IDC Antispam ROI

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IDC ROI Calculator

For Anti Spam Solutions

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ROI Results: ê

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Total Cost of Spam per year without anti-spam solution:

Number of email users:

5-Year ROI:

Initial license and / or set up cost of anti-spam software, appliance or services:

Payback (in years)

Annual cost for maintenace, updates or subscription services for anti-spam solution:

5-Year NPV using discount rate:

Type of commercial anti-spam solution in use:

Annual Increased Revenues + Savings

Base

Year 1

Year 2

Year 3

Year 4

Year 5

Technology-related benefits

Cost reduction

Productivity-related benefits

Email users

IT staff

Total

Capital Expenditures

Initial

Year 1

Year 2

Year 3

Year 4

Year 5

Services (external)

Software

Hardware

Total

Depreciation Schedule

Initial

Year 1

Year 2

Year 3

Year 4

Year 5

Services (external)

Software

Hardware

Total

Expensed Costs

Initial

Year 1

Year 2

Year 3

Year 4

Year 5

Services (internal)

Services (external)

Software (licenses/maintenance)

Server hardware (purchase/maintenance)

Total

Net Cash Flows

Initial

Year 1

Year 2

Year 3

Year 4

Year 5

Total Benefits

Less: Total Costs

Less: Depreciation

Net Profit Before Tax

Net Profit After Tax

Add: Depreciation

Less: Capital Expenditures

Net Cash Flow After Taxes

Basic Financial Assumptions

All Federal and State Taxes

40%

Discount Rate

15%

Depreciation - Straight Line (years)

Notes

1) Hardware, software, and external services costs are expensed if US$50,000 or less, and are otherwise depreciated

2) Assumes a 220-day working year, 35 hour productive working week

3) The figures presented here are an independent financial assessment by IDC based on surveys of line of business (LOB) and information technology (IT) managers about the costs of spam and benefits of anti-spam solutions

4) Actual costs and returns on investment will vary. The values in this model are based upon data collected from the survey, and reflect averages and assumptions that do not distinguish between specific vendor's products or services. The reader is encouraged to conduct a more in-depth independent assessment to make a decision

5) Currency conversion rate used: 1 USD = 0.63 GBP; 0.84 Euro

ROI DEFINED

For those readers relatively new to the field of finance, or for the rest of us who are rusty, ROI is the most common method by which organizations judge the relative attractiveness of investment opportunities. At its simplest, ROI refers to the annual return on business investment. Since the expression of the results are not unlike a personal investment, such as a bank account or return on a stock investment, many people feel intuitively comfortable with this approach.
An ROI analysis begins by identifying the important business processes that have been affected by the business analytics implementation. The incremental costs and resulting benefits attributed to the business analytics implementation are then calculated over five years of use in "production" mode. To account for factors, such as inflation and interest rates, both costs are discounted and then expressed in today's dollars. This is what economists call the present value of the investment. ROI uses these present values to assess the relative attractiveness of investments. ROI can be mathematically expressed as:

present value of benefits
________________________________

present value of costs

IDC ROI METHODOLOGY

ROI as the key financial impact measure: ROI is the most popular way of measuring the financial merits of any type of corporate investment alternative. It is easy to understand and communicate, and, once you have the right numbers, it is easy to calculate. However, ROI does not tell the whole story. It does not consider how long it takes to break even on the investment or the overall profits it will bring in because ROI results are expressed in a percentage of return. Therefore, IDC includes an analysis of payback period and net present value (NPV) in its research.
Using standard financial assumptions: In its research, IDC uses one set of conservative financial assumptions across all case studies. This allows IDC to compare the results of organizations in different industries and financial circumstances. These financial assumptions include:

Discount rate: 15%
Tax rate: 40%
Software or hardware expensed up to $50,000
Depreciation: straight line

SIMPLE ROI VERSUS MORE COMPLEX ANALYSIS METHODS

Although ROI can be simply described as the NPV of costs over benefits, calculations based on cash flow are considered a much more representative measure of true bottom-line impact. Therefore, IDC’s ROI calculations are based on internal rate of return (IRR) — the discount rate that must be applied to annual cash flows to achieve a project NPV of zero. The financial community generally regards this approach as a more conservative and representative measure of ROI.

ROI TIME HORIZON

IDC uses a five-year time horizon, which in IDC’s experience is the time horizon preferred by CFOs when considering significant technology investment decisions. Using this timeline, year 0 represents the development phase for the solution and the beginning of year 1 is regarded as the initial production deployment phase.

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