The Total Economic Impact of Windows Embedded Intelligent Systems in Retail

8/13/2019 The Total Economic Impact of Windows Embedded Intelligent Systems in Retail

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TABLE OF CONTENTS

Executive Summary .............................................................................................................................................................. 2

Windows Embedded Simplifies The Implementation, Management, And Support Of Enterprise Retail Devices ...... 2

Factors Affecting Benefits And Costs ............................................................................................................................. 5

Disclosures........................................................................................................................................................................ 6

TEI Framework And Methodology ...................................................................................................................................... 7

Analysis ................................................................................................................................................................................. 9

Key Interview Findings .................................................................................................................................................... 9

Costs ............................................................................................................................................................................... 11

Benefits ........................................................................................................................................................................... 14

Flexibility ........................................................................................................................................................................ 18

Risk ................................................................................................................................................................................. 18

Financial Summary ............................................................................................................................................................. 21

Windows Embedded: Overview ......................................................................................................................................... 23

Appendix A: Composite Organization Description ........................................................................................................... 24

Appendix B: Total Economic Impact Overview ............................................................................................................ 24

Appendix C: Glossary ......................................................................................................................................................... 25

2012, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources.

Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total

Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional

information, go to www.forrester.com.
http://www.forrester.com/consulting


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In January 2012, Microsoft commissioned Forrester Consulting to examine the total economic impact and potential

return on investment (ROI) that enterprise retailers may realize by deploying Windows Embedded operating systems in

their front-of-store retail devices as well as their back-of-store operations and management devices. These might

include point-of-sale systems, point-of-service systems, informational kiosks, self-service checkouts, digital signage,

handheld terminals, gift registries, or other related retail-specific devices or systems.

The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of using

Windows Embedded for their intelligent systems and embedded device requirements within their organization. The

study is based on a financial model of an organizations typical experience with Windows Embedded over a three-year

period, examining the costs, benefits, risks, and flexibility provided by using the operating systems for embedded

devices in a retail environment. This model was constructed based on input from seven Microsoft enterprise retail

customers. Additionally, the study discusses the experiences of the interviewed customers to provide additional

background and clarity. Overall, the study finds that the investment in Windows Embedded provides a positive ROI of

48 percent, with a payback in approximately 17 months.

Windows Embedded is a leading provider of intelligent systems and offers a portfolio of retail-purposed operating

systems to enable enterprise retailers to deliver shopping experiences that are personal, seamless, and differentiated. In

one-on-one personal interviews with Microsoft, Forrester learned that Microsofts point of view in retail is grounded in

delivering intelligent systems to deliver shopping experiences that are personal to each shopper, seamless across every

point of interaction, and differentiated in a way that increases a retailers uniquebrand value. By providing a single

platform of reliable, highly secure, and flexible technologies, the Windows Embedded portfolio of products equips

retailers to quickly adapt business models to changing business climates, productively absorb disruptions in technology,accommodate individual customer preferences, identify and exploit new opportunities, and address regulatory pressures

as they arise (e.g. payment card industry) from a position that is informed by actionable intelligence.

For enterprise retailers, the inherent value of an intelligent system that uses Windows Embedded technology is that it

can capture, track, and manage the data that is collected on the devices; they can then use that data to make better

decisions as well as to glean deep insight and business intelligence. Intelligent systems represent what many expect will

be the future of business.

To understand the financial impact of using Windows Embedded, Forrester interviewed seven companies of varied

environments and needs. Some of these were large retailers, including grocery and department store chains, while some

were specialty retailers with boutique stores. These organizations used different versions of Windows Embedded

some used earlier versions, while others had deployed or planned to deploy new versions. However, all of the retailers

interviewed were able to articulate the impact that Windows Embedded had on their organizations, and many could

discuss either the current or the projected impact of the operating system on their organizations. We have synthesized

these responses into a single financial model to understand the total economic impact of a Windows Embedded

deployment on a sample organization.


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Based on the interviews with the seven existing customers, Forrester constructed a Total Economic Impact (TEI)

framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The

composite organization that Forrester synthesized from these results represents a large retailer, with approximately

50,000 employees and 1,000 stores. We assume that each store uses Windows Embedded for cash registers, point-of-

service systems, point-of-sale systems, self-service checkouts, informational kiosks, digital signage, handheld

terminals, and other retail-specific devices.

