A Forrester Total Economic Impact™

Study Commissioned By SAP

December 2019

The Total Economic

Impact™ Of Machine
Learning With SAP
Cost Savings And Business Benefits
Enabled By Using Machine Learning With
SAP’s Product Suite
 Table Of Contents
Executive Summary 1
Key Findings 1
The Age Of Machine Learning Is Upon Us 4
TEI Framework And Methodology 5
The Machine Learning With SAP Customer Journey 6
Interviewed Organizations 6
Key Challenges 6
Key Results 7
Composite Organization 8
Analysis Of Benefits 9
Process Efficiency From Invoice And Expense Automation 9
Increased Employee Efficiency From Reporting Automation 11
Efficiency Gains Within The Call Center 12
Increased Productivity From Product Identification Automation In The
Repair Center 13
Reduced Time To Derive Insights From Data 14
Decrease In Unsold Product Due To Improved Demand Planning 15
Reduced Inventory Carrying Cost From Improved Demand Planning
16
Increased Profit From Purchases Based On More Relevant Offerings
17
Unquantified Benefits 18
Flexibility 19
Analysis Of Costs 20
Estimating Potential Benefits 21
Machine Learning With SAP: Overview 22
Appendix A: Total Economic Impact 23
Appendix B: Endnotes 24

Project Team: ABOUT FORRESTER CONSULTING

Nick Mayberry
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 Executive Summary
Total Benefits Artificial intelligence powered by machine learning is now critical to
business strategy, regardless of industry. Nearly two-thirds of executives
are either implementing or expanding their use of the technology, and
revealing the insights hidden in firms’ massive amounts of data. SAP
provides a suite of solutions — enhanced by machine learning — that
helps its customers infuse intelligence throughout the enterprise. SAP
commissioned Forrester Consulting to conduct a Total Economic Impact™
(TEI) study and examine the potential benefits enterprises may realize by
deploying machine learning with SAP. The purpose of this study is to
Total benefits from automation:
provide readers with a framework to evaluate the potential financial impact
$32,921,047 to their organizations of leveraging machine learning in SAP’s product
suite.
To better understand the benefits associated with this investment,
Forrester interviewed several customers with years of experience using
machine learning within SAP’s product suite. Quantified costs have not
been included in the analysis as organizations pair machine learning with
a broad range of SAP products of varying costs. This pairing allows
organizations to efficiently analyze massive amounts of business data,
uncovering powerful insights while automating tedious business
processes. Interviewed customers used machine learning with the
Total benefits from predictive following SAP products: SAP Cash Application, SAP Concur, SAP Data
analytics: Hub (evolved to SAP Data Intelligence in early 2020), SAP HANA, SAP
Leonardo Machine Learning Foundation (now SAP Data Intelligence) and
$16,427,952 SAP S/4HANA. Prior to using machine learning with SAP, customers were
spending their time mired in the day-to-day tactics necessary to keep their
businesses running. However, getting trapped in short-term task
management left them insufficiently able to focus on the long-term
strategies needed to further accelerate their businesses. By streamlining
operations, such strategic projects could receive necessary attention. As
one customer put it, “Instead of focusing on day-to-day problems, we can
now focus on exponential innovation.”

Key Findings
Quantified benefits. The following risk-adjusted present value (PV)
quantified benefits are representative of those experienced by the
companies interviewed:
› Process efficiency from invoice and expense automation valued at
$12,976,891. Using machine learning with SAP Cash Application and
SAP Concur, customers can automate much of the process for invoicing
clients and approving employee expenses. Customers report automation
rates increasing from 90% to 97% using machine learning with SAP.
› Increased employee efficiency from reporting automation worth
$10,071,751. Through the use of machine learning with SAP S/4HANA,
customers can automate tedious business reporting. By automating the
thousands of reports needed to share critical information both internally
and with customers, machine learning results in substantial cost savings.

1 | The Total Economic Impact™ Of SAP Machine Learning

 › Efficiency gains within the call center valued at $4,774,756. Machine
Reduced learning with SAP HANA helps customers build proprietary tools that can
reporting deflect calls from the call center as well as assist call centers in better
time: serving consumers. One interviewee shared that they were able to
deflect millions of calls from its contact center, achieving over $2 million
70,000 hours
in savings.
› Increased productivity from product identification automation in
the repair center worth $4,073,464. With SAP Leonardo Machine
Contacts
Learning Foundation, organizations are able to build internal
deflected: applications incorporating computer vision to assist repair centers in the
15% efficient identification of products and their components. Such
automation saves valuable time from researching products and their
components manually.
Additional › Reduced time to derive insights from data valued at $1,024,185.
products Using SAP Data Hub and SAP HANA, organizations are able to
repaired automate the consolidation of multiple data repositories. This does away
annually: with tedious extract, transform, load (ETL) processes, allowing data
125 analysts to directly analyze live data or build internal solutions that allow
non-technical employees equal access to this live data.
Reduced › Decrease in unsold product due to improved demand planning
time-to- worth $8,703,982. Using predictive analytics with SAP S/4HANA,
insights: organizations can improve the accuracy of their demand planning.
Improved accuracy leads to better matching of customer demand with
104 days
product supply, decreasing the amount of unsold product.
› Reduced inventory carrying cost from improved demand planning
valued at $6,136,364. The improvement in demand planning provided
by machine learning with SAP can also lead to an additional benefit of
reduced inventory carrying cost. As less product goes unsold, thanks to
predictive analytics with SAP, less inventory needs warehousing, thereby
lowering the associated costs of physical storage.
› Increased profit from purchases based on more relevant offerings
worth $1,587,606. Predictive analytics with SAP further benefitted
organizations by allowing them to better serve consumers. Once the
business’s various data sources had been pooled in SAP HANA,
customers apply predictive analytics to better understand consumers’
desires, providing more relevant offerings at the individual level.
Unquantified benefits. The interviewed organizations either experienced
or expected to experience the following benefits, which are not quantified
for this study:
› Reorienting around long-term strategic projects.
› Increased employee satisfaction.
› Increased customer satisfaction.
› Decreased bias in hiring.
Forrester’s interviews with seven existing customers and subsequent
financial analysis found that an organization based on these interviewed
organizations experienced benefits of nearly $50,000,000 over three
years.

