When we bought our current house, my energy-conscious wife did everything possible to reduce our carbon footprint. The list of improvements she implemented ranged from inexpensive actions like unplugging electronics when not in use, adjusting the thermostat a few degrees higher in the summer, switching to LED light bulbs – to buying energy-saver appliances and solar panels.
Well, the last one generated a lot of debate because it was a big-ticket item. Yours truly raised a lot of questions before the decision was made. What’s the initial price tag? What is the total cost of ownership? How much would we really save on our energy bill? What is the ROI? What is the payback period?
Not surprisingly, the solar company we talked to was ready to help our decision-making along. The vendor supplied not just raw information but a complete financial justification on its website that included an estimated payback period and ROI.
The idea is that prospective customers would enter their own monthly energy costs and the calculator would figure out how many panels we would need, their material cost, labor cost to install it, and other factors including tax rebates and subsidies. It would then come up with a net price for the installation and depending upon the hours of sun per year in our part of California and the amount of energy produced, we would know the saved utility bills as well as how long until that initial expense would pay for itself in energy bill savings.
In our case, an appropriate number of solar panels would cost us about $9,600 up front – but we would make up that expense in four years (assuming our energy rates stay constant).
Hard numbers + softer sentiments = total value
The solar company also included other factors in the total ROI. For example, higher resale value, because it turns out a home with installed solar panels is more desirable. We also heard appeals to non-quantitative priorities and values, such as reducing our energy demands and carbon footprint.
The decision-making was easy, and it was informed. No flim-flam and no hard-sell tactics. This vendor was able to communicate the value of solar energy in the language and metrics that each of the stakeholders (my wife and I) were looking for – both qualitative, like our environmental impact, and quantitative metrics such as the total ROI and payback period. They gave us the tools to figure out whether this solar investment would make sense for us. And as a result, they made the sale.
The above process highlights that even when it comes to a household investment of less than $10,000, a prudent buyer goes through a thorough financial justification process. And reputed vendors will make that buying process easy and seamless by providing the tools necessary for buyers to make an informed and rational decision.
Extrapolating to the enterprise world!
Of course, in the world of enterprise technology, the numbers are much bigger, with the average selling price of leading software and hardware platforms well into the six figures or even millions of dollars. So, the stakes are much higher in making the right choice.
Now, our flagship product category, AIOps (Artificial Intelligence for IT Operations), is an area of enterprise technology that IT departments and CIOs face barriers in implementing because stakeholders may not understand all its potential benefits or be able to quantify its value. They need to discuss technology as means to an outcome and translate proposed IT investments into value delivered, business outcomes, and economic impacts.
At Digitate, as one of the leading vendors in the AIOps space, we realized that we need to communicate the value of our solutions in the different languages of IT, business outcomes, and finance. We need to not only highlight the value that our ignio solution provides but also provide the tools and metrics for CIOs to use to demonstrate the value of their proposed products and solutions, to non-IT stakeholders and influencers.
When our merchandising system goes down, we cannot send the right products to our stores to sell to our customers. We had this problem occur four to six times per year. What we have done with ignio AIOps to reduce these business disruptions is phenomenal.
– Head of IT, productivity and automation tools, retail [quoted in the Forrester TEI study]
An objective view of the value received
With that goal in mind, we commissioned an independent third party – Forrester Consulting, an arm of the respected Forrester analyst firm – to conduct a “Total Economic Impact™” study of our AIOps solution, the ignio™ suite. Total Economic Impact (TEI) is Forrester Consulting’s methodology for measuring the comprehensive impact of investments, technologies, projects, and initiatives.
The resulting TEI studies are holistic business cases that include decision drivers, the customer journey, qualitative and quantitative impacts, and actual quotes from customers – culminating in a sample financial model that shows an estimated return on investment (ROI). They are meant to help readers who are considering a similar investment to understand the experience and outcomes achieved by other customers.
Forrester’s Total Economic Impact™ (TEI) methodology delivers a rigorous cost-benefit analysis that measures the value, business flexibility, and associated risks that are specific to a technology or solution. And for ignio, the results of the TEI study were outstanding.
A typical company with about 5,000 employees, the Forrester team found, would realize 185% ROI over three years from investing in the ignio suite. Its financial benefits would fall into these main categories:
- Improved uptime and performance ($6.11 million in benefits)
- Reduced IT costs ($1.43 million)
- Revenue assurance, or protecting losses ($2.18 million)
- Better security and regulatory compliance ($463,000)
These results were based on multiple in-depth interviews that Forrester conducted with our customers. They understood the costs the customers have incurred and benefits and value that they have realized by using our AIOps solution. Thereafter, they created a model to categorize these benefits and business outcomes.
Using this model, for a prospect of a certain size, in the financial industry, Forrester estimated the benefits they stand to gain by implementing our AIOps solution. The well-laid-out results provide transparency regarding the benefits and values.
Now using this model, a prospect can quickly understand the relation between the costs and benefits, calculate the ROI, payback period, and net present value of their investment.
We encourage our prospects to visit us at www.digitate.com/roi, download the study, use the ROI calculator, or simply go through with the exercise with our salespeople and see the quantified benefits for themselves. Because finally, all said and done, it’s seldom about the technology but always about the value and business outcomes the technology delivers