In developing the financial model to capture the experiences of the various organizations, Forrester observed several

trends. Although the lower overall cost of using the Windows Embedded operating system with existing Microsoft

products, services, and technologies was a factor, interviewees commented that It wasnt just a cost decision . . . it was

about functionality and value. Retailers indicated that key features included the stability of the operating system, the

familiarity of the user interface for both developers and users, and the ability to use and connect Windows Embedded to

a variety of retail industryspecific devices

As the interviewed organizations included a variety of retailersfrom boutique department stores to general

merchandisers and large grocery, food, and beverage retailersnot every benefit described in the interviews isrelevant to this composite organization. This study includes customer-driven qualitative benefits and examples as well

as economic benefits as included in the financial model.

Through confidential interviews conducted by Forrester with the Windows Embedded retail customers and our TEI

financial analysis, we found that a composite organization, based on the interviews and modeled on a large enterprise

retailer, experienced the risk-adjusted ROI, payback period, total benefits and costs of present value (PV), and net

present value (NPV) shown in Table 1.

In Table 1 and subsequent tables, the NPV is calculated in order to incorporate the time value of money over the three-

year period of the analysis. While this study looks at a three-year period, as per our TEI methodology, most enterprise

retailers look at a longer period of time. In situations where the period is longer than three years, the total economic

return and benefits for Windows Embedded customers would be greater.


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Benefits.The composite organization experienced the following benefits:

o Significant reduction in training time.As a result of the use of a familiar interface, the composite

organization is able to reduce its new employee training needs by two-thirds, down from three hours to less

than a single hour. With an average of 10,000 employees requiring system training each year, this yields a

three-year risk-adjusted PV of $738,595.

o Software failure rates cut in half.With the more stable operating environment provided by Windows

Embedded, the composite organization can be expected to reduce its service tickets for point-of-service and

other retail enterprise devices by 50 percent, leading to a three-year risk-adjusted net present value of

$168,310.

o Lower systems management and server costs.By centralizing servers in the data center rather than having

them distributed in stores, the composite organization was able to consolidate its upfront software spend and

save $300,000. The three-year risk-adjusted net present value of the cost avoidance is $270,000.

o Elimination of redundant administration costs.With the ability to manage and roll out a single golden

image, the composite organization was able to avoid an additional administration resource. The three-year

risk-adjusted net present value of the savings to the organization is $246,198.

o Reduction in the number of development resources.The use of Windows Embedded offers a familiar

interface and toolset for developers. Taking advantage of the features and drivers included with the retail-

specific version of Windows Embedded allows the composite organization to avoid an additional five

development resources. The total three-year risk-adjusted impact is a savings of $1,519,467.

Costs.The composite organization experienced the following costs:

1Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more

information on risk, please see the section on risk later in this document.


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o Licenses.The composite organization required a total of 15,000 point-of-service licenses at a three-year

risk-adjusted present value of $1,481,250.

o Servers.The composite organization put in centralized servers in a data center at a total three-year risk-

adjusted present value of $108,000.

o Microsoft support.The composite organization has an annual support contract with Microsoft, of which we

attribute 50 percent to the support of Windows Embedded. This yields a total three-year risk-adjusted

present value of $402,870.

Figure 1 illustrates the risk-adjusted financial results that were achieved by the composite organization. As evidenced

by the graph, the initial investment and ongoing costs are outweighed by the benefits achieved, with payback achieved

after approximately 17 months. The risk-adjusted values take into account any potential uncertainty or variance that

exists in estimating the costs and benefits, which produces more conservative estimates. The following factors may

affect the financial results that an organization could experience:

The use of Windows Embedded will vary based on the type of company. Although the composite organization is

a large retailer, the interviews included in this case study included boutique retailers and large food and grocery

($2,000,000)

($1,500,000)

($1,000,000)

($500,000)

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

($2,000,000)

($1,500,000)

($1,000,000)

($500,000)

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

Initial Year 1 Year 2 Year 3CashFlow

Total Costs Total Benefits Running Total


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store chains, among others. The ROI will vary depending on how Windows Embedded is used in the

environment.

The return in this case study is driven in part by the ability of the composite organization to move from servers in

retail locations to a centralized cluster, which was enabled in part by the use of Windows Embedded. This will

vary depending on the needs and technology state of the company.

Forrester has included a discrete license cost for Windows Embedded. However, some of the retailers

interviewed cited a bundled cost with their chosen software, so would not consider a discrete license cost for the

operating system software. For the purposes of this analysis, Forrester has not included the cost of the devices

themselves, as this is considered to be constant regardless of operating system.

