Forrester Total Economic Impact of Microsoft Azure IaaS

The Total Economic Impact™
Of Microsoft Azure IaaS

Cost Savings and Business Benefits
Enabled By Azure Infrastructure As A Service (IaaS)
JUNE 2023
A FORRESTER TOTAL ECONOMIC IMPACT™ STUDY COMMISSIONED BY MICROSOFT

Table Of Contents Consulting Team: Margaret Firth
Matthew Dunham
Executive Summary ................................................. 1
The Microsoft Azure IaaS Customer Journey ....... 6
Key Challenges ...................................................... 6
Solution Requirements ........................................... 7
Composite Organization ......................................... 7
Analysis Of Benefits ................................................ 8
Avoided On-Premises Infrastructure Costs ............ 8
Avoided Legacy Infrastructure Management FTE
Costs .................................................................... 10
Avoided Lost Revenue From Improved Reliability
.............................................................................. 12
Income From New Azure IaaS Offerings ............. 13
Unquantified Benefits ........................................... 14
Flexibility ............................................................... 15
Analysis Of Costs .................................................. 17
Azure Implementation And Initial Workload
Migration Costs .................................................... 17
Ongoing Azure Costs And Additional Workload
Migration ............................................................... 18
Financial Summary ................................................ 20
Appendix A: Total Economic Impact ................... 21
Appendix B: Endnotes .......................................... 22
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THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS

Executive Summary
Microsoft Azure infrastructure as a service (IaaS) empowers companies to reduce or
avoid managing infrastructure and instead focus on the strategic needs of their
businesses while saving costs. A robust portfolio of offerings allows users to easily
customize the infrastructure environment to support stability, security and compliance,
sustainability, and a modern cloud infrastructure.
Azure IaaS allows companies to manage

infrastructure as a service on Microsoft Azure as an KEY STATISTICS
alternative to self-managing, traditional on-premises
infrastructure. Users retain control of installation,
configuration, and management of their software
including operating systems, middleware, and
applications. Cloud services including compute,
storage, and networking are available to be Return on investment (ROI) Net present value (NPV)
provisioned on an on-demand, usage-based pricing 264% $12.12M
model that can be scaled up and down quickly and
easily.
Microsoft commissioned Forrester Consulting to five representatives with experience using Azure
conduct a Total Economic Impact™ (TEI) study and IaaS. For the purposes of this study, Forrester
examine the potential return on investment (ROI) aggregated the interviewees’ experiences and
enterprises may realize by deploying Azure IaaS.1 combined the results into a single composite
The purpose of this study is to provide readers with a organization that is a global conglomerate with $4
framework to evaluate the potential financial impact billion in annual revenue and 20,000 employees.
of Azure IaaS on their organizations. Prior to using Azure IaaS, these interviewees noted
To better understand the benefits, costs, and risks how their organizations’ on-premises infrastructure
associated with this investment, Forrester interviewed costs were high and kept IT staff busy maintaining
the environment, including hardware. The legacy
environment was not backed up in the cloud. The
underlying network had limited resiliency, which
raised worries about downtime and penalties such as
Year 3 reduction in
lost revenue. The time-consuming and costly process
infrastructure costs of provisioning new infrastructure in an on-premises
70%
environment lacked the flexibility to innovate and to
quickly respond to the changing needs of the
business.
After the investment in Azure IaaS, migrating

workloads to the cloud was simpler and faster than
THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 1

EXECUTIVE SUMMARY
before, conferring additional flexibility without Azure IaaS features unlock revenue from new
compromising on security and compliance or and improved offerings. Over the course of the
compatibility with hybrid and multicloud three-year analysis, this benefit has a value of
environments. Key results from the investment, $5.2 million.
regardless of the operating system environment
Unquantified benefits. Benefits that provide value
contemplated, include cost savings on infrastructure,
for the composite organization but are not quantified
enhanced services, and a cloud-ready stance with an
in this study include:
enhanced ability to migrate workloads and optimize
infrastructure for business needs. • Increased innovation and reduced technical
debt. After the investment in Azure IaaS, the
KEY FINDINGS
composite can run a variety of workloads with
Quantified benefits. Three-year, risk-adjusted less technical debt and greater efficacy, leading
present value (PV) quantified benefits for the to greater innovation. Testing capabilities expand
composite organization include: and could be conducted in parallel, and the
• Avoided legacy infrastructure costs. With composite can spin up or spin down a variety of
Azure IaaS, the composite organization saves on services that enable a faster time to market and
storage, compute, networking, and other services solutions tailored to business needs.
by avoiding investment in hardware and software • Improved security. In the face of increasing
and reducing the real estate footprint associated cyberattacks, the composite organization enjoys
with its legacy, on-premises environment. Over improved security as a result of its investment in
the course of the three-year analysis, this benefit Azure IaaS.
is valued at $6.8 million.
• Better compliance for global operations.
• Freed up to 80% of time spent on Azure IaaS supports key security strategies and
infrastructure maintenance for more strategic compliance with regulations across geographies
tasks. Adopting Azure IaaS reduces the need for for the composite. The composite could entrust
FTEs to maintain the on-premises environment at sensitive, regulated workloads to Azure IaaS.
the composite and its hardware. The composite
reallocates the staff to more interesting and • Improved employee experience. For the
strategic work. The time savings over the course composite organization, Azure IaaS is a key
of the three-year analysis is valued at $2.8 component in supporting remote work for
million. employees. Shifting from self-managing
infrastructure to infrastructure as a service frees
• Eliminated 90 minutes of downtime through employees from rote maintenance tasks, allowing
greater reliability. The stability of the Azure IaaS them to spend more time on more interesting and
cloud and the ability to avoid downtime allows the strategic tasks.
composite to avoid lost revenue. Over the course
of the three-year analysis, the value of this • Improved sustainability. The composite
benefit is $1.9 million. organization realizes greater efficiencies and a
reduced carbon footprint using Azure IaaS
• Realized new income streams through Azure compared to legacy on-premises infrastructure.
IaaS capabilities. The innovation Azure IaaS
enables is a catalyst for the composite Costs. Three-year, risk-adjusted PV costs for the
organization to realize new income streams. composite organization include:

