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EXECUTIVE SUMMARYTEI FRAMEWORK AND METHODOLOGYFrom the inf ormation provided in the interviews,Forrester constructed a Total Economic Impact f ramework for those organizations considering aninvestment in IBM Planning Analytics with Watson.The objective of the framework is to identify the cost,benef it, flexibility, and risk factors that affect theinvestment decision. Forrester took a multistepapproach to evaluate the impact that IBM PlanningAnalytics with Watson can have on an organization.DUE DILIGENCEInterviewed IBM stakeholders and Forresteranalysts to gather data relative to IBM PlanningAnalytics with Watson.DECISION-MAKER INTERVIEWSInterviewed four decision-makers atorganizations using IBM Planning Analytics withWatson to obtain data with respect to costs,benefits, and risks.COMPOSITE ORGANIZATIONDesigned a composite organization based oncharacteristics of the interviewees’organizations.FINANCIAL MODEL FRAMEWORKConstructed a financial model representative ofthe interviews using the TEI methodology andDISCLOSURESrisk-adjusted the financial model based onReaders should be aware of the following:issues and concerns of the decision-makers.This study is commissioned by IBM and delivered byForrester Consulting. It is not meant to be used as acompetitive analysis.CASE STUDYForrester makes no assumptions as to the potential ROIthat other organizations will receive. Forrester stronglymodeling the investment impact: benefits, costs,advises that readers use their own estimates within theframework provided in the study to determine theflexibility, and risks. Given the increasingappropriateness of an investment in the PlanningAnalytics with Watson.investments, Forrester’s TEI methodologyIBM reviewed and provided feedback to Forrester, butForrester maintains editorial control over the study and itsfindings and does not accept changes to the study thatcontradict Forrester’s findings or obscure the meaning ofthe study.Employed four fundamental elements of TEI insophistication of ROI analyses related to ITprovides a complete picture of the totaleconomic impact of purchase decisions. Pleasesee Appendix A for additional information on theTEI methodology.IBM provided the customer names for the interviews butdid not participate in the interviews.THE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSON5

The IBM Planning Analytics with Watson Customer JourneyDrivers leading to the Planning Analytics with Watson investmentInterviewed ef financial officerIndustrial servicesEMEA 100M to 500MCommercial managerPackagingAPAC 1B to 5BBusiness architectEntertainmentGlobal 10B Director of FP&ARetailAmericas 10B single organizational hierarchy. This can be achallenge when two different solutions display thesame data in different ways or they areconf igured to organize the data in a singular lens,such as a general ledger lens or a product lens.Interviewees f rom larger organizations with morecomplex planning cycles said the reconciliation ofdata f rom two or more different planning systemsof ten required manual effort from dedicatedresources.KEY CHALLENGESInterviewees said their organizations each performedthree primary types of recurring planning activities:budgeting, forecasting, and reporting. Each of theorganizations performed these activities on a monthlyor annual basis during regular planning cycles, suchas f or financial planning. Prior to adopting IBMPlanning Analytics with Watson, keeping track of andmanually executing on these activities usingspreadsheets created the following challenges: Obsolete data and insights. Even when datawas made easy to consume and visuallyappealing, it would often be obsolete by the timeit was delivered. This is because theorganizations often compiled data in batchreports, such as monthly sales reports. As aresult, f rontline workers had little visibility intotheir perf ormance relative to their targets, andmanagers did not have the insights they neededto accurately forecast performance and createaction plans.Siloed planning workflows. Organizations —particularly large enterprises — often adoptseveral different planning solutions catered tospecific departments, functions, or planningcycles. Ultimately, however, the outputs ofindividual planning activities must roll up into aTHE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSON“We used to have four differenthierarchies for four differentapplications. Now, they all roll upto a single segment.”Business architect, entertainment Expensive and inflexible spreadsheet-basedlegacy planning systems. Having siloedplanning workflows also meant that theinterviewees’ organizations needed to pay foradditional licensing, hardware, and support foreach planning system. Furthermore, theseplanning solutions required additional integrationwork so they could effectively communicate witheach other. And any changes would require even6

