The Total Economic Impact™ Of A Migration To Microsoft Dynamics 365 Business Central,

#1 · 7 April 2025, 11:36

Quote from bsdinsight on 7 April 2025, 11:36

Below is a detailed summary of each section of the document titled “The Total Economic Impact™ Of A Migration To Microsoft Dynamics 365 Business Central,” commissioned by Microsoft and conducted by Forrester Consulting in June 2024.

Executive Summary

Microsoft Dynamics 365 Business Central (Business Central) is a cloud-based ERP solution designed for small to medium-sized businesses (SMBs). This Forrester Total Economic Impact™ (TEI) study evaluates the financial benefits, costs, and risks of migrating from on-premises Microsoft ERP solutions (e.g., Dynamics NAV, GP, or Business Central on-premises) to Business Central. The study aims to provide a framework for organizations to assess the potential return on investment (ROI).

Forrester interviewed four representatives from organizations that recently migrated and surveyed 160 decision-makers to gather data. Results were aggregated into a composite organization with 150 employees and $15 million in annual revenue. Key findings include:

Quantified Benefits (Three-Year, Risk-Adjusted Present Value):

Staff Productivity Improvement: 12.5% for operations (worth $95,883), 15% for sales, and 15.6% for finance staff, driven by automation and real-time data access reducing manual tasks.

Avoided Third-Party Fees: Over $80,000 annually ($177,561 total), eliminating external IT consulting and reporting costs.

Avoided Legacy Costs: Up to $53,000 annually ($91,445 total), avoiding infrastructure, maintenance, and upgrade expenses.

Sales Pipeline Profitability: $364,075 from improved sales efficiency due to field access to real-time data.

Total Benefits: $729,000 over three years.

Unquantified Benefits:

Enhanced decision-making with real-time data.

Improved employee experience due to reduced manual work and an intuitive interface.

Better integration with Microsoft tools (e.g., Excel, Power BI).

Increased customer satisfaction from faster service.

Costs (Three-Year, Risk-Adjusted PV):

Subscription Fees: $82,000 for 28 users.

Implementation and Management: $118,000, including internal staff and partner support over four months, plus ongoing maintenance.

Total Costs: $200,000.

Financial Outcomes:

ROI: 265%.

Net Present Value (NPV): $529,000.

Payback Period: Less than 6 months.

The study highlights how Business Central addresses scalability, visibility, and cost challenges of on-premises ERP systems, supporting SMB growth and profitability.

The Microsoft Dynamics 365 Business Central Customer Journey

This section outlines the motivations, challenges, and objectives driving organizations to migrate to Business Central, based on interviewee and survey insights.

Key Challenges with On-Premises ERP:

Expensive Scaling: Growth increased infrastructure, personnel, and partner costs.

Static Decision-Making: Outdated data hindered finance, operations, and sales decisions, often requiring manual Excel exports prone to errors.

Limited Offsite Access: On-premises systems restricted remote data access, delaying customer service.

Customization Complexity: Maintaining integrations and customizations was resource-intensive.

Update Difficulties: Version-dependent updates required significant effort.

Investment Objectives:

Cloud deployment for scalability.

Modern, intuitive user interface.

Real-time data access anytime, anywhere.

Out-of-the-box functionality reducing customization needs.

Automatic updates.

Composite Organization Profile:

Revenue: $15 million.

Employees: 150.

Users: 28 (finance, operations, sales).

Migrated from Dynamics NAV to Business Central in the cloud, retiring 90% of legacy costs by Year 3.

Operates regionally with global customers/suppliers.

Survey Insights:

Top goals included improving financial processes (71%), employee productivity (70%), cost efficiency (69%), customer service (69%), supply chain visibility (64%), and risk-aware decision-making (56%).

Analysis of Benefits

This section quantifies and describes the benefits of migrating to Business Central for the composite organization, supported by interviewee and survey data.

Total Benefits (Three-Year, Risk-Adjusted PV): $728,964

Improvement to Staff Productivity ($95,883):

Evidence: Automation reduced manual reporting/reconciliation (e.g., 25 hours/month for finance, 20 hours/month for operations). Real-time data improved decision-making.