2 | The Total Economic Impact™ Of SAP Machine Learning

 Benefits (Three-Year)

$13.0M

$10.1M
$8.7M
$6.1M
$4.8M $4.1M
$1.0M $1.6M

Process Increased Efficiency gains Increased Reduced time to Decrease in Reduced Increased profit
efficiency from employee within the call employee derive insights unsold product inventory carrying from purchases
invoice and efficiency from center productivity from from data due to improved cost from based on more
expense reporting product demand planning improved relevant offerings
automation automation identification demand planning
automation in the
repair center

Increased profit from purchases

based on more relevant offerings,
$1,587,606
Process efficiency
Reduced inventory from invoice and
carrying cost from expense automation,
improved demand $12,976,891
planning, $6,136,364

Decrease in unsold $49.9 million

product due to three-year total benefits PV
improved demand
planning, $8,703,982

Reduced time to
derive insights from
data, $1,024,185 Increased employee
efficiency from
Increased employee
reporting automation,
productivity from product $10,071,751
identification automation in
the repair center, Efficiency gains
$4,073,464 within the call center,
$4,774,756

3 | The Total Economic Impact™ Of SAP Machine Learning

 The Age Of Machine Learning Is Upon Us
If data is the new oil, then machine learning is the combustion engine that
transforms that data into insights to propel companies forward. Machine
learning powers pragmatic AI and excels at detecting patterns in large sets
of data, leveraging these patterns to accurately predict, classify, or
optimize insights. According to Forrester’s 2019 Business Technographics
survey, 62% of global business and technology leaders are implementing
62% of global or expanding their implementation of machine learning today, and another
24% plan to implement it in the next 12 months. 1 The fervor over AI
business and powered by machine learning (ML) is well-deserved. Companies are
technology leaders seeing benefits in the form of:
are implementing or › Improved operational efficiency. Many companies start their ML
expanding their journey by using the technology to automate or optimize once manual
implementation of processes. Some companies use computer vision to scan and input data
from images, obviating the need for human data entry. Others use
machine learning. machine learning to forecast demand more accurately, optimizing
inventory and assortment within stores and warehouses.
› Increased customer lifetime value. Machine learning thrives on large
sets of customer data, where companies use it to predict future customer
behavior. Subscription-based businesses such as telcos use machine
learning algorithms to predict the likelihood of customer churn, allowing
them to intervene and retain those customers. And financial services
firms predict customers’ propensities for additional products and
services, optimizing cross-sell and upsell efforts. Machine learning is
also the brain behind most recommendation engines, increasing average
55% of global data order values and basket sizes for brands with an eCommerce presence.
and analytics decision › Risk mitigation. Machine learning also detects anomalous behavior and
makers have can predict the likelihood of whether or not a process or asset will fail.
Manufacturers therefore use machine learning for preventive
implemented or are maintenance to intervene and repair important assets before they fail.
implementing Train operators are even using the technology on sensor data to detect
automation which wheels need to be replaced. While banks and insurers are using
machine learning to improve their ability to find and prevent fraud.
technologies
Effective governance of machine learning is critical. Since machine
specifically. learning models learn from data and are not manually coded, it is important
their performance is monitored over time. As conditions change and
performance inevitably decays, companies will need to refresh their models
by training them on new data. With enough data and a bit of imagination,
organizations can avail themselves of machine learning to confront many
of their most pressing challenges today. The age of machine learning is
upon us. Organizations that leverage the technology are likely to leave
laggards in the dust.

Customer retention is
the No. 2 driver for
investing in customer
analytics.

4 | The Total Economic Impact™ Of SAP Machine Learning

 TEI Framework And Methodology
From the information provided in the interviews, Forrester has constructed
a Total Economic Impact™ (TEI) framework for those organizations
considering implementing machine learning with SAP.
The objective of the framework is to identify the cost, benefit, flexibility, and
risk factors that affect the investment decision. Forrester took a multistep
approach to evaluate the impact that machine learning with SAP can have
on an organization:

The TEI methodology DUE DILIGENCE

Interviewed SAP stakeholders and Forrester analysts to gather data
helps companies relative to their use of machine learning with SAP products.
demonstrate, justify, CUSTOMER INTERVIEWS
and realize the Interviewed seven organizations using machine learning with SAP
products to obtain data with respect to costs, benefits, and risks.
tangible value of IT
COMPOSITE ORGANIZATION
initiatives to both Designed a composite organization based on characteristics of the
senior management interviewed organizations.

and other key FINANCIAL MODEL FRAMEWORK

Constructed a financial model representative of the interviews using the
business TEI methodology and risk-adjusted the financial model based on issues
stakeholders. and concerns of the interviewed organizations.

CASE STUDY
Employed four fundamental elements of TEI in modeling machine
learning’s impact within the SAP product suite: benefits, costs, flexibility,
and risks. Given the increasing sophistication that enterprises have
regarding ROI analyses related to IT investments, Forrester’s TEI
methodology serves to provide a complete picture of the total economic
impact of purchase decisions. Please see Appendix A for additional
information on the TEI methodology.

DISCLOSURES
Readers should be aware of the following:

This study is commissioned by SAP and delivered by Forrester Consulting. It is

not meant to be used as a competitive analysis.

Forrester makes no assumptions as to the potential ROI that other

organizations will receive. Forrester strongly advises that readers use their own
estimates within the framework provided in the report to determine the
appropriateness of an investment in machine learning with SAP.

SAP reviewed and provided feedback to Forrester, but Forrester maintains

editorial control over the study and its findings and does not accept changes to
the study that contradict Forrester’s findings or obscure the meaning of the
study.

