Appendix A: Total Economic Impact PRESENT VALUE (PV) Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s The present or current value of technology decision-making processes and assists (discounted) cost and benefit estimates vendors in communicating the value proposition of given at an interest rate (the discount their products and services to clients. The TEI rate). The PV of costs and benefits feed methodology helps companies demonstrate, justify, into the total NPV of cash flows. and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. NET PRESENT VALUE (NPV) TOTAL ECONOMIC IMPACT APPROACH The present or current value of Benefits represent the value delivered to the (discounted) future net cash flows given business by the product. The TEI methodology an interest rate (the discount rate). A places equal weight on the measure of benefits and positive project NPV normally indicates that the investment should be made the measure of costs, allowing for a full examination of the effect of the technology on the entire unless other projects have higher NPVs. organization. Costs consider all expenses necessary to deliver the RETURN ON INVESTMENT (ROI) proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over A project’s expected return in the existing environment for ongoing costs percentage terms. ROI is calculated by associated with the solution. dividing net benefits (benefits less costs) by costs. Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. DISCOUNT RATE Having the ability to capture that benefit has a PV that can be estimated. The interest rate used in cash flow analysis to take into account the Risks measure the uncertainty of benefit and cost time value of money. Organizations estimates given: 1) the likelihood that estimates will typically use discount rates between meet original projections and 2) the likelihood that 8% and 16%. estimates will be tracked over time. TEI risk factors are based on “triangular distribution.” PAYBACK PERIOD The initial investment column contains costs incurred at “time The breakeven point for an investment. 0” or at the beginning of Year 1 that are not discounted. All This is the point in time at which net other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total benefits (benefits minus costs) equal cost and benefit estimate. NPV calculations in the summary initial investment or cost. tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur. THE TOTAL ECONOMIC IMPACT™ OF DIALPAD AI CONTACT CENTER 24