Assumptions: 4 finance users save 25 hours/month (15.6% time reclaimed), 4 operations users save 20 hours/month (12.5%), at $42/hour, with 50% productivity recapture.

Risks: Varies by staff skill, legacy ERP gap, and industry needs. Adjusted down 15%.

Avoided Third-Party Fees ($177,561):

Evidence: Eliminated $5,000/month external reporting and 80 annual IT consulting hours ($300/hour) due to simpler cloud management.

Assumptions: $60,000/year reporting, $24,000/year consulting avoided.

Risks: Depends on prior spending and internal capacity. Adjusted down 15%.

Avoided Costs of Previous Solutions ($91,445):

Evidence: Avoided $50,000/year legacy costs (infrastructure, maintenance), phased out 50%-90% over three years, plus 16 IT hours/month ($42/hour).

Assumptions: $25,000-$45,000/year infrastructure, $8,064/year IT support avoided.

Risks: Varies by legacy scope and contract terms. Adjusted down 15%.

Improved Sales Efficiency and Profitability ($364,075):

Evidence: 20 sales reps (15% more productive) closed 5% more deals (1 extra deal/year at $30,000 each, 8% margin), yielding $600,000 revenue, $48,000 profit, plus $135,000 productivity savings.

Assumptions: $90,000 salary, 50% recapture, $15 million revenue baseline.

Risks: Varies by customer base, sales skill, and deal specifics. Adjusted down 20%.

Unquantified Benefits:

Real-time decision-making improved outcomes.

Employee experience enhanced by less manual work and intuitive UI.

Seamless Microsoft tool integration (e.g., Power BI).

Customer satisfaction rose (85% reported higher CSAT, 71% retention improved 3.7%).

Flexibility:

Scalability in the cloud allows provisioning aligned with demand, avoiding overprovisioning costs.

Analysis of Costs

This section details the costs of migrating to and maintaining Business Central for the composite organization.

Total Costs (Three-Year, Risk-Adjusted PV): $199,654

Subscription Fees Paid to Microsoft ($81,678):

Evidence: 28 users at $85/month (split between Essentials $70 and Premium $100).

Assumptions: $28,560/year unadjusted.

Risks: Varies by license tier and user count. Adjusted up 15%.

Implementation, Ongoing Management, and Training Personnel Costs ($117,976):

Evidence: Four-month implementation with 2 FTEs (25% time, $90,000/year), $45,000 partner fee, 15-hour training for 28 users ($42/hour), plus ongoing 8 hours/month IT ($42/hour) and 20 hours/year third-party ($75/hour).

Assumptions: Initial $77,640 (personnel $15,000, partner $45,000, training $17,640), yearly $10,032 (third-party $6,000, IT $4,032).

Risks: Varies by staff skill and change management. Adjusted up 15%.

Financial Summary

This section consolidates the financial analysis:

Metrics:

ROI: 265%.

NPV: $529,000 (benefits $729,000 – costs $200,000).

Payback: <6 months.

Breakdown:

Benefits: $284,460 (Year 1), $295,085 (Year 2), $301,460 (Year 3).

Costs: $89,286 (Initial), $44,381/year (Years 1-3).

Cash Flow: Cumulative net benefits grow from $195,174 (Year 1) to $529,310 (Year 3).

Appendix A: Total Economic Impact

Explains the TEI methodology:

Components: Benefits (value delivered), Costs (expenses), Flexibility (future value), Risks (uncertainty).

Key Terms:

PV: Discounted value at 10% rate.

NPV: Net cash flows ($529,000).

ROI: 265% (net benefits/costs).

Payback: Time to breakeven (<6 months).

Appendix B: Interview and Survey Demographics

Interviews: 4 representatives from manufacturing (Europe), food/beverage (Europe), financial services (North America), healthcare (Europe).

Survey: 160 decision-makers:

Countries: US (40%), UK (20%), Canada (15%), etc.

Employees: <500 (60%), 500-999 (25%), 1,000+ (15%).

Revenue: <$50M (70%), $50M-$250M (20%), $250M+ (10%).

Industries: Retail (15%), manufacturing (14%), energy (10%), etc.

Titles: Directors (57%), VPs (15%), C-level (14%), Managers (14%).