SAP provided the customer names for the interviews but did not participate in
the interviews.

5 | The Total Economic Impact™ Of SAP Machine Learning

The Machine Learning With SAP Customer
Journey
BEFORE AND AFTER THE MACHINE LEARNING INVESTMENT

Interviewed Organizations
For this study, Forrester conducted seven interviews with SAP
customers implementing machine learning within the SAP product suite.
Interviewed customers include the following:

INDUSTRY REGION INTERVIEWEE SIZE AND SAP PRODUCT

Consumer packaged 150 FTEs
USA Director of IT
goods (CPG) SAP S/4HANA
Consumer packaged Senior finance, systems, 1,100 FTEs
Europe
goods (CPG) and projects manager SAP Concur
1,100 FTEs
Energy Europe Head of ERP applications
SAP Cash Application
Global accounts payable 14,000 FTEs
Professional services Europe
systems manager SAP Concur
30,000 FTEs
Energy USA Service delivery manager
SAP HANA
34,000 FTEs
Domain architect, product
Luxury goods Europe SAP Leonardo Machine
management
Learning Foundation
Consumer packaged 90,000 FTEs
Europe Global HR reporting lead
goods (CPG) SAP Data Hub

Key Challenges
Organizations that decided to invest in machine learning with SAP
shared the following key challenges.
› Overburdened by recurring business processes. Organizations “SAP HANA has helped us
expressed frustration that their long-term strategic goals were being increase and advance our
undermined by the day-to-day tasks and processes needed to manage focus on our long-term
their businesses. These firms hoped that by introducing a level of strategic objectives for
automation into these workflows, employees would be free to focus on customer engagement and
higher-value, more strategic work. The global HR reporting lead experience through its
shared, “We want to get away from a lot of transactional activities, and machine learning tool set and
we want to transform them into value-added activities in order to drive how it integrates well with its
efficiency across functions and departments.” applications.”
› Poor data accessibility and reliability. SAP customers also Service delivery manager, energy
expressed that before they had invested in using machine learning in
SAP’s products, they faced data challenges related to accessibility and
reliability. This stemmed from various problems including data being
unreliable, unavailable, or unable to be paired with other data to
generate unique cross-functional insights. A European CPG firm
shared: “We have a couple of challenges when it comes to our whole
network and infrastructure in terms of connecting to the source data.
We have to do a lot of fixing and patching to make sure that all of the
data warehouses and all the different ETL tools are properly together.”

6 | The Total Economic Impact™ Of SAP Machine Learning

› Siloed innovation. Not only was it common for data to exist in siloes,
but innovation projects would also often be siloed by business unit.
Organizations shared that for innovative tools like machine learning to
be useful, innovation could not be an IT-only endeavor. The luxury “I think a lot of HR departments
goods provider noted: “When we trust that we have the technology in the technology area have
right, we can provide it to everybody. The primary focus here is on this challenge because the
identifying new use cases. Because we from IT do not know all the majority of people are just not
possible use cases.” data-savvy or tech-savvy. Our
primary challenges are
Key Results definitely capability-building
and knowledge-building.”
The interviews revealed that key results from a machine learning
investment with SAP include: Global HR reporting lead, CPG

› Automation of tedious, repetitive tasks. By introducing new levels of

process efficiency, machine learning used with SAP products was able
to automate a variety of repetitive and often tedious processes
required to keep the doors open. For example, the professional
services firm and European energy firm utilized machine learning in
two separate SAP products: SAP Concur and SAP Cash Application.
Both were able to streamline finance processes such as expense and
invoice management that saved hundreds of thousands of person-
hours per year. According to the European energy firm: “After nine
weeks of use, we asked our test-user accountants how much time they “Leveraging SAP HANA, our
are saving per day. The three accountants said they would save 80 customer intent prediction tool
minutes a day, which is a lot considering we only had four out of 80 set an industry benchmark of
company codes [in the automation system] at the time.” 210 milliseconds for predicting
› Improved efficiency thanks to better business certainty. Whether intent for any customer in our
this was an organizational issue, such as data being siloed by customer base. That
business unit, or a technological issue, such as difficulty getting various performance is key to how
data repositories to work well together, machine learning was able to quickly we can relay to the
bridge the gap, pooling not only proprietary but also third-party data customer in that channel.”
efficiently and making such data actionable in real time. As the Service delivery manager, energy
American CPG firm shared: “In order to be able to work with live data,
we needed to get on a database that would provide in-memory
computing. And, we’d like to eventually have planning models that can
accurately provide us our production.”
› Cross-organizational innovation. When organizations implemented
machine learning within their respective SAP products, they found that
business units began working together to further their firm’s innovation.
For instance, instead of machine learning being a pet project of the IT
department, departments as varied as accounting, HR, and the repair “I’m looking at being able to
center began to work closely with IT to develop high-utility machine say, ‘Okay, now we have all of
learning-based solutions that empowered business unit employees in this data we’ve been gathering
their daily work. In discussing this partnership, one European CPG for well over 10 years. What
organization shared: “The idea here is to equip [HR] people with are some different angles that
certain skills because we have a lot of people that are high-EQ but we can take on the data?’
might not be that tech-savvy. The goal is to first tackle and lower the There so many different
entry barrier to use these kinds of tools to make it as comprehensible dimensions that we can look
to non-tech-savvy people as possible.” at. I don’t think it’s possible for
any person to be able to
analyze all of that quickly.”
Director of IT, CPG

7 | The Total Economic Impact™ Of SAP Machine Learning

Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a
composite company, and an associated ROI analysis that illustrates the
areas financially affected. The composite organization is representative
of the seven companies that Forrester interviewed and is used to present
the aggregate financial analysis in the next section. The composite
organization that Forrester synthesized from the customer interviews has
the following characteristics:
Description of composite. This global, billion-dollar company operates
in the business-to-consumer space, offering physical products online as
well as through retail channels. It has 30,000 employees worldwide, with
offices spread across North America and Europe. It also maintains
significant warehouse and repair center operations to serve both its retail
channels and direct customers.
Key assumptions:
Deployment characteristics. The composite organization is a long-time • 30,000 FTEs
SAP customer that has expanded its use of SAP products over the • Uses each SAP product
years. Current SAP products include: SAP Cash Application, SAP
Concur, SAP Data Hub, SAP Leonardo Machine Learning Foundation, discussed in this report
SAP HANA, and SAP S/4HANA. The firm desires to become a data- • 16,000,000 annual call
driven organization and expects machine learning to be used by both IT
as well as operational teams in front-office and back-office roles. It began volume
its machine-learning journey by implementing automation technologies to
improve operational efficiency and is now beginning to launch customer-
facing ML solutions to drive revenue and customer experience.

