What is the ROI for an API initiative?
The 674% ROI result for the IBM API Connect composite customer scenario in the Forrester study is quite large, but not very surprising. For the last several years I have been meeting with clients in all industries, of all sizes, and in all parts of the world discussing how APIs can help their business. The possibilities are truly amazing and the business leaders I talk to recognize these significant opportunities. Still, we needed a better way to demonstrate these potential returns to a larger audience.
To accomplish this IBM commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential benefits and return on investment (ROI) enterprises may realize by implementing IBM API Connect.
To maintain the study’s objectivity, all editorial control was maintained by Forrester Consulting throughout the project. In addition, IBM did not participate in any of Forrester’s interviews with the clients or in any follow-up discussions.
Forrester TEI Methodology
Forrester’s study methodology was as follows:
- Forrester performed due diligence, including learning more about IBM’s API Connect product interviewing IBM management, marketing, sales, and consulting personnel, along with Forrester analysts, to gather data relative to IBM and the marketplace for IBM API Connect.
- Forrester surveyed 32 IBM API Connect customers to obtain data with respect to costs, benefits, and risks.
- Forrester constructed a financial model of a composite organization representative of the surveyed organizations. The financial model is populated with the cost and benefit data obtained from the interviews.
- Forrester created a financial model that was aligned with Forrester’s Total Economic ImpactTM framework, making adjustments based on certain risk factors.
- Forrester wrote a comprehensive case study recapping its findings. The case study includes estimated return on investment (ROI), net present value (NPV) and the payback period associated with an investment in IBM API Connect.
Key Financial Findings from Forrester TEI Study
The summary financial results represent a composite organization that is based on the responses collected from an in-depth survey across the 32 IBM customers. The survey was used to determine the benefits and costs that resulted from an organization’s investment in IBM API Connect to help deliver projects more quickly and reach new markets across some specific areas that were part of the survey. While the benefits in this study capture the additional value of developing new projects, some organizations may also get value from reducing auditing costs, improving inventory of assets, improving business decision making, and driving customer loyalty. These additional benefits were not quantified in the survey and are not included in the financial results.
Forrester aggregated the data and developed a model representative of all the responses of customers who had implemented IBM API Connect. The study revealed significant financial benefits from an IBM API Connect deployment:
- Estimated ROI of 674 percent
- A payback period of under one year
- Total benefits over a 3 year period of approximately $12.7 million
- Net present value of $11.1 million
Of course your specific situation will most likely differ from the composite organization in number and types of projects and consumers. To assist in your own estimation, Forrester developed a simple to use web estimator tool where you can enter information about your API project plans and expected benefits. In addition, Forrester developed a more comprehensive tool that can be used by IBM subject matter experts in an IBM provided workshop to determine a more tailored ROI analysis for your specific business plans.
To learn more or calculate your own ROI please access these resources:
- Click here to download the Forrester TEI study
- Listen to the replay of the Webinar
- Access the API Connect TEI web estimator tool
- Contact your IBM sales representative to request a custom workshop from IBM to calculate your ROI using the TEI methodology
To understand more about IBM’s point of view on the API Economy visit the IBM API Economy website. IBM API Connect is IBM’s complete foundation to Create, Run, Manage, and Secure APIs. You can find more information about IBM API Connect at the API Connect website. And you can also experience a trial version of API Connect.
If you have questions, please let me know. Connect with me through comments here or via twitter @Arglick to continue the discussion.