THE IBM PLANNING ANALYTICS WITH WATSON CUSTOMER JOURNEYmore integration and customization work,ultimately resulting in hefty piles of professionalservices fees paid to system integrators or otherthird-party providers.“We had a billion dollars of salesover three businesses [and] on fourERPs linked through dozens ofspreadsheets. You can see whythat was a problem.”Commercial manager, packaging Time- and labor-intensive planning activities.With their legacy spreadsheet-based planningsolutions, the interviewees’ organizations neededto manually populate, refresh, and pull dataduring planning cycles such as month-endreporting or forecasting. For example, a dataref resh could take up to an hour to executedepending on the complexity and the amount ofdata being pulled, which would leave less time forreview and analysis. Forecasting also requiredmanual seeding of data from prior periods beforeany projections could even be made. Theorganizations repeated these manual processesf or each planning cycle and workflow, whichwasted valuable hours that could’ve be spent onother value-added activities.COMPOSITE ORGANIZATIONBased on the interviews, Forrester constructed a TEIf ramework, a composite company, and an ROIanalysis that illustrates the areas financially affected.The composite organization is representative of thef our decision-makers that Forrester interviewed andis used to present the aggregate financial analysis inthe next section. The composite organization has thef ollowing characteristics:Description of composite. The compositeorganization is a retail enterprise that operates in theAmericas. It has 5,000 employees and generatesTHE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSONannual revenues of 800 million. It previously reliedon spreadsheet-based planning solutions forindividual planning workflows. But as it continued togrow, repeating planning processes across thebranch f ootprint became a time-consuming andexpensive endeavor. This prompted the organizationto engage IBM. The organization operates 30 retailbranch locations in Year 1 of the deployment, andthis increases to 35 by Year 3. Each branch acts as aseparate revenue and cost center, whichnecessitated individual input toward annual budgetingand monthly forecasting and reporting.Deployment characteristics. The compositeorganization migrates its legacy branch sales andperf ormance data to Planning Analytics with Watsonin phases. This includes 10% of branches in Year 1,21% in Year 2, and 40% in Year 3. By Year 3, theorganization has 329 users of IBM Planning Analyticswith Watson, including 241 read-only users, 70read/write users, and 18 power users (includingadministrators/modelers). The composite alsodeploys IBM Planning Analytics with Watson Cloud,leveraging both IBM Planning Analytics with Watsonf or Microsoft Excel and IBM Planning Analytics withWatson Workspace.Key assumptions Retail organization 800M annual revenue153 users in Year 1329 users in Year 3Use cases includeFP&A, sales planning,workforce planning,and inventory planning Cloud deployment7

Analysis Of BenefitsQuantif ied benefit data as applied to the compositeTotal BenefitsYear 1Year 2Year 3TotalPresentValue 297,400 672,212 1,319,600 2,289,212 1,817,346 74,800 158,667 299,200 532,667 423,923Streamlined budgetingprocess 368,874 507,202 537,941 1,414,017 1,158,678DtrFaster system processing 279,936 461,894 489,888 1,231,718 1,004,278EtrStreamlined forecastingprocess 54,432 89,802 95,256 239,490 195,267FtrCost savings from retiredlegacy planning solutions 212,500 314,500 314,500 841,500 689,388 1,287,942 2,204,277 3,056,385 6,548,604 5,288,880Ref.BenefitAtrOptimized staffing andinventory managementBtrIncremental gross profit upliftCtrTotal benefits (risk-adjusted)OPTIMIZED STAFFING AND INVENTORYMANAGEMENTEvidence and data. Interviewees praised PlanningAnalytics with Watson for its applicability to a diverserange of use cases. For example, organizations withf rontline operations used Planning Analytics withWatson to tightly manage and monitor their supplychains, staffing models, and inventory levels. In doingso, branch managers prevented overstaffing andoverstocking of their branches, and they achievedvisibility and transparency into their organizations’day-to-day operations.By leveraging Planning Analytics with Watson tokeep track of inventory levels, branch managersensured that each item was properly accounted for atthe end of each business day. This additional visibilityencouraged managers and associates to keepthemselves accountable and to ensure there was noaccidental product loss or shrinkage. The composite deploys IBM Planning Analyticswith Watson to three retail branches in Year 1, toseven branches in Year 2, and to 14 branches inYear 3. Each retail branch is staffed with 10 sales FTEs. The average level of inventory shrinkage prior tousing Planning Analytics with Watson was 0.2%of the organization’s total annual sales. The annual salary per sales associate is 81,250.This assumes a 25% overhead burden rate.“We have a much better employeeexperience today because ourbranches are always staffed withthe right number of people tosupport the workload on any givenday.”Director of FP&A, retailModeling and assumptions. For the compositeorganization, Forrester assumes the following:THE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSON8