8 | The Total Economic Impact™ Of SAP Machine Learning

Analysis Of Benefits
QUANTIFIED BENEFIT DATA AS APPLIED TO THE COMPOSITE

Total Benefits
PRESENT
REF. BENEFIT YEAR 1 YEAR 2 YEAR 3 TOTAL
VALUE
Process efficiency from invoice and
Atr $5,218,200 $5,218,200 $5,218,200 $15,654,600 $12,976,891
expense automation
Increased employee efficiency from
Btr $4,050,000 $4,050,000 $4,050,000 $12,150,000 $10,071,751
reporting automation
Ctr Efficiency gains within the call center $1,920,000 $1,920,000 $1,920,000 $5,760,000 $4,774,756
Increased productivity from product
Dtr identification automation in the repair $1,638,000 $1,638,000 $1,638,000 $4,914,000 $4,073,464
center
Reduced time to derive insights from
Etr $411,840 $411,840 $411,840 $1,235,520 $1,024,185
data
Decrease in unsold product due to
Ftr $3,500,000 $3,500,000 $3,500,000 $10,500,000 $8,703,982
improved demand planning
Reduced inventory carrying cost from
Gtr $2,250,000 $2,475,000 $2,722,500 $7,447,500 $6,136,364
improved demand planning
Increased profit from purchases
Htr $638,400 $638,400 $638,400 $1,915,200 $1,587,606
based on more relevant offerings
Total benefits (risk-adjusted) $19,626,440 $19,851,440 $20,098,940 $59,576,820 $49,348,999

Process Efficiency From Invoice And Expense The table above shows the total of all
benefits across the areas listed below,
Automation as well as present values (PVs)
When customers implement machine learning within SAP’s product discounted at 10%. Over three years,
the composite organization expects
suite, they reported seeing substantial process efficiency gains,
risk-adjusted total benefits to be a PV
particularly in invoice and expense management. SAP Cash Application of just under $50 million.
borrows from SAP Leonardo’s machine learning to learn from
accountants’ current process behaviors across offices and geographies
without the need to specifically define rules. It then can apply what it has
learned to automate accounts receivable processes, saving substantial
time costs. One organization shared that: “Ninety percent of the 26%
information is already prepopulated when an individual opens the $13.0 million
invoice. So, it’s cut down greatly on the touch points already.” Another
stated that they already had an expense automation rate of 86%-87%, three-year
“And with machine learning we could even increase this automation to benefit PV
96%-97%.”
With SAP Concur, customers’ employees use the ExpenseIt service to
automatically extract information such as amount, date, and expense
type from an uploaded receipt. When users enter less information
manually, information capture is more reliable, saving time in the
accounts payable (AP) department when reviewing expense reports. By
Process efficiency from
making expense auditing to expense auditing more automated and invoice and expense
easier for employees, customers reported significant time savings. management: 26% of
Importantly, the overall time savings from process automation in SAP
Cash Application and SAP Concur do not just affect accounting
total benefits
employees, but IT employees as well.

9 | The Total Economic Impact™ Of SAP Machine Learning

The global AP systems manager from the professional services industry
reported, “If we remove 50% of the invoices which are currently touched
to make them zero-touch, then that would give them capacity to work in
other areas rather than the core function, which they’re actually stuck
doing day-to-day at the moment.”
Based on the customer interviews, Forrester estimates for the composite
organization:
› An IT team size of 1,000.
› An IT FTE fully burdened hourly rate of $57.
› An accounting team size of 300.
› An accounting FTE fully burdened hourly rate of $46.
› A productivity recapture rate of 50%.
Impact risk is the risk that the business
Actual benefits accrued may vary based on: or technology needs of the
organization may not be met by the
› IT team size and hourly rate. investment, resulting in lower overall
total benefits. The greater the
› Accounting team size and hourly rate. uncertainty, the wider the potential
› Productivity recapture rate. range of outcomes for benefit
estimates.
To account for these highly variable risks, Forrester adjusted this benefit
downward by 25%, yielding a three-year, risk-adjusted total PV of
$12,976,891.
Process Efficiency From Invoice And Expense Automation: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
A1 IT team size 1,000 1,000 1,000
A2 Hours saved per week for IT 3 3 3
A3 IT employee fully burdened hourly rate $57 $57 $57
A4 Total cost savings in IT A1*A2*52*A3 $8,892,000 $8,892,000 $8,892,000
A5 Accounting team size 300 300 300
A6 Hours saved per week for accounting 7 7 7
A7 Accounting employee fully burdened hourly rate $46 $46 $46
A8 Total cost savings in accounting A5*A6*52*A7 $5,023,200 $5,023,200 $5,023,200
A9 Productivity recapture 50% 50% 50%
At Process efficiency from invoice and expense automation (A4+A8)*A9 $6,957,600 $6,957,600 $6,957,600
Risk adjustment ↓25%
Process efficiency from invoice and expense automation
Atr $5,218,200 $5,218,200 $5,218,200
(risk-adjusted)