EXECUTIVE SUMMARY
• Initial migration costs of $612,000. To

complete the migration of the initial workloads,
staff at the composite organization devote time to
planning, training, migration, and implementation
tasks.
• Ongoing Azure and migration costs of less

than $4 million. After the initial migration, the
composite organization continues leveraging
Azure IaaS to migrate and run workloads, adding
new offerings over time. The composite spends
time on maintenance going forward.
The representative interviews and financial analysis

found that a composite organization experiences
benefits of $16.71 million over three years versus
costs of $4.59 million, adding up to a net present
value (NPV) of $12.12 million and an ROI of 264%.

EXECUTIVE SUMMARY
ROI BENEFITS PV NPV

264% $16.71M $12.12M
Benefits (Three-Year)
Avoided on-premises
$6.8M
infrastructure costs
Avoided legacy
infrastructure management $2.8M Reallocate 80% of infrastructure FTEs
FTE costs
Avoided lost revenue from Avoid 90 minutes of downtime annually

improved reliability $1.9M
Income from new Azure

$5.2M
IaaS offerings
“What we see now is an opportunity to

migrate applications to the cloud as
fast as we possibly can with IaaS as a
key component to enable that
migration.”
— VP of IT operations, IT
EXECUTIVE SUMMARY
TEI FRAMEWORK AND METHODOLOGY

From the information provided in the interviews, DUE DILIGENCE
Interviewed Microsoft stakeholders and
Forrester constructed a Total Economic Impact™
Forrester analysts to gather data relative to
framework for those organizations considering an
investment in Azure IaaS. Azure IaaS.
The objective of the framework is to identify the cost, INTERVIEWS

benefit, flexibility, and risk factors that affect the Interviewed five representatives at organizations
investment decision. Forrester took a multistep using Azure IaaS to obtain data with respect to
approach to evaluate the impact that Azure IaaS can costs, benefits, and risks.
have on an organization.
COMPOSITE ORGANIZATION
Designed a composite organization based on
characteristics of the interviewees’
organizations.
FINANCIAL MODEL FRAMEWORK

Constructed a financial model representative of
the interviews using the TEI methodology and
risk-adjusted the financial model based on
DISCLOSURES
issues and concerns of the interviewees.
Readers should be aware of the following:
This study is commissioned by Microsoft and delivered by

Forrester Consulting. It is not meant to be used as a CASE STUDY
competitive analysis. Employed four fundamental elements of TEI in
Forrester makes no assumptions as to the potential ROI modeling the investment impact: benefits, costs,
that other organizations will receive. Forrester strongly flexibility, and risks. Given the increasing
advises that readers use their own estimates within the
framework provided in the study to determine the
sophistication of ROI analyses related to IT
appropriateness of an investment in Azure IaaS. investments, Forrester’s TEI methodology
Microsoft reviewed and provided feedback to Forrester, provides a complete picture of the total
but Forrester maintains editorial control over the study economic impact of purchase decisions. Please
and its findings and does not accept changes to the study
that contradict Forrester’s findings or obscure the
see Appendix A for additional information on the
meaning of the study. TEI methodology.
Microsoft provided the customer names for the interviews
but did not participate in the interviews.

The Microsoft Azure IaaS Customer Journey
Drivers leading to the Azure IaaS investment
Interviews
Role Industry Region Details
• 4,000 full-time staff

• 10,000 hourly employees
Senior manager of technology Construction North America • Delivering billions of
construction value in
infrastructure and industrial
projects
• $40 billion annual revenue
Senior director of IT architecture Financial services US
• 8,000 employees
• $30 billion annual revenue
VP of IT operations IT APAC HQ, global operations
• 70+ partner companies
• Manufacturing, R&D, and retail
Manufacturing and retail APAC HQ, global operations
CIO operations
conglomerate including EMEA
• 20,000 employees
• Public school district
CIO Public sector US
• 27,000 employees
KEY CHALLENGES
Before adopting Azure IaaS, interviewees noted their
“I don’t want to continue in the
organizations managed their own infrastructure. The
data center business. I don’t
interviewees noted how their organizations struggled
with common challenges, including:
want to continue having human
capital to manage my
• Significant infrastructure costs. IT costs
infrastructure. If I can get that
related to existing data centers and ongoing
operations were significant for the interviewees’
infrastructure as a service, that’s
companies, whether they were internal or my preference.”
outsourced. Hardware was a significant
Senior director of IT architecture,
expenditure, and labor costs for maintenance
were high. Maintaining infrastructure distracted IT
financial services
teams from more strategic work.
• Lack of flexibility to right-size or expand.