The reader should be aware of the following:

The study is commissioned by Microsoft and delivered by the Forrester Consulting group.

Forrester makes no assumptions as to the potential ROI that other organizations will realize. Forrester strongly

advises that readers should use their own estimates within the framework provided in the report to determine the

appropriateness of an investment in Windows Embedded.

Microsoft 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 Forresters findings or obscure the

meaning of the study.

The customer names for the interviews were provided by Microsoft.


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From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI)framework for those organizations considering implementing Windows Embedded in a retail setting. 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 Windows Embedded can have on an organization (see

Figure 2). Specifically, we:

Interviewed seven large retailers currently using Windows Embedded to obtain fact-based metrics as well as

qualitative customer data with respect to costs, benefits, risks, and flexibility.

Designed a composite organization based on characteristics of the interviewed retail organizations (see AppendixA).

Constructed a financial model representative of the interviews using the TEI methodology. The financial model

is populated with the cost and benefit data obtained from the interviews as applied to the composite organization.

Interviewed key Forrester industry analysts to gather data relative to Windows Embedded and the marketplace

for Windows Embedded, specifically in the retail enterprise space.

Interviewed members of the Windows Embedded leadership team as well as solution sales specialists. In addition

to interviewing the Windows Embedded team, Forrester interviewed members in the Original Equipment

Manufacturer (OEM) group as well as in the Microsoft Enterprise Retail Industry leadership team.

Forrester employed four fundamental elements of total economic impact in modeling the impact of Windows

Embedded on retail organizations:

1. Costs.

2. Benefits to the entire organization.

Design composite

organization

Construct financial

model using TEIframework

Write case

study

Perform due

diligence

Conduct

customerinterviews


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3. Flexibility.

4. Risk.

Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, ForrestersTEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase

decisions. Please see Appendix B for additional information on the TEI methodology.


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Forrester uncovered key findings on the impact of Windows Embedded during the confidential customer interviews,

including the following:

Many of the retailers cited the functionality of Windows Embedded as a driving factor in its selection. One

observed, There are no unnecessary components . . . its the best option.

Although some retailers cited the lower overall cost of using the Windows Embedded operating system with

existing Microsoft products, services, and technologies as a factor in selecting it, others commented, It wasnt

just a cost decision . . . it was about functionality and value. Retailers indicated that key features included the

stability of the operating system, the familiarity of the user interface for both developers and users, and the ability

to use and connect Windows Embedded to a variety of retail industryspecific devices.

Nearly every retailer interviewed cited the ability to gain leverage from and take advantage of Microsoftslarge

ecosystem of partners for hardware, line-of-business applications, vertical industry expertise, and more. One

retailer said, Microsofts global partner ecosystemprovided a major advantage for us as we could easily

identify and partner with a certified Microsoft and Windows Embedded partner for both our front-of-store and

back-of-store operations.

Several retailers mentioned the benefit of an improved ability to hire developers. They felt that the available pool

of developer talent was much wider with Windows Embedded and therefore that it was much easier to staff their

organization with developers who have the requisite skills, without requiring additional training.

Forrester conducted confidential interviews with Windows Embedded retail customers who are based in the United

States, the United Kingdom, and continental Europe. This study uses a total of seven retailers. Profiles of the enterprise

retailers who were interviewed are below.

1. A retail corporationbased in the United Kingdom that is one of the largest global grocery retailers, as well as

a large convenience store operator and a major financial services provider. The group operates close to 5,000

retail trading outlets, employs more than 100,000 people, and has annual revenue of more than 10 billion.

2. A retail corporationthat owns and operates department stores in Germany and Belgium, offering fashion

and lifestyle products. The corporation has more than 100 stores and is held by a parent company that also

includes sports centers, specialty stores, and restaurants.

3. A retail enterprise organizationthat provides content-rich entertainment and gaming solutions to more than

125,000 bars, restaurants, and retailers around the globe. Through its various brands, the company offers

touchscreen gaming and entertainment for a variety of venues and platforms.


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4. Alarge retail womens clothing chainthat currently operates more than 1,000 womens clothing stores,

including stores in 48 states, Washington D.C., the US Virgin Islands, and Puerto Rico.

5. A perfume, book, jewelry, and confection retailerthat owns more than 2,000 stores, primarily in Germany

as well as across Europe and the United States.

