0 Analysis Document Task 7 Recommendations to Assist Cost Recovery / ROI Strategies and Budget...

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Analysis Document

Task 7Recommendations to Assist Cost Recovery / ROI Strategies and Budget Planning

May 2, 2006

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Table Of Contents

Introduction

Methodology

Sample Telework Program Business Cases

– BCA 1 – Home Office (In-Depth)

– BCA 2 – Services (High-Level)

– BCA 3 – Enterprise (High-Level)

Findings and Conclusions

Appendix A: Benefit Savings Calculations

Appendix B: Development of Telework Costs

Appendix C: Resources for Developing Telework-related Business Cases

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This report provides guidance for cost recovery, strategizing return on investment, and budget planning related to telework

This report on Recommendations to Assist Cost Recovery / ROI Strategies and Budget Planning is the seventh in a series of reports in the Telework Technology Cost Study

The overall study has three primary objectives

– Describe the current telework technology environment

– Estimate the costs of expanding telework supporting technologies so the infrastructure can support 25% to 50% of the federal workforce teleworking

– Provide recommendations on how best to expand the telework supporting infrastructure

This report provides a strategic framework and methodology for identifying the value of telework investments, and thereby enhancing the cost justification and return on investment

The information in this report will help government executives develop business case analyses that fully consider the multiple benefits of telework for making investment decisions

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For this study Booz Allen gathered information from 20 different federal organizations in 11 Departments and 5 Independent Agencies

The Booz Allen team conducted interviews, focus groups, and surveys of Chief Information Officer staff, Telework Program Coordinators, Teleworkers, and Managers of Teleworkers, respectively

Ten Departments and one Departmental Component participated in the study:

– Department of Agriculture Department of Interior

– Department of Commerce Department of Justice

– Department of Education Department of Transportation

– Department of Health and Human Services Department of the Treasury

– Department of Housing and Urban Development Department of Veterans Affairs

– U. S. Coast Guard (component of Department of Homeland Security)

Five Independent Agencies also participated in the study:

– Equal Employment Opportunity Commission National Science Foundation

– General Services Administration Securities And Exchange Commission

– National Aeronautics and Space Administration

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This report presents three sample business case analyses that could be used in an agency’s investment process as project managers try to fund various telework initiatives For this report, three sample business case analyses (BCAs) were developed

– One in-depth BCA with detailed costs, benefits, and risks. It also included a cost justification and return on investment (ROI) analysis

– Two high-level BCAs with detailed costs and high level benefits and risks

The Capital Planning and Investment Control (CPIC) process and Value Measuring Methodology (VMM) value factors were used to outline and develop the BCAs

Additionally, this report provides resources that project managers can use to develop their own telework-related BCAs

– Cost data from deliverables two and five were consolidated for easy use by the reader, e.g. unit costs, web-based application development costs, server capacity guidelines

– A guide explaining how to use the cost data to build a cost estimate for a telework BCA or telework funding requests is included

– An inventory of risks and benefits typically associated with telework initiatives is provided in the Appendix

– An explanation for how to tailor the example BCAs for their organization (e.g., an agency can add or subtract costs of components from sample BCAs as appropriate, if an agency provides more or less than is included in the BCA examples)

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Table Of Contents

Introduction

Methodology









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High-Level Data Synthesis Data Sources

• Administered surveys to teleworkers and managers of teleworkers to obtain information about telework technology availability, usage, and performance

• Conducted focus groups with Telework Program Coordinators to obtain information about telework program history and current state, technology issues, policy issues, and plans for expansion

• Conducted interviews with CIOs and other IT staff members to obtain information about the current status of the telework infrastructure and plans for enhancement

Data Collection From Three Sources in 16

Government Organizations

Development of a Series of Reports on Telework Technology

and Related Costs

• Information about costs, benefits and risks associated with telework investments

• Conducted discussion sessions with telework and technology experts to evaluate potential cost reduction and cost recovery / ROI strategies