ANALYSIS OF BENEFITSRisks. The impact of this benefit may vary based onthe f ollowing factors. The number and growth of Planning Analyticswith Watson deployments. The excess levels of staff and inventory related toits legacy environment.Results. To account for these risks, Forresteradjusted this benefit downward by 20%, yielding athree-year, risk-adjusted total PV (discounted at 10%)of 1.8 million.“In the midst of [the COVID-19pandemic], Planning Analytics withWatson helped us quickly respondto some issues in our approach tolabor planning, which helpedsupport our business in a dire timeof need.”Director of FP&A, retailOptimized Staffing And Inventory ManagementRef.MetricSourceYear 1Year 2Year 3A1Number of branchesComposite303335A2Percentage of branches leveraging IBMPlanning Analytics with WatsonComposite10%21%40%A3Number of retail branches leveraging IBMPlanning Analytics with WatsonA1*A23714A4Average store associates staffed perretail branch before IBM PlanningAnalytics with WatsonComposite101010A5Average store associates staffed perretail branch after IBM Planning Analyticswith WatsonComposite999A6Fully burdened sales associate salaryTEI Standard 81,250 81,250 81,250A7Staffing optimization using IBM PlanningAnalytics with WatsonA3*(A4-A5)*A6 243,750 568,750 1,137,500A8Average inventory shrinkage per retailbranch before IBM Planning Analyticswith WatsonB2*0.2% 53,333 48,485 45,714A9Average inventory shrinkage per retailbranch after IBM Planning Analytics withWatsonInterviews 10,667 9,697 9,143A10Improved inventory management usingPlanning Analytics with WatsonA3*(A8-A9) 128,000 271,515 512,000AtOptimized staffing and inventorymanagementA7 A10 371,750 840,265 1,649,500Risk adjustment 20% 297,400 672,212 1,319,600AtrOptimized staffing and inventorymanagement (risk-adjusted)Three-year total: 2,2890,212THE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSONThree-year present value: 1,817,3469

ANALYSIS OF BENEFITSseven branches in Year 2, and to 14 branches inYear 3.INCREMENTAL GROSS PROFIT UPLIFTEvidence and data. In addition to using PlanningAnalytics with Watson to promote operationalexcellence at the branch level, the interviewees’organizations also leveraged Planning Analytics withWatson to directly drive sales.Bef ore deploying Planning Analytics with Watson,individual sales associates did not have real-timeaccess to their current performance levels, andmanagers did not have the data to set realistic salesand growth targets for their associates. To proactivelydrive incremental growth, managers would insteadset targets based on historical performance ratherthan on real-time data.Using Planning Analytics with Watson, associatescould monitor their daily sales performance againstestablished targets and understand when theyneeded to push harder or utilize different tactics toincrease success rates. Similarly, managers couldperf orm A/B testing with different sales strategies andprovide coaching and retraining at the individual levelas needed. The average gross margins are 22%.“With high-quality data at such agranular level, [we] can make reallygood commercial decisions. Datadriven decision-making was a hugepart of our turnaround story.”Commercial manager, packagingRisks. The impact of this benefit may vary based onthe f ollowing factors: The number and growth of Planning Analyticswith Watson deployments. Individual gross margins.Results. To account for these risks, Forresteradjusted this benefit downward by 15%, yielding athree-year, risk-adjusted total PV of 424,000.Modeling and assumptions. For the compositeorganization, Forrester assumes the following: The composite deploys IBM Planning Analyticswith Watson to three retail branches in Year 1, to“Even though we were losing revenue during [the COVID-19 pandemic], we were actuallyable to increase our profitability because of the scenario-planning exercises we did withPlanning Analytics with Watson. Thanks to those, we were able to allocate the rightnumber of people to our growing resources and divest from our shrinking ones.”Chief financial officer, industrial servicesTHE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSON10