6. A retail enterprisethat specializes in the design and manufacture of licensed plush, collectible, and seasonal

toys and gifts, including retail stores, sales, marketing, finance, and operations as well as warehouse facilities,

customer service, credit, and merchandise control. The company operates approximately 100 specialty retail

outlets.

7. A food division of a large British retailer and worker co-operative. The supermarket chain has over 240

branches across the United Kingdom, including convenience stores, making it one of the ten largest grocery

retailers in the United Kingdom.

To create a financial representation of the total economic impact of using Windows Embedded intelligent systems,

Forrester first created a composite organization based on the interviewed companies, combining their characteristics to

obtain a generalized version to use as the basis of the analysis. The composite organization that Forrester synthesized

from these results represents a large retailer, with approximately 50,000 employees and 1,000 stores. We assume that

each store uses an average of 15 point-of-service devices, which are made up of cash registers, kiosks, digital signage,

and handheld devices.

As the interviewed organizations included a variety of user types, including boutique retailers and device manufacturers

as well as department and grocery stores, not every benefit described in the interviews is relevant to this composite

organization. Although they are not included in the quantitative calculations, we have included a qualitative description

of these benefits following the description of the benefit categories included in the financial model.

Table 2 provides the model assumptions that Forrester used in this analysis.


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The discount rate used in the present value (PV) and net present value (NPV) calculations is 10 percent, and we used a

three-year time horizon for the financial modeling. Organizations typically use discount rates between 8 percent and 16

percent based on their current environment.

For the purposes of this financial analysis, we include the costs that are relevant to the composite organizations use of

Windows Embedded. This consists of the operating system license costs, the server costs related to the operating

system and associated embedded devices, and the Microsoft support costs. We do not include any internal support or

administration costs, because we expect that this category of cost will be incurred regardless of what kind of operating

system is used. The following sections provide the details of each of the three categories of cost included in the

financial analysis.

While some of the interviewed organizations were able to provide costs for their Windows Embedded licenses, others

paid a bundled cost for the operating system with their hardware purchase. For the purposes of this financial model, we

use a license cost based on the organizations that were able to provide this information, extrapolating that the costs for

the operating system were similar for the bundled prices.

The composite organization has an average of 15 point-of-service devices per store, and a total of 1,000 stores, leading

to a total of 15,000 devices. At $79 per license, this is a total cost of $1, 185,000, as shown in Table 3.


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The systems management and server costs in this financial model reflect the server costs related to the devices running

Windows Embedded. Several of the interviewed organizations reported that they were able to move much of their

server costs out of their retail outlets into centralized data centers, since the operating system facilitated remote

management. Therefore, in this category, we capture the systems management and server costs in the data center

specific to the point-of-service devices. We estimate that for the composite organization, this systems management and

server cost is approximately $100,000, as listed in Table 4.

For many of the retailers, the need to support their devices over a five-, seven-, or even ten-year horizon was a key

element in their decision to use Windows Embedded intelligent systems in their front-of-store and back-of-store sales,

service, and operations.

A key differentiator for Microsoft is its long-term commitment to support its family of products and operating systems.

Every version of Windows Embedded is supported for ten years, which gives buyers the assurance that they can use

their devices for their useful lifetime.

Most of the interviewed organizations cited a cost for extended Microsoft support. These were commonly enterprise-

wide agreements, including other Microsoft products in addition to Windows Embedded intelligent systems. Therefore,


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we apply a portion of the total support cost in this financial model, representing the proportion of the support that is

relevant to the operating system. For the composite organization, we include a total annual contract cost of $300,000, of

which we attribute 50 percent to the support of the operating system, yielding a total cost of $150,000 annually. See

Table 5 for the details of this calculation.

Table 6 lists the total costs included in this financial model over the three-year analysis period. For additional detail on

these summary numbers, please see the previous sections.


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The following sections detail the benefits identified during customer interviews. It also discusses the projected impact

on the composite organization. We include benefits related to a reduction in costs and time for training, fewer service

tickets, lower software and server and systems management costs as well as lower IT administration and development

costs. Additionally, we describe non-quantified benefit categories, including lower energy usage, improved device and

systems management, peace of mind due to a reliable and secure platform, higher employee productivity, and the

ability to use and, access real-time business data to inform decision making.