• Used frameworks of the Capital Planning and Investment Control (CPIC) process and Value Measuring Methodology (VMM) value factors to organize and develop sample business cases analysis (BCA)

• Estimated costs and benefits associated with sample telework investments that bring agencies to the “basic” and / or “ideal” levels for Home Office, Services, and Enterprise solutions defined in Task 4

• Developed one in-depth and two high-level sample BCAs that incorporated cost estimates, cost reduction and cost recovery / ROI strategies, and addressed risk

Detailed Synthesis of Findings to Develop

Sample Cost Recovery / ROI

Strategies

The information for this report was distilled from other data gathering and analysis that was previously performed for this study and from business case development best practices

Detailed Reports

• Several reports in this study have established the technologies, costs, and enhancement plans required for telework expansion

• Task 2, Task 3, and Task 4 specify the technology components needed for scalability

• Task 2 and Task 5 detail the costs required for recommended technology enhancements

• Task 6 and Task 9 incorporate the technology and cost requirements from the other tasks and provide recommendations for initiating and implementing telework program enhancement and expansion plans

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Technology Currently in Place*

BCA 1: Home Office•Reutilized PCs (no security software)•Limited peripherals (printer/copier/fax)•Network interface (broadband router)•Limited mobile telephone (exec staff only)•Security resources (including firewall and authentication devices)

BCA 2: ServicesEnterprise connectivity, •Voice conferencing, mobile telephone access (exec staff only)•Help desk support•Technical training (general)

BCA 3: Enterprise•Secure network access, including VPN/ firewall solution•Remote email access, terminal emulation system, web interfaces (limited)

Additional Technology Needed

for Basic SolutionBCA 1: Home Office•Laptop & docking station•Peripherals for all teleworkers (printer/copier / fax)•Mobile telephone for all teleworkers*

BCA 2: Services•Voice communications (calling card)

BCA 3: Enterprise•Basic solution is currently in place (no

additional components necessary)

Additional Technology Needed

for Ideal SolutionBCA 1: Home OfficeIdeal solution is not covered in BCA 1; these components are not calculated**Advanced authentication devicesCollaboration tools (web cam)PDA devices for all teleworkers

BCA 2: ServicesResidential broadband service

BCA 3: EnterpriseWeb interfaces (all admin functions)

The sample BCAs were developed to bring agencies to the “basic” and / or “ideal” levels for Home Office, Services, and Enterprise solutions

* The Task 4 Report listed cell phone, calling card, or additional telephone line as three voice communication options in the basic solution; in this sample BCA series, a calling card was selected to meet teleworker voice communication requirements

** BCA 1 focuses on funding a “basic” solution only.

Red text indicates the components included in the BCA calculations

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The Capital Planning and Investment Control (CPIC) process provides the context for the development of BCAs in the federal government

Regardless of the dollar size and ultimate recipient of a BCA (i.e., bureau Office of Chief Information Officer (OCIO), department OCIO, or Office of Management and Budget (OMB)), each BCA must step through the process outlined in the graphic to the right

Each of the sample BCAs in this report are assumed to be in the “Select” phase, which is where investments are developed, submitted and scored

“Select” phases across government require each BCA to analyze the potential value, cost and risk for the investment in question

Context for Sample BCAs

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The Value Measuring Methodology (VMM) is a structured approach for investment analysis that can be used to evaluate potential telework infrastructure enhancements…

…including the evaluation of the three essential factors of decision making in a structured, quantifiable and repeatable manner

Sample VMM Framework Used to Structure the BCAs in this Section:

FY09 Sub Total:

FY08 Sub Total:

FY07 Sub Total:

Priority

Priority

Metric,Target,Scale

Value Measures

Pre-Risk Total

Risk Inventory% - impact on costs

% - impact on value (benefits)

Risk Tolerance Boundary

Value Factors

CO

ST

RIS

KV

AL

UE

Direct Costs

(Dollar Figures)