10 | The Total Economic Impact™ Of SAP Machine Learning

Increased Employee Efficiency From Reporting
Automation
SAP customers also reported process efficiency gains from machine
learning with SAP by automating reporting processes. Even the smallest
organization that Forrester interviewed reported having thousands of
reports to manage. Machine learning within SAP HANA and SAP
S/4HANA supports IT departments in the creation of flexible business
intelligence dashboards that can present real-time data with a user- $10.1 million
friendly interface. These dashboards are automatically rendered for three-year
viewing across devices and can be managed by non-technical teams. benefit PV
The director of IT in the CPG industry shared: “In a matter of 1 hour, I
was able to pull together a dashboard from just a spreadsheet that I 20%
uploaded. That dashboard worked on every single mobile device I tested
it on. The other thing with this is it doesn’t have to be an IT person that
creates the dashboard.”
Increased employee
For the composite organization, Forrester assumes:
efficiency from reporting
› Ten thousand (10,000) reports are generated annually.
automation: 20% of total
› A full day is required of two employees to produce the reports before benefits
machine learning.
› One (1) hour is required of one employee to produce the ML-based
dashboard.
› An hourly fully burdened rate of $65 for each employee.
The increased employee efficiency from reporting automation will vary
with:
› The number of reports generated annually.
› The amount of reporting resources required before and after machine
learning.
› The fully loaded compensation of the employees involved.
To account for these risks, Forrester adjusted this benefit downward by
10%, yielding a three-year, risk-adjusted total PV of $10,071,751.

11 | The Total Economic Impact™ Of SAP Machine Learning

Increased Employee Efficiency From Reporting Automation: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
B1 Reports generated per year 10,000 10,000 10,000
Hours to produce report before machine
B2 8 8 8
learning
Hours to produce dashboard using
B3 Interview 1 1 1
machine learning
Number of employees in reporting process
B4 2 2 2
per office before machine learning
Number of employees developing
B5 1 1 1
dashboard using machine learning
B6 Hourly salary $60 $60 $60
B7 Productivity recapture 50% 50% 50%
Increased employee efficiency from ((B1*B2*B4*B6)-
Bt $4,500,000 $4,500,000 $4,500,000
reporting automation (B1*B3*B5*B6))*B7
Risk adjustment ↓10%
Increased employee efficiency from
Btr $4,050,000 $4,050,000 $4,050,000
reporting automation (risk-adjusted)

Efficiency Gains Within The Call Center

Machine learning in conjunction with SAP products also generates
efficiency gains within the call or contact center. Using SAP HANA,
customers were able pool their various data sources into one in-memory
database that then provided the flexibility to develop their own ML-
enhanced internal applications. These applications could process data in $4.8 million
near real time with the aim to better serve customers through the contact
center. three-year
benefit PV
In one such example, the American energy provider built a customer
intent prediction tool that allowed contact center employees to know with
increased certainty why a customer was making contact, getting the
customer to proceed on their customer journey faster than before. This 10%
substantially reduced the volume of calls received by the contact center.
The service delivery manager shared: “And out of the 16 million calls we
get, we’re hovering around 1 to 1.2 million calls in a year that we would Efficiency gains within
have effectively reduced. That’s a significant chunk of change, close to
$2.4 million in savings.” the call center: 10% of
Forrester estimates for the composite organization:
total benefits
› Total annual call volume of 16,000,000 calls.
› A total cost per call of $2.
Improved call center efficiency will vary based on:
› Total annual call volume.
› Total cost per call.
To account for these relatively variable risks, Forrester adjusted this
benefit downward by 20%, yielding a three-year, risk-adjusted total PV of
$4,774,756.

12 | The Total Economic Impact™ Of SAP Machine Learning

Efficiency Gains Within The Call Center: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
C1 Total call volume before machine learning Interview 16,000,000 16,000,000 16,000,000
C2 Total call volume after machine learning 14,800,000 14,800,000 14,800,000
C3 Total reduced calls from machine learning Interview 1,200,000 1,200,000 1,200,000
C4 Average cost per reduced call $2 $2 $2
Ct Efficiency gains within the call center C3*C4 $2,400,000 $2,400,000 $2,400,000
Risk adjustment ↓20%
Ctr Efficiency gains within the call center (risk-adjusted) $1,920,000 $1,920,000 $1,920,000

Increased Productivity From Product Identification

Automation In The Repair Center
SAP Leonardo Machine Learning Foundation allows customers to
incorporate SAP’s machine learning solutions directly into other SAP
applications or into proprietary applications. One such use case
discovered during the interviews was the inclusion of computer vision in
a SAP customer’s application to help automate the identification of
products by repair center technicians.
The luxury goods provider shared that in their previous environment,
repair technicians had to identify products and their components in large
catalogues containing over 80,000 different products. By leveraging
computer vision to automate product and component identification, the
luxury goods provider was able to both save time in their repair centers $4.1 million
as well as increase repair technician satisfaction with their work.
three-year
For the composite, Forrester modeled: benefit PV
› Four (4) minutes saved by automating product identification with
computer vision. 8%
› Repair center technician fully burdened hourly rate of $28.
› A total repair technician team of 500.
Increased productivity
› Two hundred sixty (260) workdays per year.
from product
The increased employee productivity from automated product
identification may vary based on:
identification automation
in the repair center: 8%
› Average time-to-identify products before machine learning.
of total benefits
› Repair center technician pay rate and team size.
› Workdays per year.
To account for these risks, Forrester adjusted this benefit downward by
10%, yielding a three-year, risk-adjusted total PV of $4,073,464.