raised barriers to adopting new technologies or
Relying on physical infrastructure and the time
launching new offerings.
and effort it entailed to procure and maintain
constrained how quickly and easily companies • Poor security, stability, and sustainability.
could scale up to meet business needs in new The on-premises environment had drawbacks
geographies or through new offerings. Scaling when it came to reliability, cybersecurity, the
down physical infrastructure was prohibitive or ability to operate globally, and compliance. It was
impossible and involved significant effort, such as also limited when it came to meeting the
deprovisioning data centers or servers. This business’s workload hosting requirements,
impeding innovation.

THE MICROSOFT AZURE IAAS CUSTOMER JOURNEY
though it also utilizes virtualization from time to time.

Going forward, some workloads are deployed entirely
“More flexibility, speed, better in the cloud, whereas some remain hybrid between
security, for sure. We’ve on-premises and virtual environments. Over time, the
definitely met those objectives.” composite leverages Azure IaaS for a variety of use
cases including business continuity and disaster
CIO, manufacturing and retail recovery, website hosting, high performance
computing, big data for surveillance and IoT needs,
and to support internal applications, such as SAP.
SOLUTION REQUIREMENTS The company typically uses Linux OS, but also
The interviewees’ organizations searched for a makes use of Windows Server.
solution that could: The company buys Azure IaaS services to support its
• Optimize infrastructure costs and labor effort. environment including Storage, Compute,
Networking, Virtual Machines including specialized
• Simplify and accelerate transformation to a high- VMs for HPC (e.g. HBv4), Reserved Instances or
performance modern infrastructure in the cloud. Reserved Virtual Machine Instances, Microsoft
• Securely manage and govern hybrid and Defender for Cloud, and Active Directory.
multicloud environments for global operations.
• Uphold resiliency and business continuity with

tools to defend against cyberattacks. Key Assumptions
COMPOSITE ORGANIZATION • $4 billion annual

Based on the interviews, Forrester constructed a TEI revenue
framework, a composite company, and an ROI • Global operations
analysis that illustrates the areas financially affected. • 20,000 employees
The composite organization is representative of the
• Migrations are a blend
five interviewees, and it is used to present the
of lift-and-shift and
aggregate financial analysis in the next section. The
composite organization has the following
more complex
characteristics: workloads requiring
additional development
Description of composite. The composite
organization operates globally, servicing B2B and
and rearchitecting
B2C customers. Research and development efforts
are significant at the organization. The composite has
20,000 employees working across retail and
manufacturing operations and aspects of the
business are highly regulated.
Deployment characteristics. The composite is

undergoing a digital transformation and is moving
workloads gradually to the cloud from legacy on-
premises environments via mostly lift-and-shift,

Analysis Of Benefits
Quantified benefit data as applied to the composite
Total Benefits
Present
Ref. Benefit Year 1 Year 2 Year 3 Total
Value
Avoided on-premises
Atr $1,872,000 $2,574,000 $3,963,960 $8,409,960 $6,807,273
infrastructure costs
Avoided legacy infrastructure
Btr $810,000 $1,101,600 $1,555,200 $3,466,800 $2,815,222
management FTE costs
Avoided lost revenue from
Ctr $765,000 $765,000 $765,000 $2,295,000 $1,902,442
improved reliability
Income from new Azure IaaS
Dtr $1,275,000 $2,550,000 $2,550,000 $6,375,000 $5,182,382
offerings
Total benefits (risk-adjusted) $4,722,000 $6,990,600 $8,834,160 $20,546,760 $16,707,319
AVOIDED ON-PREMISES INFRASTRUCTURE

COSTS
“I was able to increase my
Evidence and data. Interviewees said that moving to
storage and reduce my cost.”
the cloud using Azure IaaS presented opportunities
for infrastructure modernization and cost savings. Not Senior director of IT architecture,
only did interviewees realize more cost efficiencies, financial services
but the new IaaS infrastructure was more modern,
higher performing, and included more services and
capabilities. Interviewees shared a range of ways in
which they could optimize infrastructure and realize capex costs and described budgetary benefits
cost savings on various components, including from being able to shift to opex.
storage, networking, and compute resources. • Interviewees saw reduced storage costs. A CIO
Interviewees also experienced cost savings from in the public sector shared: “The cost per
avoiding data center refreshes (e.g., upgrades to terabyte could reach up to $450 on-premises.
power density, cooling, installation of new cabling, Now, with moving to Azure, that cost really
hardware such as storage or servers). In some became one-third.”
cases, interviewees saw cost reductions related to
• Interviewees saved on networking as well. A
reduced real estate costs (e.g., rents) or from cooling
costs for data center buildings. Costs savings vary senior manager of technology at a construction
depending on the environment, but could include the company said, “We went from spending $2
following: million to spending $700,000 on networking”
since adopting Azure IaaS.
• Interviewees noted retiring on-premises servers,
• Interviewees described significant savings on
at times as many as 70% or more.
infrastructure since implementing Azure IaaS. A
• Interviewees’ organizations avoided data center senior manager of technology at a construction
refreshes that would have involved significant company said, “[In terms of] actual budget

