Microsoft Dynamics AX ERP Return on Investment (ROI) validated by Forrester

March 31st, 2014 No comments

Forrester Research’s consulting division conducted a study on the Total Economic Impact of Microsoft Dynamics AX on organizations. The study conducted with 24 organizations validates a high ROI of 92% with Microsoft Dynamics AX deployments. According to Forrester, Microsoft Dynamics AX ERP reduces operations costs and increases business value. The study shows an average payback period of 21 months, average Net Present Value (NPV) of over US$ 3 Million and an Internal Rate of Return (IRR) of 53%. These are pretty astounding statistics for any ERP solution especially given that the study only took in to consideration benefits in the first 3 year. A higher time horizon (which is common for ERP projects) would show even better numbers since most successful ERP implementations pay at least over 5-7 years

Composite Organization Three-Year Risk-Adjusted ROI

ROI IRR Payback Period Total Benefits(PV) Total Costs (PV) Net Present Value
92% 53% 21 months $6,269,550 ($3,259,651) $3,009,899

Source: Forrester Research, Inc.

Key areas of benefits cited by Forrester are both quantifiable benefits and non-quantifiable benefits. The quantifiable benefits of replacing legacy applications with Microsoft Dynamics AX are summarized in the table below

Benefit Benefit Source Value

Increased business user productivity

Greater automation translates to higher efficiency and being able to do more with less people. Savings are typically in accounting, procurement, customer service, and logistics.

45 employees on average eliminated or not added with increased growth
US$ 5.8 million over 3 years

Reduced IT Team Size

Decreased team size due to easier manageability of the ERP application and a single application versus multiple legacy applications

US$ 2.2 million over 3 years
Year 1: Four fewer IT FTEs
Year 2: Six fewer IT FTEs
Year 3: Seven fewer IT FTEs

Eliminated systems license and maintenance cost

Microsoft Dynamics AX typically has one of the lowest software assurance costs of 16% in the ERP industry. That coupled with the fact that a Microsoft Dynamics AX implementation typically eliminates multiple legacy applications leads to ongoing continual savings every year.

US$ 1.1 million over 3 years
Average annual savings in software assurance cost of $360,000

Non-quantified benefits that are listed but not included in the analysis for the Total Economic Impact are

  • Improved business performance: Generally organization’s that used Microsoft Dynamics AX had overall performance improve with increased sales and profitability. This is achieved through faster responses to market changes and decreased internal costs. Personally, I think this should have been a quantifiable benefit as it is so significant and could nearly double the ROI and NPV value measurements.
  • Improved system reliability and uptime: Microsoft Dynamics AX exhibited better uptime and system reliability than the legacy systems replaced leading to less disruption in work and better operations for the organization.
  • Better decision making: By having a unified ERP system allowed users to get data more easily and make more informed decisions which improves business outcomes and reduces time. Increased business intelligence capabilities helped with time to market especially for global companies.

The summary of the business value which includes the total cost as well as the total quantified benefit is shown below. In total cost, Forrester included all of the following

  • Software license cost for Microsoft Dynamics AX
  • Annual Software assurance and maintenance cost
  • Professional services and consulting costs
  • Training costs
  • Internal FTE Labor cost
  • Hardware costs

summary of the business value

Source: Forrester Research, Inc.

If you would like to see how Ignify can help bring this value to your organization or see a demonstration of Microsoft Dynamics AX please email us at dynamics@ignify.com.

Sandeep Walia is the CEO of Ignify. Ignify is a technology provider of CRM, eCommerce and ERP, and Point of Sale software solutions to organizations. Ignify has won the worldwide Microsoft Partner of the Year Award in 2013, 2012 and 2011. Ignify has been included as the fastest growing business in North America for 7 years in a row by Deloitte, Inc Magazine and Entrepreneur Magazine from 2007 to 2013.

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