13 | The Total Economic Impact™ Of SAP Machine Learning

Increased Productivity From Product Identification Automation In The Repair Center: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
Items repaired per day before implementing computer
D1 Interview 8 8 8
vision
D2 Minutes saved per item by computer vision 4 4 4
Items repaired per day after implementing computer
D3 8.5 8.5 8.5
vision
D4 Repair technician fully burdened hourly rate $28 $28 $28
D5 Technicians 500 500 500
D6 Workdays 260 260 260
Increased productivity from product identification (D3-
Dt $1,820,000 $1,820,000 $1,820,000
automation in the repair center D1)*D4*D5*D6
Risk adjustment ↓10%
Increased productivity from product identification
Dtr $1,638,000 $1,638,000 $1,638,000
automation in the repair center (risk-adjusted)

Reduced Time To Derive Insights From Data

Interviewed SAP customers shared that machine learning, when used in
conjunction with SAP products, can reduce the time it takes them to
derive insights from data. This is a function of multiple products,
including SAP Data Hub, SAP HANA, and SAP S/4HANA. SAP Data
Hub discovers, refines, and governs any type, variety, and volume of $1.0 million
data across an organization’s distributed data landscape, while SAP
three-year
HANA and SAP S/4HANA allow for in-memory, real-time data analysis. benefit PV
When married with machine learning, these products infuse the data
analysis process with automation that eliminates tedious data 2%
management process and reduces time-to-insight derivation.
The director of IT from the CPG industry shared: “[The current] process
is tedious, because we’re taking the data out of SAP and processing it
through ETL using a SQL server. And then taking that data and loading it
into [a third] tool. Once this project is completed, we will be able to go Reduced time to derive
directly to the database.” insights from data: 2% of
Forrester estimates for the composite organization: total benefits
› Three (3) working days for the insight derivation process before
machine learning.
› One insight derivation process ran every week.
The reduced time to derive insights from data may vary based on:
› The current time to derive insights from data.
› The number of insight derivation processes run per year.
To account for these risks, Forrester adjusted this benefit downward by
10%, yielding a three-year, risk-adjusted total PV of $1,024,185.

14 | The Total Economic Impact™ Of SAP Machine Learning

Reduced Time To Derive Insights From Data: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
Data scientist team size for insight derivation
E1 4 4 4
without machine learning
Hours to insight derivation without machine
E2 24 24 24
learning
Data scientist team size for insight derivation with
E3 1 1 1
Machine learning
Hours to insight derivation without machine
E4 8 8 8
learning
E5 Annual data to insight processes 52 52 52
E6 Hourly data scientist salary $100 $100 $100
(E1*E2*E5*E6)-
Et Reduced time to derive insights from data $457,600 $457,600 $457,600
(E3*E4*E5*E6)
Risk adjustment ↓10%
Reduced time to derive insights from data
Etr $411,840 $411,840 $411,840
(risk-adjusted)

Decrease In Unsold Product Due To Improved

Demand Planning
Interviewed organizations reported that using machine learning-based
predictive analytics with SAP HANA and SAP S/4HANA allowed them to $8.7 million
improve the accuracy of their demand planning. Thanks to in-memory 18% three-year
computing capabilities, predictive analytics tools were consistently fed benefit PV
with live data in real time, allowing organizations to respond quickly to
changes in supply and demand within their supply chains. This increased
accuracy led to a more efficient production of goods, resulting in a
decrease of unsold products and the associated production costs. The
American CPG firm reported: “Part of it is wanting to be more efficient in
the supply chain. For example, keeping track of the age of the product
and being able to distribute that product in a more efficient manner, Decrease in unsold
ensuring that each store has the best quality available.” product due to improved
Based on the customer interviews, Forrester estimates for the composite demand planning: 18%
organization:
of total benefits
› Fifty million (50,000,000) products are sold annually.
› Five percent (5%) of products are unsold due to poor planning.
› A cost of goods sold of $7.
› A 25% reduction in waste thanks to machine learning.
The reduction in costs from decreased unsold product will vary based on:
› Average amount of product unsold.
› Cost of goods sold.
› Percentage of waste able to be reduced by machine learning.
To account for these risks, Forrester adjusted this benefit downward by
20%, yielding a three-year, risk-adjusted total PV of $8,703,982.

15 | The Total Economic Impact™ Of SAP Machine Learning

Decrease In Unsold Product Due To Improved Demand Planning: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
F1 Total products sold annually 50,000,000 50,000,000 50,000,000
F2 Percent of product unsold due to poor planning 5% 5% 5%
F3 Cost of unsold product $7 $7 $7
F4 Percent of waste decreased due to machine learning 25% 25% 25%
Decrease in unsold product due to improved demand
Ft F1*F2*F3*F4 $4,375,000 $4,375,000 $4,375,000
planning
Risk adjustment ↓20%
Decrease in unsold product due to improved demand
Ftr $3,500,000 $3,500,000 $3,500,000
planning (risk-adjusted)

Reduced Inventory Carrying Cost From Improved

Demand Planning 13%
When machine learning is used in conjunction with the SAP product
suite, not only can organizations save on the direct costs associated with $6.1 million
unsold product, but they can also save on indirect costs as well. SAP’s three-year
predictive analytics, in conjunction with SAP HANA or SAP S/4HANA, benefit PV
arms organizations with the most up-to-date forecasting for their supply
chain and can reduce overproduction. This has the knock-on benefit of
reducing inventory carrying costs of overproduced, unsold product.
For the composite organization, Forrester assumes:
› A $100,000,000 cost to carry inventory growing at 10% annually.
Reduced inventory
› Fifty percent (50%) of this cost is able to be reduced by machine
learning.
carrying cost from
improved demand
› A 25% reduction of this cost.
planning: 13% of total
› Twenty percent (20%) of this cost is attributable to machine learning
with SAP.
benefits
Reduced cost to carry inventory may vary based on:
› The amount of cost able to be reduced by machine learning.
› The effectiveness rate of machine learning as applied.
To account for these risks, Forrester adjusted this benefit downward by
10%, yielding a three-year, risk-adjusted total PV of $6,136,364.

