When it comes to ROI, it’s always a challenge to calculate it—numerous aspects, both quantified and unquantified, should be considered. Lucky we, Forrester published their research on The Total Economic Impact™ of SAP Hybris Commerce for B2B last year. For the research study Forrester interviewed and surveyed 40 organizations that use the solution.
Based on the acquired information, Forrester has created a framework to help companies that plan to implement SAP Hybris Commerce Cloud for B2B to evaluate their ROI potential. The framework uses the four factors of benefits, costs, flexibility, and risks to model the solution’s economic impact. The results clearly show that large business can benefit tremendously from SAP Hybris implementation reaching 307% ROI in three years. But will this work for smaller companies? Let’s figure this out.
Big guys first. Let’s take an international organization with $1 billion in annual revenue with 30% of revenue or $300 million generated through digital channels that equals 60,000 orders with average order value of $5,000. Account managers and sales representatives assigned to specific regions do the majority of sales. A backend system for invoices, data collection and order processing exists for each market. This makes reconciliation between different systems a manual effort and leads to inconsistent user interface and experience for customers. Additionally, customers expect the organization to develop an ecommerce platform to match the experience, usability, and features of B2C ecommerce platforms.
The organization implemented SAP Hybris Commerce Cloud for B2B to create a consistent system interface for all the functional products, enabling their B2B clients to enjoy a B2C customer experience such as viewing past orders and recommended products, automating recurring orders, and so on.
The total cost of implementing SAP Hybris Commerce Cloud for B2B is comprised of license subscription fees, initial implementation, and ongoing costs. The cost of the basic license depends on the number of core processors that use SAP Hybris Commerce Cloud for B2B. Let’s say our organization required 14 core processors with yearly cost per each equaling $35,000 that makes a total of $1,470,000 or $1,617,000 with a 10% risk adjustment within a 3-year span. Important notice: all the costs mentioned in this article are estimates, not quotes.
The initial professional services fee that our organization paid to an implementation partner or to SAP Hybris was $400,000. Those costs went to the effective integration of SAP Hybris Commerce Cloud for B2B with other back office and external applications. It also included the customization, testing, and rollout of the application company-wide. Implementation took 8 months for 20 employees utilized at 30%, each receiving a fully-burdened $100,000 salary annually. That makes a total of $880,000 for initial implementation with 10% risk adjustment included. These costs may vary depending on the scope of required external and internal support. Plus changes in scope, customization, testing and the company-wide application rollout are all additional costs to consider.
Furthermore, our organization needed 12 FTEs with the average annual salary of $100,000 to support the implementation. Costs of ongoing professional services to maintain the solution were also included.
After the implementation of SAP Hybris Commerce Cloud, the organization was able to see an increase in AOV by 5% or $250 per transaction with 50% of the increase in AOV attributed to their investment in SAP Hybris Commerce Cloud for B2B. The increased risk-adjusted net-new revenue from improvement was estimated at $19,125,000 for 3 years with present value of $15,853,681.
Besides increasing AOV, SAP Hybris solutions help improve margin thanks to cutting spending on processing orders and acquiring new customers. Processing costs average about 1% of the sale value, due to reconciliation with the backend system, as well as more streamlined processing, invoicing, and fewer field input mistakes. SAP Hybris Commerce Cloud for B2B helped cut processing costs by 70% thanks to better system integration and increased sales via digital channels. This resulted in $8,505,000 for 3 years with present value of $7,050,225.
Many product SKUs were maintained in the organization’s commerce database. The organization often rolled out new SKU versions and pricing, and each time there was an update, it involved a manual update of the database and its reconciliation with the front-end platform. However, SAP Hybris Commerce Cloud for B2B commerce pulled in data quite fast, and the composite organization found that this led to increased productivity of their marketing and ecommerce teams.
If our organization’s marketing team consists of 24 people with average annual burden rate of $75,000, 30% productivity improvement of resources and 50% productivity captured by the organization resulted in risk-adjusted $729,000 for 3 years with present value of $604,305.
And here are the results of implementing SAP Hybris Commerce Cloud for B2B visualized in one single picture:
Let’s apply the same methodology to calculate ROI of SAP Hybris implementation for a mid-size company. There is a ROI calculator based on Forrester’s methodology that is of great help when it comes to ROI calculation.
Let’s take a business with $43 million annual revenue, 85% of B2B revenue coming through the digital channel, 24 marketing, ecommerce, and knowledge management people responsible for B2B sales with an annual salary of $35,000 each.
For such a configuration, the SAP Hybris Commerce Cloud for B2B license costs could reach $196,350 with present value of $162,764 and ongoing maintenance cost could reach $501,270 with present value of $415,528 for a 3-year span, while initial implementation might take $58,960. That makes a total cost of $756,580, $637,252 as present value.
With the increase in AOV of 5% and 50% of it attributed to the investment in SAP Hybris Commerce Cloud for B2B, the increased risk-adjusted net-new revenue from improvement is estimated as $2,275,875 for 3 years with present value of $1,886,588. Improved margins through reduction in processing costs reach $1,012,095 total for 3 years with present value $838,977, while improved marketing and ecommerce team productivity is expected to result in $340,200 with present value of $282,009.
Remarkably, the payback period for such an organization is calculated only at less than 6 months with ROI reaching 372% within only 3 years.
Let’s take a look at the same organization from another angle. Imagine they have 1,000 prospect and existing customer contacts, 300 average monthly web and phone orders with each value averaging at $25,000, a 1.5% email conversion rate and 5 existing marketing systems including CRM, knowledge base, websites, etc. It seems at first glance that the organization might need SAP Hybris Marketing, but let’s consider the costs first.
While the initial implementations costs for such a configuration reach a relatively moderate $189,050, the ongoing maintenance costs are prohibitive at $1,149,750 where the present value is $953,086 for a 3-year span. The license fees are surprisingly small totaling $197,000 with the present value of $163,000 within a 3-year period, but this doesn’t help when you have to pay more than a million for implementation and maintenance.
Let’s get to the benefits. While the high-level benefit summary looks not bad with the increase in net new revenue from increased AOV reaching $365,500 for 3 years or $302,153 in present value; the benefits from reducing the costs for disparate marketing systems for the same period reach $342,000 or $283,501 in present value, the increased net revenue from improved conversion rate is only $1,010 where the present value is $837.
Together this results in a payback period of more than 72 months and -49% ROI within the first 3 years. This means that not every business needs a mass market online marketing solution like SAP Hybris Marketing and can do much better with smaller scale tools.
To correctly evaluate the potential financial impact of investing in SAP Hybris products for your own organization you have to take the specifics of your business environment into consideration. Depending on different determining factors, as we have seen, you can enjoy a dramatic 372% ROI or face a horrifying -49% ROI within the first 3 years.
So even if you have the budget and the team to set the process up for you to gain maximum value out of these smart marketing tools, take the time to choose the right product by calculating ROI increase predictions and have a clear idea of if and when the solutions will pay off.