Do you know Exchange 2010 improves storage capabilities so that customers can now replace SAN’s with cheaper, direct attached SATA drives? Did you know the new features in Office 2010 can allow employees to do their own photo/video editing allowing you to replace license costs associated with other products? SharePoint 2010 also includes award winning technology for content management, enterprise search, and social tools for the enterprise.
In today’s macroeconomic climate, businesses need thorough and defensible cost frameworks to justify a new investment. In this second post (of a two part series), I will compare one of Microsoft’s approaches to provide cost justification to the Gone Google tool.
Gone Google Calculator – Recap
In my first post I was pretty harsh on the Gone Google calculator. I received some emails about whether that was ‘fair’. Absolutely. In this economic climate, something as serious as a financial calculator can’t be a ‘webified’ version of Three Card Monte. There are of course many ways to improve their tool but Google’s own customers ultimately need to provide feedback based on their own use of Google Apps.
Tools as a Reflection
In the end, this isn’t really about the final output either set of tools will provide. You’ll even note that I am not even attempting to line up our cloud offering versus theirs to declare a ‘winner’. The point of this post is to compare which approach is more sophisticated. I argue that calculators are a reflection of how each company seeks to engage a dialog with business customers. I believe Microsoft’s approach shows maturity, respect and trust.
If you are interested in the final TEI tally: Exchange 2010 has ROI of 48% with payback in 5.2months, Office 2010 has a payback in 5month and SharePoint 2010 has ROI of 108% with payback in 10months.
NOTE: I fully acknowledge there is no one size fits all approach that will work for everyone. Every tool has some way it could be improved and since every customer scenario is different, you try to construct an approach that is helpful but not onerous to complete and therefore, not useful.
Microsoft’s Approach – Rely on Experts.
We’ve found that relying on a third party methodology for evaluating technology investments often can be a better approach than doing it yourself. Google may claim they did this as well but per my observations, they used a collection of disparate methodologies and unrelated data to drive their tool.
In my division we have found Forrester’s Total Economic Impact methodology to be comprehensive, rigorous and well suited for understanding potential impact of technology projects. We’ve recently released TEI studies for Exchange 2010, Office 2010 and SharePoint 2010.
DISCLOSURE: TEI studies are commissioned so why do we use this approach? With Forrester Research you are in essence asking to be subjected to their IP, to their industry data and analyst insight. Forrester maintains editorial control over the entire study, including the findings. Sponsoring vendors are not even allowed to listen to the customer interviews conducted by Forrester analysts. Given it’s their methodology though I have to defer to Forrester to answer any questions related to the TEI process.
But what I can do is explain some the major elements contained in TEI studies and why they are far more trustworthy than Google’s effort.
NPV – The Cost of ‘later’ in terms of ‘now’.
Projects that given one time payback might be viewed as less successful than those with provide savings over a multiple years. TEI uses a three year assumption and leverages Net Present Value (NPV) calculations to show cash flow analysis. NPV is the term used in capital budgeting to analyze the profitability of an investment or project. In essence, take all the money you’ll spend for a given period of time and provide a figure in ‘today’s’ dollars as the basis for analysis. Google uses one year only. Below is an example output for a TEI study. I have intentionally removed the numbers because of guidance from Forrester about taking snippets out of context.
Three Legs to the Stool: Costs, Benefits and Risk
Forrester’s approach includes a comprehensive set of large areas that drive the calculations. Cost is of course the majority of reasonable financial spending related to a project. This includes licenses, hardware, software, implementation, administration, maintenance and IT /Help Desk training. Google’s approach does not include the last four!
Benefits are the area of expected cost avoidance, for example savings in storage or elimination of licenses. They also can include the expression of efficiency gains resulting from new features. This is where using a third party is so helpful as compared to one anecdotal study by a customer as in the case of Google. Forrester has access to other customer experiences as well as macro level insights into technology impact over years of research. Net, your claims are being weighed against historical norms. Google uses one customer and bogus sets of claims that arguably aren’t even real situations.
Risk is the biggest advantage in any calculator as an input. With risk inputs, you test your assumptions by subjecting them to a gauntlet of filters. What if the time to implement is longer? What if the license cost savings are less, etc? This is a conservative and respectable way to avoid overstatements for any major input into the tool. For example, in the Office 2010 TEI study; a 50% risk reduction filter was applied to the benefits findings. Yes, 50%. Whatever the tool spit out cut it in half. That is aggressive filtering that keeps legitimacy to the findings. Google does not offer any risk metrics for throttling their outputs.
No Posters Needed. Let the Results Speak for Themselves.
In summary, I think you’ll agree there are several advantages to Microsoft’s approach when compared to Google. Now with Exchange 2010, Office 2010 and SharePoint 2010 available to all customers it’s time for customers to their results speak for themselves.