Many of the interviewed organizations mentioned that by using Windows Embedded intelligent systems, they were

able to offer a familiar interface for their end users, which resulted in an easier ramp-up process and lower training

needs. With relatively high turnover rates in staff, the savings in training time was significant, particularly for the larger

companies. For the composite organization, we estimate a turnover rate of 20 percent, meaning that approximately

10,000 new users require training annually. This turnover rate is a conservative one as, based on the interviews,

turnover can reach as high as 35 percent annually. With the familiar Windows interface, the composite organization isable to reduce its training time from three hours to less than a single hour per employee. We quantify this savings in

terms of the hourly cost for those employees and the total time saved in training annually. The details of this calculation

are shown in Table 7.

There was consensus among the interviewed organizations that use of the Windows Embedded operating systems to

power their retail business environment made them better able to predict, manage, and minimize software and service


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and support costs. One interviewee commented that, in general, the number of service tickets was reduced and

downtime was little to none.

According to several enterprise retailers, Windows Embedded provided superior reliability and stability as well as a

more natural user interface compared with alternative solutions. As a result, the retailers experienced productivity

gains. One retailer indicated that it was able to redeploy upwards of 1.5 of its full-time employees to higher value and

business impact tasks.

Additionally, the retailers cited the benefits of being able to consolidate systems, manage Windows Embedded devices

remotely, and access and take advantage of a common set of tools for IT development. These capabilities resulted in

significant gains in service and engineering productivity. Even more importantly for many of those interviewed, there

was less downtime because of fewer help desk tickets and fewer service and support requests.

For the composite organization, we estimate that prior to using Windows Embedded, on average, about 80 percent of

the endpoints generated a ticket over the course of a year related to OS software failure. As a result of the use of

Windows Embedded OS, the organization is able to reduce this number by half, cutting it to 40 percent and eliminating6,000 service calls. We use a cost of $12 per ticket to generate a benefit impact in this category of $72,000 in total

annual savings, as shown in Table 8.

The large retail organizations interviewed cited their ability to centralize the servers used to manage their point-of-

service and other retail-specific devices with Windows Embedded intelligent systems. They were able to move from

having in-store servers for managing the endpoints to remote management from data centers. This leads to an overall


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reduction in cost, as the centralized server costs are lower. The savings across the 1,000 stores for the composite

organization are $300,000, as shown in Table 9. These savings are a conservative estimate, as it is likely that there is

additional cost avoidance from reduced setup and administration as well.

With the improved facility to maintain and roll out a single image using Windows Embedded intelligent systems, the

administration needs of each interviewed organization were reduced as well. For the composite organization, we

estimate that one fewer resource is required in internal administration as a result of this simplification. The fully loaded

rate for this administrator is $100,000 annually. Table 10 shows the total savings to the organization.

Given the combination of familiarity with the platform and the available drivers and features, the compositeorganization is able to avoid hiring additional development resources. We estimate that an additional five developers

would be needed without Windows Embedded intelligent systems. At a fully loaded rate of $130,000, this is a total

annual savings of $650,000. The details of this calculation are provided in Table 11.


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In addition to the quantified benefits listed in the previous sections, the retailers cited several other categories of

benefits. While the retailers could not provide metrics to calculate the impact of these benefits, they recognized that the

benefits were valuable to their organizations.

Connectivity.The ability to connect the enterprise retailers intelligent devicesincluding their POS systems,

interactive screens, digital signage, and other retail-specific deviceswith their back-end and front-of-store

systems enables them to capture data to aid them in their decision making. The data can also be used to gain

insight into opportunities to improve how they market, sell to, and service their customers.

Manageability.Windows Embedded is built and optimized for enterprise retail industry devices. It includes

enterprise-grade security and management features such as server and system integration, data encryption,

application signing, and application lockdown, out of the box. Interviewed retailers indicated that they spent less

time and money on managing, tracking, and optimizing all of their retail devices in both the front and back-of-store operations.

Energy savings.The ability to quickly hibernate and wake up the operating systems led to significant energy

savings as devices were enabled to go to sleep immediately while not in use.

Security.Windows Embedded products are designed to meet enterprise security requirements. Customers noted

that Windows Embedded products met required data, personal identifiable information, and payment card

industry (PCI) compliance standards as well as other business and risk requirements. Multiple retailers mentioned

that they felt security was better with Windows Embedded than with alternative operating systems, most of

which were more common targets for attacks. One commented , Chances are, I am already safer with a smaller

target.

Familiarity.Several retailers mentioned that they selected Windows Embedded based on past experience and

familiarity with Microsoft products and technologies, as well as the Microsoft developer and partner network and

communities.