ANALYSIS OF BENEFITS
dollars, we’re roughly looking at $5 million in Risks. Benefits realized may vary based on the
savings [since we adopted Azure IaaS].” following factors:
• A CIO in the public sector detailed the cost • Workload needs and IaaS offerings selected.
savings enabled by Azure IaaS: “[In Year 1, we]
• Existing infrastructure costs and the extent
were able to save around 20% by moving into the
legacy or on-premises infrastructure must be
Azure IaaS. And that transpired into a million-
maintained going forward.
dollar savings just on the infrastructure side.”
Results. To account for these risks, Forrester
Modeling and assumptions. For the composite
adjusted this benefit downward by 10%, yielding a
organization, Forrester assumes the following:
three-year, risk-adjusted total PV (discounted at 10%)
• Infrastructure costs at the composite are $5.2 of $6.8 million.
million in Year 1, growing 10% each year to
support corporate expansion.
• Each year existing workloads are migrated to

Azure IaaS and new IaaS offerings launch.
• The number of workloads migrated increases in

Years 2 and 3, decreasing costs as more legacy
infrastructure is deprecated and more resources
optimized.
Avoided On-Premises Infrastructure Costs

Ref. Metric Source Year 1 Year 2 Year 3
Annual on-premises infrastructure costs Composite -
A1 $5,200,000 $5,720,000 $6,292,000
prior to Azure IaaS 10% growth
Reduction in on-premises infrastructure
A2 Interviews 40% 50% 70%
costs after Azure IaaS
At Avoided on-premises infrastructure costs A1*A2 $2,080,000 $2,860,000 $4,404,400
Risk adjustment ↓10%
Avoided on-premises infrastructure costs

Atr $1,872,000 $2,574,000 $3,963,960
(risk-adjusted)
Three-year total: $8,409,960 Three-year present value: $6,807,273

AVOIDED LEGACY INFRASTRUCTURE

MANAGEMENT FTE COSTS
“[It’s] a bigger story than the
Evidence and data. Interviewees noted that their
savings — we are providing way
organizations’ traditional on-premises data centers
required significant IT labor effort to manage. Before more services than we were able
Azure IaaS, their IT teams had to manage the to provide in earlier days.”
provision and maintenance of all aspects of
Senior manager of technology,
infrastructure including hardware and software. Azure
IaaS removed the need to self-manage infrastructure.
construction
The interviewees’ staff repurposed time toward
higher-value tasks.
• As more workloads are migrated to Azure IaaS,
• According to interviewees, IT staff could
the interviewees noted their companies gradually
discontinue a range of infrastructure
repurposed tens or even hundreds of employees,
management tasks, including server
depending on the size of the interviewee’s
management, administration, adding random-
organization.
access memory (RAM), and upgrading hardware
among others, saving significant time. Modeling and assumptions. For the composite
• A senior manager of technology at a construction
company said, “The amount of time that my team • The composite organization continues running
has to manage and do the legacy work on server hybrid workloads.
management, server administration, adding
• In Year 1, 15 FTEs are repurposed with initial
RAM, upgrading hardware on a continual basis
workload migrations. Scaling at the composite
— that just doesn’t exist anymore.”
results in headcount growth in Years 2 and 3.
• A CIO in the public sector described: “We have
• Despite headcount growth, the amount of legacy
really freed up many of our developers’ time. …
infrastructure management effort avoided
The heavy lifting administration has been taken
increases year-over-year as staff becomes more
care of by this migration”.
efficient and additional workloads are migrated.
• Interviewees’ organizations responded to these
Risks. Benefits realized may vary based on the
time savings in a variety of ways, typically
following factors:
repurposing staff to new tasks within the IT
organization. This work was characterized as • The number of staff supporting legacy
“more attractive” and “more strategic.” infrastructure.
• According to a senior manager of technology at a • Compensation of staff supporting legacy

construction company: “When [IT staff] don’t infrastructure.
have to do administration work, it frees them up • The number and nature of workloads migrated.
to do what I would consider more attractive work. Some workloads, such as hybrid, may require
It keeps them more engaged because the work is ongoing maintenance of on-premises
challenging. It’s just not your typical server infrastructure.
administration.”


adjusted this benefit downward by 10%, yielding a
three-year, risk-adjusted total PV of $2.8 million.
Avoided Legacy Infrastructure Management FTE Costs

FTEs supporting legacy infrastructure
B1 Composite 15 17 18
prior to Azure IaaS
On-premises FTE reduction after Azure
B2 Interviews 50% 60% 80%
IaaS (cumulative)
Average fully loaded salary of FTE
B3 TEI standard $120,000 $120,000 $120,000
(annual)
Bt B1*B2*B3 $900,000 $1,224,000 $1,728,000
management FTE costs

Btr $810,000 $1,101,600 $1,555,200
management FTE costs (risk-adjusted)