16 | The Total Economic Impact™ Of SAP Machine Learning

Reduced Inventory Carrying Cost From Improved Demand Planning: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
Forrester
G1 Cost of carrying inventory $100,000,000 $110,000,000 $121,000,000
Research
Percentage of cost able to be reduced by
G2 50% 50% 50%
better planning
G3 Percentage of cost reduced 25% 25% 25%
Percentage of impact directly attributable to
G4 20% 20% 20%
machine learning with SAP
Reduced inventory carrying cost from
Gt G1*G2*G3*G4 $2,500,000 $2,750,000 $3,025,000
improved demand planning
Risk adjustment ↓10%
Reduced inventory carrying cost from
Gtr $2,250,000 $2,475,000 $2,722,500
improved demand planning (risk-adjusted)

Increased Profit From Purchases Based On More

3%
Relevant Offerings
One of the more advanced use cases of machine learning, and one that
interviewed customers were beginning to explore, is the prediction of $1.6 million
consumer preferences and intent. The American energy firm developed three-year
two separate internal solutions based on machine learning in conjunction benefit PV
with SAP HANA. One is aimed at customer intent prediction and the
other is aimed at recommending products and actions to customers. Not
only do these solutions decrease call volume for the contact center, as
reported above, they also lead to more relevant offerings being
presented to customers. This increases the number of purchases and
results in increased profit for the firm.
Increased profit from
The service delivery manager in the energy industry detailed, “What [our purchases based on
product recommendation engine] brought to the forefront was the
amount of offerings that we’ve been able to offer to customers that are more relevant offerings:
more relevant in nature. And so, that has led to an increase in custom. 3% of total benefits
We’ve seen a significant spike in enrollment.”
For the composite organization, Forrester models:
› Five percent (5%) of calls resulting in a sale without predictive
analytics.
› A doubling of sales from calls after implementing predictive analytics.
› Sixty percent (60%) of new sales being attributable to predictive
analytics.
› An average transaction price of $10.
Increased profit from more relevant offerings to customers may vary
based on:
› The rate of sales before and after implementation of predictive
analytics.
› The number of new sales attributable to predictive analytics.
› Average transaction price.
To account for these risks, Forrester adjusted this benefit downward by
5%, yielding a three-year, risk-adjusted total PV of $1,587,606.

17 | The Total Economic Impact™ Of SAP Machine Learning

Increased Profit From Purchases Based On More Relevant Offerings: Calculation Table
REF. METRIC CALC. YEAR 1 YEAR 2 YEAR 3
H1 Call volume Composite 16,000,000 16,000,000 16,000,000
Percent of calls resulting in a sale without
H2 5% 5% 5%
predictive analytics
Percent of calls resulting in a sale with predictive
H3 10% 10% 10%
analytics
Percent of new sales attributed to predictive
H4 60% 60% 60%
analytics
H5 Average transaction price $10 $10 $10
H6 Profit margin 14% 14% 14%
Increased profit from purchases based on more H1*(H3-
Ht $672,000 $672,000 $672,000
relevant offerings H2)*H4*H5*H6
Risk adjustment ↓5%
Increased profit from purchases based on more
Htr $638,400 $638,400 $638,400
relevant offerings (risk-adjusted)

Unquantified Benefits
Organizations noted seeing several benefits from implementing machine
learning with SAP products that were not quantifiable. These could
potentially be quantified in a financial analysis if given the appropriate
data and metrics, and are as follows:
› Reorienting around long-term strategic projects. Thanks to the
addition of automation, the more efficient management of supply
chains, and a better understanding of customers, machine learning
paired with SAP products allows employees to spend less time focused
on the rat race of day-to-day operations. Instead, they can spend more
time tending to long-term strategic projects that were pushed aside in
the prior, short-sighted environment. As the European energy provider
noted: “The time savings are big enough. It will allow the users to do
more interesting and much higher value work than just clearing bank
statements.”
› Increased employee satisfaction. The reorientation of employees
from low-value to high-value work also has a significant impact on
employee satisfaction. The head of ERP applications from the energy
industry reported: “We asked for help from [employees] because we
needed them as test users. They were not that happy because they
feared that they would maybe lose their jobs [to automation]. After nine
weeks, we asked the test users if they would implement [the
automation], and they said they would also use it in their daily lives if
they could.”
› Increased customer satisfaction. Machine learning with SAP
products also reportedly helped to improve customer satisfaction. The
American energy company stated: “The benefit was far and wide. We
saw customer engagement increase. Recently, our customer officer
has started measuring our customer experience based on NPS scores,
and we saw substantial increase in that.2 That focused customer
experience is now evident in all parts of how we interact with our
customers.”

18 | The Total Economic Impact™ Of SAP Machine Learning

› Decreased bias in hiring. One organization reported expecting
machine learning to help it eradicate bias from the hiring process but
understood there were clear pitfalls involved. The global HR reporting
lead stated, “We want to make sure doing linear regression actually
discriminates for the legitimate factors that we intend, versus having
unintended biases in the policy.” They continued, “My biggest fear
would be unintentionally including hair color, eye color, things which
have nothing to do with our pay policy, instead of the implicit
discriminators that we’ve built into our pay policies like performance.”

Flexibility
The value of flexibility is clearly unique to each customer, and the
measure of its value varies from organization to organization. There are
multiple scenarios in which a customer might choose to implement
machine learning with SAP products and later realize additional uses and Flexibility, as defined by TEI,
business opportunities, including: represents an investment in additional
capacity or capability that could be
› Flexible infrastructure. Organizations noted that using machine turned into business benefit for a future
learning with SAP products helped to make their infrastructure more additional investment. This provides an
flexible for future strategy or innovation projects. The director of IT from organization with the “right” or the
ability to engage in future initiatives but
the CPG industry shared: “It has also helped us from an infrastructure not the obligation to do so.
perspective. We have a more robust, integrated system. It’s easy to
maintain. It has significant advantages over stitching together a bunch
of disparate systems for new implementations and projects.”
› User-driven innovation. Our interviews also revealed that
organizations were taking an open-ended approach to innovation
involving machine learning with SAP. More specifically, interviewees
reported developing a machine learning-based innovation with a SAP
product and then putting it in the hands of employees to see how they
would use it. The aim was to discover unknown or unpredictable use
cases for the technology. The domain architect, product management
from the luxury goods industry explained, “I think it’s now on us to
provide and promote this technology to as many employees as
possible, that they come up with new ideas how to use it.”
Flexibility would also be quantified when evaluated as part of a specific
project (described in more detail in Appendix A).