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The total benefits included in the financial analysis are shown in Table 12.

Flexibility, as defined by the Total Economic Impact(TEI) framework, represents an investment in additional

capacity or capability that could be turned into business benefit for some future additional investment. This provides an

organization with the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios

in which a customer might choose to implement Windows Embedded in their retail storefront or back-of-store

operations and later realize additional uses and business opportunities. Flexibility would also be quantified when

evaluated as part of a specific project (described in more detail in Appendix B).

Although we have not quantified the impact of flexibility in this study, several of the retailers mentioned that they felt

that using Windows Embedded would allow them to be more flexible in their businesses in the future. One interviewee

described this by saying, We are selling an experience to our customers. Windows Embedded will help us support that

as we evolve.Another customer cited a positive change that enabled faster and easier delivery of software packages to

their hardware. Moving to the Windows Embedded platform enabled us to be agile and to change our business

model . . . Now, we are better informed and armed with the right data to identify and extend our business to new

business growth opportunities.

Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. Implementation

riskis the risk that a proposed investment in Windows Embedded may deviate from the original or expected

requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology


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needs of the organization may not be met by the investment in Windows Embedded, resulting in lower overall total

benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.

Quantitatively capturing and reflecting investment and impact risk in financial estimates results in more meaningful

and accurate estimates and a more accurate projection of the return on investment (ROI). In general, risks affect costs

by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers

should be taken as realistic expectationsbecause they represent the expected values considering risk.

The following implementation risk that affects costs is identified as part of this analysis:

The Microsoft support costs for an organization will vary widely depending on implementation specifics unique

to each organization.

The following impact risk that affects benefits is identified as part of this analysis:

The move from distributed servers to a centralized cluster drove a large part of the analysis, and the value of this

shift will vary depending on the organizations current situation.

To apply risk adjustments to the original estimates, the TEI model uses a triangular distribution method to calculate

risk-adjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values

that could occur within the current environment for each category of cost and benefit. The risk-adjusted value is the

mean of the distribution of those points. For each of the cost and benefit categories included in the financial model, the

original estimate (as described in the previous sections) is multiplied by the mean value shown in Table 13, derived

from the low, most likely, and high estimates of that variable.


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The financial results calculated in the Costs and Benefits sections can be used to determine the return on investment

(ROI), net present value (NPV), and payback period for the composite organizations investment in Windows

Embedded. These are shown in Table 14.

($1,285,000) ($150,000) ($150,000) ($150,000) ($1,735,000) ($1,658,028)

$1,422,000 $1,122,000 $1,122,000 $3,666,000 $3,062,975

($1,285,000) $1,272,000 $972,000 $972,000 $1,931,000 $1,404,947

Table 15 shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the

risk-adjustment values from Table 13 in the Risk section to the cost and benefits numbers in Tables 6 and 12. Ascompared with the previous table, these risk-adjusted numbers provide a more conservative and therefore more reliable

prediction of an organizations experience with Windows Embedded. As demonstrated in Table 15, the overall

investment profile is favorable, with a risk-adjusted rate of return of 48 percent over the three-year horizon of the

analysis, and a payback period of approximately a year and a half. While this financial summary reflects the favorable

nature of the investment in Windows Embedded, the interviewed customers cited a number of reasons, financial and

otherwise, for their choice of operating system. Windows Embedded offered the organizations advantages in their

ability to serve their customers, train and retain their staff, and develop applications for their devices. All of the

interviewed customers confirmed that Windows Embedded was a strong choice that had made a difference in their

environments and would position them well for the future.


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With Windows Embedded, Microsoft extends the power of Windows and the cloud to intelligent systems. Windows

Embedded encompasses operating systems, tools, systems, and services. Enterprise retailers benefit from its one

trusted platform to connect systems and devices across stores, distribution centers, manufacturing facilities, offices,

subsidiaries, division and Corporate / HQ systems. These systems use familiar, flexible, scalable, secure and cost-

effective solutions from the most comprehensive partner ecosystem. Microsoft also has a thriving and active developer

community. All of which can empower retailers to be smarter, faster, and more flexible. Microsoft entered the

embedded marketplace more than 15 years ago and continues to lead the evolution toward intelligent systems with an

extensive suite of technologies for enterprises across a variety of industries.