AVOIDED LOST REVENUE FROM IMPROVED

RELIABILITY
“I have more security controls
Evidence and data. According to interviewees,
around the level of application.
moving to Azure IaaS from their organizations’ legacy
on-premises infrastructures ensured reliability for
And of course, I have been
critical workloads. With a backup in the cloud, seeing more resilience in the
interviewees’ companies reduced outages and system that translates [to] less
quickly restored operations when they did occur. outages.”
Depending on the interviewee whose organization
was involved, the amount of downtime avoided could Senior director of IT architecture,
be anywhere from hours to days or weeks. financial services
• A senior manager of technology at a construction
company estimated, “[We’ve] reduced time [to • A 10% operating margin.
restore] by 75%.” Risks. Benefits realized may vary based on the
• A senior director of IT architecture at a financial following factors:
services company stated: “We lose between $1 • How much downtime was experienced prior to
million to $2 million from every minute that we are adopting Azure IaaS.
down. We used to face one or two outages every
year. The big difference is that before, it used to • The cost implications of downtime for the
take us around 2 to 4 hours to do a full [recovery organization or workload.
time objective] (RTO). Now, it’s 15 to 30 • Redundancy in configuration.
minutes.”
• The operating margin applicable according to
Modeling and assumptions. For the composite industry.
• Lost revenue is valued at $100,000 per minute of adjusted this benefit downward by 15%, yielding a
downtime. three-year, risk-adjusted total PV of $1.9 million.
Avoided Lost Revenue From Improved Reliability

Server downtime before Azure IaaS
C1 Interviews 90 90 90
(minutes per year)
C2 Lost revenue per minute of downtime Interviews $100,000 $100,000 $100,000
C3 Operating margin TEI standard 10% 10% 10%
Avoided lost revenue from improved

Ct C1*C2*C3 $900,000 $900,000 $900,000
reliability
Avoided lost revenue from improved

Ctr $765,000 $765,000 $765,000
reliability (risk-adjusted)

INCOME FROM NEW AZURE IAAS OFFERINGS

Evidence and data. Features from Azure IaaS,
“[We’ve] been able to monetize
including scale, performance, availability, and
reliability, made it possible for the interviewees’
some of the rich data that we
organizations to launch new offerings, generating have [which] has led to a new
new streams of revenue. In several instances, business model.”
interviewees noted that Azure-native tools and the
access to data they provided could be monetized:
CIO, manufacturing and retail
• A CIO at a manufacturing and retail company

detailed how Azure IaaS helped their company
gain a better understanding of the market and and new revenue: “For handling that specific
respond to customer sentiment in a way that infrastructure for doing new lending capabilities, I
impacted its business: “[We’ve gained a] better used to have a generic infrastructure. But if there
understanding of the market through some of the is a new external connectivity that is going to be
data lakes that we’ve been building and [Azure- required, it takes weeks for me to roll out that
native] tools, including several [in the] AI area. … new functionality. Now, I can roll it out in hours.
We have been able to get a much better view of That means the business can start doing their job
how customers think about us, why they think and it’s securing that process.”
we’re good, why we’re not good, where we could Modeling and assumptions. For the composite
improve and really get a lot of customer organization, Forrester assumes the following:
sentiment data. I’d like to believe that that has led
• Benefits take at least six months to realize,
to better service, better business.”
lowering the revenue realized in Year 1.
• In addition, the interviewee at the manufacturing
• Not all additional income is attributable to Azure
and retail organization shared that they had
IaaS alone, so an attribution of 75% is applied to
rebuilt a B2B sales platform on Azure IaaS with
account for the need to develop and realize
significant quality upgrades, generating more
business ideas capable of generating income.
sales. The same organization introduced new
product-as-a-service offering replacement parts Risks. Benefits realized may vary based on the
on a subscription basis and opened a new line of following factors:
business selling road condition datasets to smart
• The value of new offerings made possible
cities.
through Azure IaaS.
• The senior director of IT architecture noted that
• Operating margin applicable according to
their financial services organization started a new
industry.
initiative that provided lending services
generating close to $1 billion in revenue. • How quickly value can be realized.
• This interviewee also noted the ability to Results. To account for these risks, Forrester
configure the infrastructure as needed and adjusted this benefit downward by 15%, yielding a
deploy quickly was important to their three-year, risk-adjusted total PV of $5.2 million.
organization’s ability to generate new offerings

Income From New Azure IaaS Offerings

Value of offering made possible with
D1 Interviews $20,000,000 $40,000,000 $40,000,000
Azure IaaS (average annual revenue)
D2 Operating margin TEI standard 10% 10% 10%
Percentage of income attributed to Azure

D3 Composite 75% 75% 75%
IaaS
Dt Income from new Azure IaaS offerings D1*D2*D3 $1,500,000 $3,000,000 $3,000,000
Income from new Azure IaaS offerings