ANALYSIS OF BENEFITSIncremental Gross Profit UpliftRef.MetricSourceYear 1Year 2Year 3B1Number of retail branches leveraging IBMPlanning Analytics with WatsonA33714B2Annual sales per retail branchComposite 26,666,667 24,242,424 22,857,143B3Average percentage sales uplift usingIBM Planning Analytics with WatsonInterviews0.5%0.5%0.5%B4Incremental sales uplift using IBMPlanning Analytics with WatsonB1*B2*B3 400,000 848,485 1,600,000B5Average gross marginComposite22%22%22%BtIncremental gross profit upliftB4*B5 88,000 186,667 352,000Risk adjustment 15% 74,800 158,667 299,200BtrIncremental gross profit uplift (riskadjusted)Three-year total: 532,667STREAMLINED BUDGETING PROCESSEvidence and data. Interviewees said a commonpain point across their organizations is the time ittakes to complete an annual budgeting cycle. Forsome organizations, this process can take up to sixmonths from beginning to end, including the time tocreate budget templates, input historical andf orecasted data, compile and merge datasets, andreview and f inalize the consolidated plan. Producingthe annual budget involves input from variousf unctions, branches, and lines of business, eachof ten working with different templates and evendif ferent planning systems or software. The endresult is often a disjointed budgeting process that isiterative rather than cumulative and requiressignificant hours of rework and review.Interviewees said IBM Planning Analytics withWatson tackled these challenges by acting as acentral planning system that could be integratedacross different endpoints and planning workflowswithin their organizations. End users could thereforecreate their inputs with the confidence that they wereTHE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSONThree-year present value: 423,923working with the latest historical and forecast dataand under a singular view that was aligned and usedacross the organization — from executive leadershipdown to individual business managers. By accessinga single source of truth, the organizations increasedcommunication and collaboration during thebudgeting process, reduced the frequency andlikelihood of errors, and lessened the need formultiple, iterative review cycles.“[Previously,] any changes to thebudget carried a two-week cycletime. Now, all updates are done inthe same day. It sounds corny, butit really is [done with] just a click ofa button.”Commercial manager, packagingModeling and assumptions. For the compositeorganization, Forrester assumes the following:11

ANALYSIS OF BENEFITS The composite uses a bottom-up approach for itsannual budgeting process and each retail branchindividually contributes to the master plan. The number of retail branches grows organicallyf rom 30 in Year 1 to 33 in Year 2 and to 35 inYear 3. In Year 2, the composite deploys IBM PlanningAnalytics with Watson for operational andproduct-level planning that involves an additionalFTE per branch across the organization’sf ootprint for annual budgeting. The f ully burdened hourly rate per planning FTEis 60.Risks. The impact of this benefit may vary dependingon the f ollowing factors: Industry- and organization-specific characteristicsthat impact the complexity of the organization’sannual budgeting process. For example, smallorganizations often have less siloed planningworkf lows and processes compared to largerenterprises. The organization’s budgeting approach, whichcan impact the amount of overhead needed tocomplete its annual budgeting cycle. Forexample, using a top-down approach relies onf ewer inputs than using a bottom-up approach. The organization’s legacy planning environment,which will impact the efficiency of its annualbudgeting process prior to adopting IBM PlanningAnalytics with Watson, and ultimately, themagnitude of improvement it achieves with it.Results. To account for these risks, Forresteradjusted this benefit downward by 10%, yielding athree-year, risk-adjusted total PV of 1.2 million.THE TO

THE TOTAL ECONOMIC IMPACT OF IBM PLANNING ANALYTICS WITH WATSON 4 EXECUTIVE SUMMARY ROI Frontline benefits from Planning Analytics with Watson Internal benefits from Planning Analytics with Watson 159% 3.2M BENEFITS PV 5.3M NPV PAYBACK 14 months 689K 195K 1M 1.2M 424K 1.8M Cost savings from retired legacy planning solutions