Marked by rapid changes in demands and capabilities, the retail sector and enterprise business technology

environments are in a constant state of growth and evolution. Newly defined expectations in how an enterprise can

access, manage, and use data that is stored in embedded devices and back-office systems translate into an improved

ability to deliver personal, seamless, and differentiated shopping and brand experiences to customers. Furthermore,

retailers are using retail industry-specific solutions and technologies to deliver connected shopping experiences that aredesigned to deliver more personalized and relevant experiences; and more importantly, to deliver on the its brand

promise. Today shoppers and consumers today want the independence to shop and buy via the channel and the device

of their choice, whether it is interacting with digital signage in a specialty store, using a kiosk to learn more about a

product, purchasing groceries via a self-service checkout system, or shopping for a retailers products or services via

their retail mobile device while at home or in the store.

Microsoft positions Windows Embedded as a reliable, secure, and highly manageable platform for building enterprise

retail solutions with embedded devices in the marketplace. This family of operating systems enables diverse, innovative

solutions built on one trusted platform. When it comes to marketplace differentiation, both enterprise customers and

manufacturers of retail-specific devices choose the Windows Embedded platform for its enterprise-built capabilities

and the high value proposition around reliability, security, manageability, natural user interface, and long-term supportoptions that easily integrate into almost any business and IT environment.


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For this Total Economic Impact(TEI) study, Forrester has created a composite organization to illustrate the

quantifiable costs and benefits of implementing Windows Embedded intelligent systems for retail, hospitality, and

travel devices, including point-of-sale, self-service kiosks, digital signage, handheld terminals, and other industry-

specific devices in front-of-store and back-of-store operations. The composite company is intended to represent a large

retailer with 50,000 employees and is based on characteristics of the interviewed customers.

The composite company has approximately 1,000 stores with an average of 15 points of service in each, including both

registers and handheld devices. The internal software development team comprises 35 people.

In purchasing Windows Embedded products, the composite company has the following objectives:

Improved management of its front-of-store and back-of-store devices, including maintenance and rollout of the

standard image.

Ease of use and strong functionality for its devices.

The ability to develop and run applications on the operating system as needed.

Improved stability and uptime for its devices.

Total Economic Impact(TEI) is a methodology developed by Forrester Research that enhances a companys

technology decision-making processes and assists vendors in communicating the value proposition of its products and

services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of ITinitiatives to both senior management and other key business stakeholders.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility.

Benefits represent the value delivered to the user organizationIT and/or business unitsby the proposed product

or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to

analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model

place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of

the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user

organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear lineof accountability established between the measurement and justification of benefit estimates after the project has been

completed. This ensures that benefit estimates tie back directly to the bottom line.


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Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business

units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the

investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures

any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be

tied to the benefits that are created.

Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in

two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood

that the estimates will be measured and tracked over time. TEI applies a probability density function known as

triangular distribution to the values entered. At minimum, three values are calculated to estimate the underlying range

around each cost and benefit.

Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can

typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the

strategic value of an investment. Flexibility represents the value that can be obtained for some future additional

investment building on top of the initial investment already made. For instance, an investment in an enterprise-wide

upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce

licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated.

The collaboration can only be used with additional investment in training at some future point in time. However,

having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI

captures that value.

Discount rate:The interest rate used in cash flow analysis to take into account the time value of money. Although the

Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment

environment. Forrester assumes a yearly discount rate of 10 percent for this analysis. Organizations typically use

discount rates between 8 percent and 16 percent based on their current environment. Readers are urged to consult their

respective organizations to determine the most appropriate discount rate to use in their own environment.

Net present value (NPV):The present or current value of (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 other projects

have higher NPVs.

Present value (PV):The present or current value of (discounted) cost and benefit estimates given at an interest rate

(the discount rate). The PV of costs and benefits feed into the total net present value of cash flows.


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Payback period:The breakeven point for an investment, which is the point in time at which net benefits (benefits

minus costs) equal initial investment or cost.

Return on investment (ROI):A measure of a projects expected returnin percentage terms. ROI is calculated by

dividing net benefits (benefits minus costs) by costs.

In the cash flow tables used in this study (such as the following example table), the initial investment column contains

costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1

through 3 are discounted using the discount rate (shown in the Framework Assumptions section) at the end of the year.

Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value (NPV)

calculations are not calculated until the summary tables and are the sum of the initial investment and the discounted

cash flows in each year.

The Total Economic Impact of Windows Embedded Intelligent Systems in Retail

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