Dtr $1,275,000 $2,550,000 $2,550,000
(risk-adjusted)
UNQUANTIFIED BENEFITS
Interviewees mentioned the following additional
“[In] a business that changes
benefits that their organizations experienced but were
not able to quantify:
quickly, a lot of times —
especially in the legacy days of
• Increased innovation and reduced technical
being on-premises — the
debt. Azure IaaS makes it possible for the
business would request a certain
interviewees’ organizations to reduce technical
debt. Interviewees’ companies could easily,
size server and then realize that
quickly, and cost-effectively test out new services we actually didn’t need that
or deploy new features, even those that require much, but you had already paid
high-performing infrastructure. According to a for it. In Azure, you’re spinning it
senior manager of technology at a construction up, they try it, and then you can
company: “It’s game changing. It just allows you
spin it down or even increase it if
to deliver to the business faster and more
you have to.”
efficient services. You can try things before you
deploy, and that just gives the business a lot Senior manager of technology,
more input in what you are providing to them for construction
a service.”
A senior director of IT architecture at a financial

services company saw these features as a “huge me weeks sometimes to fine-tune. Now, it’s
improvement” and noted: “[Developers] can have taking minutes for me to provision them.”
their environments built out faster without waiting
Developers at interviewees’ organizations could
and they can test out different types of sizes
self-provision assets and applications and
based on performance that they want to go in
modules could be tested and completed more
and achieve that. Before I used to do it through
effectively and get to market faster. Azure IaaS
virtualization servers but, as I mentioned, it took
opened new possibilities to make parallel testing

possible, increasing efficiency and effectiveness features, such as the ability to spin up
of releases and deployments. virtual workloads and the ability to
configure remote desktops, went a long
A CIO in the public sector noted: “Our
way in supporting remote work as a key
development cycle is much more effective than
part of enhanced employee experience
before. We have better development test
during the COVID-19 pandemic and
environments on an ad hoc basis. We are so
beyond. According to a senior manager of
agile now, so we can have multiple projects
technology at a construction company: “If
running at the same time and that all transpires
there is a big workload, we can click a
into less people. We can quickly set up and turn
button and spin up more resources.
off the new server environment, for example.”
During the pandemic, that was a really big
• Improved security. Multiple interviewees factor, because our workforce was
mentioned improved security as an objective of working remote, and we were able to just
their investment in Azure IaaS. Adopting Azure spin up more resources to be able to
IaaS was key to improving cybersecurity posture handle that.”
in the face of increasing cyberattacks. A VP of IT
▪ More interesting work. With Azure IaaS,
operations at an IT company noted: “[Azure IaaS]
IT staff at the interviewees’ organizations
is very beneficial for the network perspective
spent less time patching and maintaining
since it has been achieving Zero Trust and
legacy infrastructure, and more time on
microsegmentation if possible. [It’s been
new, more interesting tasks in the Azure
beneficial for users] being able to use our
IaaS environment.
services anywhere, anytime.”
• Improved sustainability. Azure IaaS was an
• Better compliance for global operations.
important part of sustainability strategies,
Azure IaaS supports key security strategies and
rendering operations more efficient and less
compliance with regulations across geographies.
carbon-intensive than legacy on-premises data
Interviewees whose companies are in regulated
centers. A CIO at a manufacturer said: “We
industries could entrust sensitive workloads to
compared the CO2 accounting from our existing
Azure IaaS. With Azure data centers in nearly all
data center versus comparable compute on
regions, Azure IaaS was well suited to global
Azure. And now, since recently, we have gotten a
operations. A senior manager of technology at a
lot better in the FinOps space and we feel that
construction company said: “It’s mostly the user
we’re also making progress on running a cloud
experience, just because with the latency — with
much more efficiently than a traditional data
Azure IaaS — they don’t need to come all the
center.”
way back to headquarters for our on-premises
services, so they’re closer to the resources FLEXIBILITY
depending on the Azure region that they’re in.” The value of flexibility is unique to each customer.
• Improved employee experience. Azure IaaS There are multiple scenarios in which a customer
helped the interviewees’ organizations deliver a might implement Azure IaaS and later realize
high-quality employee experience, including: additional uses and business opportunities, including:
• New technologies and functionalities. Azure

▪ Better support of remote work.
Interviewees found that Azure IaaS IaaS has a wide and constantly growing range of
options and functionalities. The service model

means that companies can try new things and

deploy without an expensive investment that
cannot easily be recouped. A CIO in the public
sector described the ways in which their
organization could quickly and economically try
out or deploy new IaaS functionalities: “If [we]
want like any service, app service, like Hadoop or
HPC or whatever it is, we can quickly set it up
and pilot it basically. If we don’t have that
capability, we would need a data center or
somewhat of a build out basically where we are
putting servers and all that capability.”
• Optimized infrastructure for usage and cost.

Azure IaaS easily scales up or down, and offers
clear visibility into usage, which puts customers
in good stead to understand their usage and
optimize accordingly.
• Multicloud and edge. Azure IaaS is a suitable

part of a strategy involving multiple clouds and
minimizing vendor lock-in for cloud services.
Companies can flexibly move workloads if the
need arises. A senior architect at a financial
services company said: “We are using Azure as
part of my multicloud strategy. I don’t want to
create vendor lock-in for my hyperscalers or my
cloud providers as a whole.”
• A CIO at a public sector organization detailed use

of IaaS in edge environments: “We are doing
quite a bit of AI-based, real-time monitoring and
collecting a lot of data, use cases for edge
computing for monitoring, surveillance, and how
to analyze that data better. We are using quite a
bit of those data integration tools as well as data
analysis tools and creating a lot of dashboards
and monitoring capabilities, not only for that
purpose, but also for application and
infrastructure monitoring as well.”
Flexibility would also be quantified when evaluated as

part of a specific project (described in more detail in
Appendix A).