Quantified

Benefits

Degree of Caution Required

Benefits (Present Value) TotalReduced Employee Absence Savings 10,862,952Real Estate Footprint Savings 2,538,311Employee Retention Savings 206,493Improved Employee Productivity 22,631,151

Total $36,238,906

HardwareLaptop with Docking Station

$2,072

Less 80% ($1,658)Less Cost of Desktop ($326)Sub Total $88

PeripheralsPrinter / Copier / Fax $238Sub Total $238

Total Per User $326

Narrative Risk Level

Probability Cost ImpactValue

Impact

High 50% 25% -25%Medium 30% 15% -15%Low 25% 5% -5%EXAMPLE

Sample VMM Outputs:

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For the purposes of these sample BCAs, an abridged version of VMM’s methodology was employed

Cost, value and risk are estimated for one alternative, instead of the three that OMB’s Circular A-11 requires for business cases

Value definition is confined to the “government financial” value factor only – One of VMM’s key strengths, the quantification of

qualitative benefits (i.e., the other four value factors), requires a prioritization process that is most effective when completed in an interactive session using an appropriate automated tool

– This process should be done at the highest appropriate level of agency management

Risk inventory and possible risk mitigation strategies were defined in lieu of detailed risk analysis– Assessment of probability and impact would need to be

done in collaborative sessions with technical and policy staff or representatives of partner agencies

– Only then could its impact on the value and risk scores be determined

* Only the actions in “bold” were performed in sample BCAs

Overview of VMM Methodology*

Step 1. Develop a Decision-Framework– Identify & Define the Value Structure– Identify & Define the Risk Structure– Identify & Define the Cost Element

Structure – Begin Documentation

Step 2. Alternatives Analysis (estimate value, cost, & risk)– Identify & Define Alternatives– Estimate Value and Cost– Conduct a Risk Analysis– On-going Documentation

Step 3: Pull Together the Information– Aggregate the Cost Estimate– Calculate the Return-on-Investment– Calculate the Value Score– Calculate the Cost and Value Risk Scores– Compare Value, Risk and Cost

Step 4: Communicate and Document

Overview of VMM Methodology*

Step 1. Develop a Decision-Framework– Identify & Define the Value Structure– Identify & Define the Risk Structure– Identify & Define the Cost Element

Structure – Begin Documentation

Step 2. Alternatives Analysis (estimate value, cost, & risk)– Identify & Define Alternatives– Estimate Value and Cost– Conduct a Risk Analysis– On-going Documentation

Step 3: Pull Together the Information– Aggregate the Cost Estimate– Calculate the Return-on-Investment– Calculate the Value Score– Calculate the Cost and Value Risk Scores– Compare Value, Risk and Cost

Step 4: Communicate and Document

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The five VMM value factors help identify, define, and quantify the financial and non-financial benefits of telework investments

Value Factors Description Relevant Telework Benefits

Direct User (Customer) Value

Value associated with the delivery of high-quality, citizen-centered services

Realization of value in this factor typically drives the realization of value in all the other factors

Enhanced Quality of Work Life – Telework affords employees flexibility to better accomplish work and non-work responsibilities

Workforce Improvements – Telework has been found to increase employee productivity, morale, and retention

Social (Non-direct User/Public) Value

Secondary or indirect benefits directly attributable to the investment under consideration

Society benefits anytime the government is a good steward of public funds

Environmental/Civic Benefits – Widespread telework reduces traffic congestion and pollution due to fewer daily commuters

Continuity of Operations – Telework program can be used to help government work continue during emergencies

Potential Real Estate Savings – Telework enables reduced need for office space, resulting in taxpayer savings

Government Operational/ Foundational Value

Value associated with investments in building up the infrastructure - whether in staff skills or technology - required to accommodate a changing environment


Enhanced Recruiting – Telework is an attractive benefit that gives agencies a competitive advantage in recruiting high-quality candidates

Government Financial Value

Traditional direct cost information used in financial return-on-investment ratios