Below is a detailed summary of each section of the document titled “The Total Economic Impact™ Of A Migration To Microsoft Dynamics 365 Business Central,” commissioned by Microsoft and conducted by Forrester Consulting in June 2024.

Executive Summary

Microsoft Dynamics 365 Business Central (Business Central) is a cloud-based ERP solution designed for small to medium-sized businesses (SMBs). This Forrester Total Economic Impact™ (TEI) study evaluates the financial benefits, costs, and risks of migrating from on-premises Microsoft ERP solutions (e.g., Dynamics NAV, GP, or Business Central on-premises) to Business Central. The study aims to provide a framework for organizations to assess the potential return on investment (ROI).

Forrester interviewed four representatives from organizations that recently migrated and surveyed 160 decision-makers to gather data. Results were aggregated into a composite organization with 150 employees and $15 million in annual revenue. Key findings include:

Quantified Benefits (Three-Year, Risk-Adjusted Present Value):
- Staff Productivity Improvement: 12.5% for operations (worth $95,883), 15% for sales, and 15.6% for finance staff, driven by automation and real-time data access reducing manual tasks.
- Avoided Third-Party Fees: Over $80,000 annually ($177,561 total), eliminating external IT consulting and reporting costs.
- Avoided Legacy Costs: Up to $53,000 annually ($91,445 total), avoiding infrastructure, maintenance, and upgrade expenses.
- Sales Pipeline Profitability: $364,075 from improved sales efficiency due to field access to real-time data.
- Total Benefits: $729,000 over three years.

Unquantified Benefits:
- Enhanced decision-making with real-time data.
- Improved employee experience due to reduced manual work and an intuitive interface.
- Better integration with Microsoft tools (e.g., Excel, Power BI).
- Increased customer satisfaction from faster service.

Costs (Three-Year, Risk-Adjusted PV):
- Subscription Fees: $82,000 for 28 users.
- Implementation and Management: $118,000, including internal staff and partner support over four months, plus ongoing maintenance.
- Total Costs: $200,000.

Financial Outcomes:
- ROI: 265%.
- Net Present Value (NPV): $529,000.
- Payback Period: Less than 6 months.

The study highlights how Business Central addresses scalability, visibility, and cost challenges of on-premises ERP systems, supporting SMB growth and profitability.

The Microsoft Dynamics 365 Business Central Customer Journey

This section outlines the motivations, challenges, and objectives driving organizations to migrate to Business Central, based on interviewee and survey insights.

Key Challenges with On-Premises ERP:
- Expensive Scaling: Growth increased infrastructure, personnel, and partner costs.
- Static Decision-Making: Outdated data hindered finance, operations, and sales decisions, often requiring manual Excel exports prone to errors.
- Limited Offsite Access: On-premises systems restricted remote data access, delaying customer service.
- Customization Complexity: Maintaining integrations and customizations was resource-intensive.
- Update Difficulties: Version-dependent updates required significant effort.

Investment Objectives:
- Cloud deployment for scalability.
- Modern, intuitive user interface.
- Real-time data access anytime, anywhere.
- Out-of-the-box functionality reducing customization needs.
- Automatic updates.

Composite Organization Profile:
- Revenue: $15 million.
- Employees: 150.
- Users: 28 (finance, operations, sales).
- Migrated from Dynamics NAV to Business Central in the cloud, retiring 90% of legacy costs by Year 3.
- Operates regionally with global customers/suppliers.

Survey Insights:
- Top goals included improving financial processes (71%), employee productivity (70%), cost efficiency (69%), customer service (69%), supply chain visibility (64%), and risk-aware decision-making (56%).

Analysis of Benefits

This section quantifies and describes the benefits of migrating to Business Central for the composite organization, supported by interviewee and survey data.

