Google has enlisted the number-crunchers at Forrester Consulting to answer a simple question: How much is faster collaboration worth to businesses? More specifically, Google was looking to quantify the ROI of switching to the Google Apps cloud suite — and came up with a very impressive figure of 307% over three years. Where did that eye-popping figure come from? And is it accurate? Here’s some perspective.
The survey, as conducted by Forrester Research, pooled responses from customer and stakeholder interviews and surveys from administrators and end-users. The survey attempted to put together a “Total Economic Impact” metric for moving from a legacy system to Google’s cloud.
That 307% figure is actually a risk-adjusted take on the 391% dollar-for-dollar return on investment, which is another way of saying that for every dollar spent on a Google Apps deployment, Forrester has calculated that you’ll save three on infrastructure and other costs associated with on-premises solutions.
Moreover, the report indicates that the break-even point is just seven months after initial deployment. And Google says in its official blog entry on the matter that the productivity gains from switching to Google Apps grow as customers get accustomed to the suite – and as Google adds new features, The VAR Guy figures.
And finally, to put a dollar sign on it, The VAR Guy will let Google’s blog speak for itself: “The risk-adjusted Net Present Value (NPV) of switching to Google Apps is over $10,000,000 for the typical large business. Productivity gains contribute over $7,000,000 to this amount.”
While The VAR Guy would love to see a similar analysis for the upcoming Microsoft Office 365 suite, dollars and cents speak for themselves. And who knows? Maybe this survey can sell customers on a Google Apps migration.
Still, The VAR Guy offers a note of caution to readers: Sure, Forrester Research has a solid reputation with many CIOs. And plenty of businesses are moving to Google Apps. But there’s no way for The VAR Guy to confirm or dispute the research findings that Forrester and Google are promoting. More than saving money, most cloud projects seem to be about speed to market and simplified IT processes rather than rapid RIO.
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It would seem to me that the ROI would be different for a startup / spinoff needing to implement from scratch vs a company that already made the infrastructure investment. At least until it is time to refresh the infrastructure. As with all IT projects, customers’ true opportunity for savings and gains varies with time.
It is interesting that they picked a large multi-national with 18,000 employees for the model. 18,000 licenses to Office and Exchange makes up about 2/3′s of the $3,000,000 in non-productivity savings compared to Google Apps. Neither case assumes the kind of discounts an 18,000 user shop would negotiate though.
Where does it all point to in the future? Traditional email and office suites will have downward price pressure and as Google and other SaaS alternatives gain share, they will likely raise prices to increase their profits. But for today, the customer wins with savings either way and the VAR gets squeezed in the middle as prices and proportionate discount or rebate driven margins fall at the same rate.
Which all leads back to a point the VAR Guy and MSP Mentor make often: VARs need to adjust business models to small but recurring revenue streams for software and hardware as a service as well as develop the capability to drive more of their revenue and profit from value-added services further upstream than install and config. This is not an overnight switch. It will be a long time, if ever, before all IT is delivered as a service. It is clear however that the traditionally everything on-premise model will be shrinking on a consistent basis.