Recommendation: Approve — this replacement is not fully discretionary. Per the Project Charter, the legacy platform's vendor has announced end-of-support, and continuing to run unsupported software past that date isn't a risk the organization is willing to carry — "do nothing" isn't genuinely available. What this analysis justifies is the scope chosen: a full modernization with six new integrations, rather than a bare like-for-like replacement of the current system. At full benefit realization, the corrected $11,582,050 investment (RAIDD D-005) produces a 10-year discounted NPV of approximately −$2,585,000 at an 8% discount rate, with undiscounted payback around Year 9 and discounted payback around Year 15 — longer than a typical 10-year enterprise-system planning horizon, though within a core platform's realistic 15-year service life. Benefit realization ramps over the first two years (50% Year 1, 80% Year 2, 100% from Year 3) as change adoption matures. These figures are shown as computed, not adjusted to look more favorable — the case for approving rests on the mandatory replacement, not on a fast payback.
The NPV and payback figures above are informational, not an approval gate — a payback-period test only means something when spending is optional. Since the platform is being replaced regardless, the real decision this analysis supports is the scope comparison, not whether to act.
Quantified Annual Benefits (Full Realization)
| Category | Annual Value | Basis |
|---|---|---|
| Labor Efficiency (Claims Processing) | $1,200,000 | Reduced manual processing time from automation |
| Error / Rework Reduction | $450,000 | Fewer claims errors and appeals |
| Compliance Risk Avoidance | $300,000 | Risk-adjusted avoidance of regulatory penalty exposure |
| Legacy System Decommissioning Savings | $380,000 | Retired legacy license/maintenance fees |
| Customer Retention / Satisfaction | $200,000 | Faster claims turnaround reduces churn (conservative) |
| TOTAL ANNUAL BENEFIT | $2,530,000 |
Cost Summary
| Category | Amount |
|---|---|
| One-Time Implementation Cost (Year 0) | $11,582,050 |
| Annual Ongoing Cost (Year 1+) | $950,000 / year |
Ongoing cost = Software Licensing ($180K) + Hosting/Infrastructure ($220K) + Vendor Maintenance ($150K) + Internal Support ($300K) + Enhancements ($100K). Full detail on the Costs Detail tab of the Excel workbook.
10-Year Cash Flow & Payback
| Year | Realization | Net Cash Flow | Cumulative (Undiscounted) | Cumulative (Discounted @ 8%) |
|---|---|---|---|---|
| 0 | — | ($11,582,050) | ($11,582,050) | ($11,582,050) |
| 1 | 50% | $315,000 | ($11,267,050) | ($11,290,383) |
| 2 | 80% | $1,074,000 | ($10,193,050) | ($10,369,601) |
| 3 | 100% | $1,580,000 | ($8,613,050) | ($9,115,346) |
| 4 | 100% | $1,580,000 | ($7,033,050) | ($7,953,999) |
| 5 | 100% | $1,580,000 | ($5,453,050) | ($6,878,678) |
| 6 | 100% | $1,580,000 | ($3,873,050) | ($5,883,010) |
| 7 | 100% | $1,580,000 | ($2,293,050) | ($4,961,095) |
| 8 | 100% | $1,580,000 | ($713,050) | ($4,107,470) |
| 9 | 100% | $1,580,000 | $866,950 | ($3,317,077) |
| 10 | 100% | $1,580,000 | $2,446,950 | ($2,585,231) |
Undiscounted cumulative turns positive in Year 9. Discounted cumulative does not turn positive within the 10-year window shown — extending the same $1,580,000/year steady-state benefit forward (not shown in the table above), discounted payback occurs around Year 15. That's past a typical 10-year enterprise-system planning horizon, though within a core platform's realistic 15-year service life. This is presented as computed rather than reframed to look better: the approval case for this program rests on the legacy platform's vendor end-of-support (see the recommendation above and the Project Charter), not on a fast payback.
How This Relates to the TCO
The Total Cost of Ownership analysis shows that this platform's 10-year TCO ($21.08M) is higher than the cost of simply maintaining the legacy system ($14.0M) — and this Cost-Benefit Analysis shows the same thing from a different angle: at the corrected budget, the quantified efficiency, risk, and retention benefits above ($2.53M/year at full realization) don't fully offset the incremental cost within a 10-year window (10-year NPV of −$2.59M). Neither analysis argues this program pays for itself quickly. Both exist because "simply maintain the legacy system" isn't actually available past the vendor's announced end-of-support — so the real question both documents answer is what the right-sized replacement costs and delivers, not whether replacing it is worth doing. Read TCO and CBA together — TCO answers "what will this cost," CBA answers "what do we get for it."