Total Benefits (Three-Year, Risk-Adjusted PV): $728,964
- Improvement to Staff Productivity ($95,883):
  - Evidence: Automation reduced manual reporting/reconciliation (e.g., 25 hours/month for finance, 20 hours/month for operations). Real-time data improved decision-making.
  - Assumptions: 4 finance users save 25 hours/month (15.6% time reclaimed), 4 operations users save 20 hours/month (12.5%), at $42/hour, with 50% productivity recapture.
  - Risks: Varies by staff skill, legacy ERP gap, and industry needs. Adjusted down 15%.
- Avoided Third-Party Fees ($177,561):
  - Evidence: Eliminated $5,000/month external reporting and 80 annual IT consulting hours ($300/hour) due to simpler cloud management.
  - Assumptions: $60,000/year reporting, $24,000/year consulting avoided.
  - Risks: Depends on prior spending and internal capacity. Adjusted down 15%.
- Avoided Costs of Previous Solutions ($91,445):
  - Evidence: Avoided $50,000/year legacy costs (infrastructure, maintenance), phased out 50%-90% over three years, plus 16 IT hours/month ($42/hour).
  - Assumptions: $25,000-$45,000/year infrastructure, $8,064/year IT support avoided.
  - Risks: Varies by legacy scope and contract terms. Adjusted down 15%.
- Improved Sales Efficiency and Profitability ($364,075):
  - Evidence: 20 sales reps (15% more productive) closed 5% more deals (1 extra deal/year at $30,000 each, 8% margin), yielding $600,000 revenue, $48,000 profit, plus $135,000 productivity savings.
  - Assumptions: $90,000 salary, 50% recapture, $15 million revenue baseline.
  - Risks: Varies by customer base, sales skill, and deal specifics. Adjusted down 20%.

Unquantified Benefits:
- Real-time decision-making improved outcomes.
- Employee experience enhanced by less manual work and intuitive UI.
- Seamless Microsoft tool integration (e.g., Power BI).
- Customer satisfaction rose (85% reported higher CSAT, 71% retention improved 3.7%).

Flexibility:
- Scalability in the cloud allows provisioning aligned with demand, avoiding overprovisioning costs.

Analysis of Costs

This section details the costs of migrating to and maintaining Business Central for the composite organization.

Total Costs (Three-Year, Risk-Adjusted PV): $199,654
- Subscription Fees Paid to Microsoft ($81,678):
  - Evidence: 28 users at $85/month (split between Essentials $70 and Premium $100).
  - Assumptions: $28,560/year unadjusted.
  - Risks: Varies by license tier and user count. Adjusted up 15%.
- Implementation, Ongoing Management, and Training Personnel Costs ($117,976):
  - Evidence: Four-month implementation with 2 FTEs (25% time, $90,000/year), $45,000 partner fee, 15-hour training for 28 users ($42/hour), plus ongoing 8 hours/month IT ($42/hour) and 20 hours/year third-party ($75/hour).
  - Assumptions: Initial $77,640 (personnel $15,000, partner $45,000, training $17,640), yearly $10,032 (third-party $6,000, IT $4,032).
  - Risks: Varies by staff skill and change management. Adjusted up 15%.

Financial Summary

This section consolidates the financial analysis:

Metrics:
- ROI: 265%.
- NPV: $529,000 (benefits $729,000 – costs $200,000).
- Payback: <6 months.
Breakdown:
- Benefits: $284,460 (Year 1), $295,085 (Year 2), $301,460 (Year 3).
- Costs: $89,286 (Initial), $44,381/year (Years 1-3).
Cash Flow: Cumulative net benefits grow from $195,174 (Year 1) to $529,310 (Year 3).

Appendix A: Total Economic Impact

Explains the TEI methodology:

Components: Benefits (value delivered), Costs (expenses), Flexibility (future value), Risks (uncertainty).
Key Terms:
- PV: Discounted value at 10% rate.
- NPV: Net cash flows ($529,000).
- ROI: 265% (net benefits/costs).
- Payback: Time to breakeven (<6 months).

Appendix B: Interview and Survey Demographics

Interviews: 4 representatives from manufacturing (Europe), food/beverage (Europe), financial services (North America), healthcare (Europe).
Survey: 160 decision-makers:
- Countries: US (40%), UK (20%), Canada (15%), etc.
- Employees: <500 (60%), 500-999 (25%), 1,000+ (15%).
- Revenue: <$50M (70%), $50M-$250M (20%), $250M+ (10%).
- Industries: Retail (15%), manufacturing (14%), energy (10%), etc.
- Titles: Directors (57%), VPs (15%), C-level (14%), Managers (14%).