Analysis Of Costs
Quantified cost data as applied to the composite
Total Costs
Present
Ref. Cost Initial Year 1 Year 2 Year 3 Total
Value
Azure implementation
Etr and initial workload $611,800 $0 $0 $0 $611,800 $611,800
migration costs
Ongoing Azure costs
Ftr and additional workload $0 $1,343,100 $1,614,800 $1,893,100 $4,851,000 $3,977,860
migration
Total costs (risk-
$611,800 $1,343,100 $1,614,800 $1,893,100 $5,462,800 $4,589,660
adjusted)
AZURE IMPLEMENTATION AND INITIAL

WORKLOAD MIGRATION COSTS “We work in different time zones,
Evidence and data. The interviewees noted their so we have specific resources
organizations migrated workloads from on-premises that are only turned on for a very
environments via a lift-and-shift methodology or specific period of time. [We’re]
virtualization. Interviewees described a range of tasks
only paying when they’re in use,
involved in the initial migration, including:
and Azure just makes that so
• Planning around migration impacts of a particular much easier to manage. We have
workload on the organization.
services that are only on for 4
• IT staff devoting time to migrating data and hours a day or only on a specific
preparing workloads for migrations and to training time zone for seven days or five
on Azure tools for migration and running days out of the week.”
workloads.
Senior manager of technology,
Modeling and assumptions. For the composite
organization, Forrester assumes the following: construction
• Six IT FTEs with cloud expertise devote 20
weeks to planning, training, migration, and
implementation tasks. Risks. Costs realized may vary based on the
following factors:
• As part of the overall digital transformation and in
support of the migration effort, the composite • The number and nature of the workloads
incurs costs related to additional third-party migrated.
consulting services. • IT labor costs.
• The composite continues the migration effort with Results. To account for these risks, Forrester
additional workloads going forward. adjusted this cost upward by 15%, yielding a three-
year, risk-adjusted total PV (discounted at 10%) of
$612,000.

ANALYSIS OF COSTS
Azure Implementation And Initial Workload Migration Costs

Ref. Metric Source Initial Year 1 Year 2 Year 3
FTEs involved in Azure IaaS planning,
E1 Interviews 6
migration, and prelaunch implementation
Length of planning, migration, and
E2 Interviews 20
implementation (weeks)
Average fully loaded salary of Azure IT
E3 TEI standard $90
(hourly)
E4 Other initial costs Interviews $100,000
Azure implementation and initial

Et E1*E2*(E3*40)+E4 $532,000 $0 $0 $0
workload migration costs
Risk adjustment ↑15%
Azure implementation and initial

Etr $611,800 $0 $0 $0
workload migration costs (risk-adjusted)
Three-year total: $611,800 Three-year present value: $611,800
ONGOING AZURE COSTS AND ADDITIONAL of the subscriptions that we have that does not
WORKLOAD MIGRATION run 24/7 would run us about $15,000 a month
Evidence and data. The interviewees noted that and the way that we have the servers configured
their organizations implemented multiple workloads to shut down during specific times and be
on Azure IaaS over time, first migrating existing available for very specific time zones, we’ve got
workloads and later implementing workloads on that cost decreased down to about $8,500 a
Azure IaaS at outset. Some interviewees noted their month.”
organizations ran some workloads on a hybrid basis. Modeling and assumptions. For the composite
Workloads on Azure IaaS included networking, organization, Forrester assumes the following:
storage, compute, and management and security
• The composite organization uses a variety of
services. Resources were optimized to run only when
needed (e.g., within operating hours within a virtual machines to support the Azure IaaS
particular geography) and the interviewees’ workloads, including D-series and E-series, HBv4
organizations received a discount through the for high-performance computing, reserved
Microsoft Hybrid benefit. instances, and services such as Microsoft
Defender for Cloud and Active Directory.
• Interviewees described a reduction in the amount
of labor needed to maintain infrastructure using • To support ongoing migrations — both lift-and-
IaaS compared to an on-premises environment, shift and virtualization — the composite
as well as a shift away from maintenance of organization purchases Express Route and
physical infrastructure toward other tasks as incurs additional migration costs.
needed to maintain the Azure IaaS workloads. • As more workloads are migrated and the Azure
• Interviewees optimized various licensing, IaaS environment grows, the number of staff
maintenance, and migration tasks. Examples managing increases from three in Year 1 to five
included one described by a senior manager of in Year 3.
technology at a construction organization: “One

ANALYSIS OF COSTS
Risks. Costs realized may vary based on the • Ability to optimize based on usage.
following factors:
• The number and complexity of migrations. adjusted this cost upward by 10%, yielding a three-
year, risk-adjusted total PV of less than $4 million.
• Compensation for the IT staff managing the
Azure IaaS environment.
• Type and number of services and infrastructure

components purchased.
Ongoing Azure Costs And Additional Workload Migration

Ref. Metric Source Initial Year 1 Year 2 Year 3
F1 Azure licensing costs Interviews $600,000 $660,000 $726,000
F2 Additional workload migration costs Interviews $60,000 $60,000 $60,000
F3 FTEs supporting Azure IaaS Interviews 3 4 5
Average fully loaded salary of FTE