19 | The Total Economic Impact™ Of SAP Machine Learning

Analysis Of Costs
Machine Learning With SAP Investment Costs
The investment costs of machine learning as used within SAP’s product
suite include upfront implementation time and costs, licensing fees,
ongoing management time from internal resources, and some ongoing
external consultant assistance. For the composite organization:
› Upfront implementation costs included SAP and other third-party
implementation services, as well as internal resource time and effort
over the deployment period. Tasks included, retiring legacy systems,
data migration and cleanup, application development, and planning
and training consultations.
› Annual costs include SAP subscriptions, other services, and internal
resources’ time.
While several cost factors have been identified, they have not been
incorporated into this analysis as some costs here are difficult to quantify
and others have a level of variance that results in inaccurate estimates
based upon an individual organization’s situation and needs. Readers
should consider their own experience and situation when estimating any
of the above cost categories.

20 | The Total Economic Impact™ Of SAP Machine Learning

Estimating Potential Benefits
Across eight interviews with customers using multiple SAP products, interviewed business leaders reported
using machine learning for two primary objectives: automation and predictive analytics. Some customers used
automation to optimize tedious or repetitive tasks, saving time and reducing human error. Other customers used
predictive analytics to quickly analyze historical and real-time data, optimizing production, supply chain
management, and customer recommendations.
The figures below highlight the potential impact machine learning may have across different use cases across
departments using SAP’s product suite. These calculations may be used to get a high-level estimate of potential
financial benefits for machine learning when applied to internal and external business processes. The findings
are based on a composite organization of 30,000 employees and over $1 billion in sales. The figures do not
explicitly include several factors, including profit margin, percent of productivity recapture, and risk factor, among
others. The final benefit value in the far-right column represents the three-year net present value of the
composite organization’s quantified benefits. For a more specific estimate of machine learning’s potential impact,
please refer to the benefit tables in the body of the study or SAP’s online benefit calculator.

Automation Benefits By Use Case

Predictive Analytics Benefits By Use Case

21 | The Total Economic Impact™ Of SAP Machine Learning

Machine Learning With SAP: Overview
The following information is provided with SAP. Forrester has not validated any claims and does not endorse
SAP or its offerings.

SAP’s business technology platform helps companies connect processes and experiences to make confident
decisions with its data management, analytics, AI, internet of things, blockchain technologies, and application
development and integration services on an open cloud platform. Using SAP’s advanced machine learning
capabilities built into business processes, companies can achieve results beyond human capacity and
outmaneuver their competition.
Elevate business actions to automate and improve data-driven innovation, with confidence and integrity, at
enterprise scale. SAP’s machine learning solutions like SAP Data Intelligence enable companies to optimize
business processes with cloud-based data orchestration and machine learning services. Access 90+ built-in
machine learning algorithms with SAP HANA’s business data platform or create and use your own.
Humanize experiences that create customer and employee fanatics through tailored touchpoints that exceed
expectations. Leverage machine learning built into intelligent ERP such as SAP S/4HANA or travel and expense
management with SAP Concur. Ready-to-go business services like SAP Cash Application help businesses
automate labor-intensive invoice matching so that employees can focus on higher value tasks and meaningful
customer engagement.
Extend beyond SAP technologies and embrace a broad technology landscape by leveraging an open
ecosystem on an extensible framework with SAP Cloud Platform. Develop and integrate innovative technologies
on a common multicloud platform to extend business processes rapidly with prebuilt business services and
developer-friendly tools.

22 | The Total Economic Impact™ Of SAP Machine Learning

Appendix A: Total Economic Impact
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 Present value (PV)
of their products and services to clients. The TEI methodology helps
companies demonstrate, justify, and realize the tangible value of IT The present or current
initiatives to both senior management and other key business value of (discounted) cost and
stakeholders. benefit estimates given at an
interest rate (the discount rate).
The PV of costs and benefits feed
into the total NPV of cash flows.
Total Economic Impact Approach

Benefits represent the value delivered to the business by the Net present
product. The TEI methodology places equal weight on the value (NPV)
measure of benefits and the measure of costs, allowing for a
full examination of the effect of the technology on the entire The present or current value of
organization. (discounted) future net cash flows
given an interest rate (the discount
rate). A positive project NPV
normally indicates that the
investment should be made, unless
Costs consider all expenses necessary to deliver the other projects have higher NPVs.
proposed value, or benefits, of the product. The cost category
within TEI captures incremental costs over the existing
environment for ongoing costs associated with the solution. Return on
investment (ROI)

A project’s expected return in

percentage terms. ROI is
Flexibility represents the strategic value that can be calculated by dividing net benefits
obtained for some future additional investment building on (benefits less costs) by costs.
top of the initial investment already made. Having the ability
to capture that benefit has a PV that can be estimated.
Discount
rate

The interest rate used in cash flow

Risks measure the uncertainty of benefit and cost estimates analysis to take into account the
given: 1) the likelihood that estimates will meet original time value of money. Organizations
projections and 2) the likelihood that estimates will be typically use discount rates
tracked over time. TEI risk factors are based on “triangular between 8% and 16%.
distribution.”

Payback
period
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 The breakeven point for an
using the discount rate at the end of the year. PV calculations are calculated for investment. This is the point in time
each total cost and benefit estimate. NPV calculations in the summary tables are at which net benefits (benefits
the sum of the initial investment and the discounted cash flows in each year. minus costs) equal initial
Sums and present value calculations of the Total Benefits, Total Costs, and investment or cost.
Cash Flow tables may not exactly add up, as some rounding may occur.

23 | The Total Economic Impact™ Of SAP Machine Learning

Appendix B: Endnotes

1Source: Forrester Analytics Global Business Technographics® Data and Analytics Survey, 2019
2Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain &
Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

24 | The Total Economic Impact™ Of SAP Machine Learning