value

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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

§  Assumptions –  Avoided commercial database license cost: $30,000

–  Avoided annual database maintenance costs: $6,000

§  3 -year non-risk adjusted benefit (present value) of $42,194

Source: Forrester Research, Inc.

Year 1 Year 2 Year 3 Total PV* IT Cost Avoidance Due To Use Of Open Source Stack $36,000 $6,000 $6,000 $48,000 $42,194

* Present Value

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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

§  Assumptions –  Composite organization integrates Alfresco ECM with its CRM system

–  One-time cost savings of $50,000

§  3 -year non-risk adjusted benefit (present value) of $45,455

Source: Forrester Research, Inc.

Year 1 Year 2 Year 3 Total PV* Integration And Development Efficiencies $50,000 $0 $0 $50,000 $45,455

* Present Value

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Benefits: Total benefits (non-risk-adjusted) Year 1 Year 2 Year 3 Total PV*

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 resources $80,000 $80,000 $80,000 $240,000 $198,948

IT cost avoidance due to use of open source stack $36,000 $6,000 $6,000 $48,000 $42,194

Integration and development efficiencies $50,000 $0 $0 $50,000 $45,455

Total benefits $1,066,000 $330,000 $330,000 $1,726,000 $1,489,752

64% 17%

13%

3% 3% Avoided software license costs

IT maintenance cost savings

Use of less expensive developer resources

IT cost avoidance due to use of open source stack

Integration and development efficiencies

Source: Forrester Research, Inc.

* Present Value

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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

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Risk-adjustment factors

Low Original High Mean

Costs

Alfresco subscription 98% 100% 105% 101%

Integration costs 100% 100% 115% 105%

Hardware investment 98% 100% 105% 101%

Training costs 98% 100% 105% 101%

Benefits

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

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

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%

Source: Forrester Research, Inc.

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.

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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

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Financial summary, ROI, and payback period

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

Source: Forrester Research, Inc.

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

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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

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Thank you

Questions?

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

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