F4 TEI standard $187,000 $187,000 $187,000
(annual)
Ongoing Azure costs and additional
Ft F1+F2+(F3*F4) $0 $1,221,000 $1,468,000 $1,721,000
workload migration
Risk adjustment ↑10%
Ongoing Azure costs and additional

Ftr $0 $1,343,100 $1,614,800 $1,893,100
workload migration (risk-adjusted)

Financial Summary
CONSOLIDATED THREE-YEAR RISK-ADJUSTED METRICS
Cash Flow Chart (Risk-Adjusted)
The financial results calculated in the

Total costs Total benefits Cumulative net benefits
Benefits and Costs sections can be
used to determine the ROI, NPV, and
$16.0 M payback period for the composite
Cash
flows
organization’s investment. Forrester

$14.0 M assumes a yearly discount rate of 10%
for this analysis.
$12.0 M
$10.0 M
$8.0 M
These risk-adjusted ROI, NPV,
$6.0 M
and payback period values are
$4.0 M
determined by applying risk-
adjustment factors to the
$2.0 M unadjusted results in each
Benefit and Cost section.
-$2.0 M
-$4.0 M
Initial Year 1 Year 2 Year 3
Cash Flow Analysis (Risk-Adjusted Estimates)

Present
Initial Year 1 Year 2 Year 3 Total
Value
Total costs ($611,800) ($1,343,100) ($1,614,800) ($1,893,100) ($5,462,800) ($4,589,660)
Total benefits $0 $4,722,000 $6,990,600 $8,834,160 $20,546,760 $16,707,319
Net benefits ($611,800) $3,378,900 $5,375,800 $6,941,060 $15,083,960 $12,117,659
ROI 264%

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
the measure of costs, allowing for a full examination that the investment should be made
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.”
The initial investment column contains costs incurred at “time

0” or at the beginning of Year 1 that are not discounted. All
other cash flows are discounted using the discount rate at the
end of the year. PV calculations are calculated for each total
cost and benefit estimate. NPV calculations in the summary
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.

Appendix B: Endnotes
1 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s
technology decision-making processes and assists vendors in communicating the value proposition of their
products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the
tangible value of IT initiatives to both senior management and other key business stakeholders.


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The Total Economic Impact™

Of Microsoft Azure IaaS

A FORRESTER TOTAL ECONOMIC IMPACT™ STUDY COMMISSIONED BY MICROSOFT

ABOUT FORRESTER CONSULTING

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS

Azure IaaS allows companies to manage

After the investment in Azure IaaS, migrating

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 1

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 2

• Initial migration costs of $612,000. To

• Ongoing Azure and migration costs of less

The representative interviews and financial analysis

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 3

ROI BENEFITS PV NPV

Avoided lost revenue from Avoid 90 minutes of downtime annually

Income from new Azure

“What we see now is an opportunity to

TEI FRAMEWORK AND METHODOLOGY

The objective of the framework is to identify the cost, INTERVIEWS

FINANCIAL MODEL FRAMEWORK

This study is commissioned by Microsoft and delivered by

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 5

Role Industry Region Details

• 4,000 full-time staff

• Lack of flexibility to right-size or expand.

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 6

though it also utilizes virtualization from time to time.

• Uphold resiliency and business continuity with

COMPOSITE ORGANIZATION • $4 billion annual

Deployment characteristics. The composite is

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 7

Total benefits (risk-adjusted) $4,722,000 $6,990,600 $8,834,160 $20,546,760 $16,707,319

AVOIDED ON-PREMISES INFRASTRUCTURE

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 8

• Each year existing workloads are migrated to

• The number of workloads migrated increases in

Avoided On-Premises Infrastructure Costs

At Avoided on-premises infrastructure costs A1*A2 $2,080,000 $2,860,000 $4,404,400

Risk adjustment ↓10%

Avoided on-premises infrastructure costs

Three-year total: $8,409,960 Three-year present value: $6,807,273

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 9

AVOIDED LEGACY INFRASTRUCTURE

• According to a senior manager of technology at a • Compensation of staff supporting legacy

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 10

Results. To account for these risks, Forrester

Avoided Legacy Infrastructure Management FTE Costs

Risk adjustment ↓10%

Avoided legacy infrastructure

Three-year total: $3,466,800 Three-year present value: $2,815,222

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 11

AVOIDED LOST REVENUE FROM IMPROVED

Avoided Lost Revenue From Improved Reliability

C2 Lost revenue per minute of downtime Interviews $100,000 $100,000 $100,000

C3 Operating margin TEI standard 10% 10% 10%

Avoided lost revenue from improved

Risk adjustment ↓15%

Avoided lost revenue from improved

Three-year total: $2,295,000 Three-year present value: $1,902,442

THE TOTAL ECONOMIC IMPACT™ OF MICROSOFT AZURE IAAS 12