In the past, only this value was quantified and factored into decision metrics


Potential Real Estate Savings – Telework enables reduced need for office space, resulting in taxpayer savings

Strategic/Political Value

Captures and quantifies the value associated with advancing organizational and government-wide initiatives and mandates

Legislative Compliance – Agencies are required to provide telework opportunities to all eligible staff


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Table Of Contents

Introduction

Methodology









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This section provides three sample BCAs that seek funding required to close the gap between the organization’s current infrastructure and the “basic” or “ideal” telework infrastructure

Assumptions1. Each sample agency’s current level of infrastructure is assumed to be consistent with Scenario B (see Appendix)2. Agency objective is to close the gap between their current infrastructure to the ‘basic” and / or “ideal” level of telework support3. Agencies are scaling up to 50 percent of the agency teleworking

BCA Size of Agency Detail Level of BCA Technical Investments Covered

1.

Home Office

Large Agency (100K Staff)

Scaling up to 50K teleworkers

In-Depth:

– Detailed costs

– Detailed benefits

– Sample risk impacts

– Cost justification

– ROI analysis

Increasing from current to basic level of infrastructure for teleworker-at-home equipment

– Laptop with software (basic)

– Printer/copier/fax (basic)

2.

Services

Medium Agency (50K Staff)


High-Level:

– Detailed costs

– High-level cost justification

– General discussion of risks

Increasing from current to ideal level of infrastructure for telecommunications services

– PDA or cell phone service (basic)

– Broadband service (ideal)

Does not include help desk support since the study found that all agencies currently provide this service

3. Enterprise

Small Agency (10K Staff)


High-Level:

– Detailed costs

– High-level cost justification

– General discussion of risks

Increasing from current to ideal level of infrastructure for enterprise application access

– Web access application development (ideal)

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Table Of Contents

Introduction

Methodology









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Implementing a “Basic” Teleworker-at-Home solution for 50,000 employees at an agency with 100,000 staff can yield over $36 million of benefits in a 3-year period

VA

LU

E

Value Factors Corresponding BenefitsGovernment Operational/Foundational Value Reduced Employee Absence Savings

Government Financial Value Real Estate Footprint Savings

Government Operational/Foundational Value Employee Retention SavingsDirect User (Customer) Value Improved Employee Productivity

Key Metrics:

ROI – ~225%, NPV - $20.2 million, Payback – Year 1

Risk Impact:

ROI – ~180%, NPV - $13.9 million, Payback – N/ARIS

K Risk Inventory

+5%: impact on costs

-15%: impact on value (benefits)


CO

ST

$16.0 million: Pre-Risk Total

$16.8 million: Risk-Adjusted Total

FY07 Sub Total: $5.4 million



Teleworker-at-Home Components in this

BCA:

•Laptop with Docking Station• Combination printer/ copier/fax machine

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An investment of approximately $16 million over 3 years is required to provide a “Basic” Teleworker-at-Home solution for 50,000 staff at an agency with 100,000 staff

A 3-year implementation allows for phased approach over multiple budget cycles and allows all desktops to be refreshed with laptops

– All estimates are in FY07 dollars

The acquisition cost of a laptop can be offset by the current cost of acquiring a desktop

– The approximate annualized cost of a desktop, including maintenance, is $326

Since Telework frequency per OPM is one day per week (or 20%), only 20% of the laptop expense was charged to the telework initiative

– The remaining 80% of the expense can be shared by agency cost categories, such as annual infrastructure and COOP compliance

Hardware

Laptop with Docking Station $2,072

Less 80% ($1,658)

Less Cost of Desktop ($326)

Sub Total $88

Peripherals Printer / Copier / Fax $238

Sub Total $238

Total Per User $326

The laptop and printer / copier / fax unit costs are annualized and include refresh and annual maintenance expense

– Please refer to Appendix B for further detail on costs

FY07 FY08 FY09 Total

Annual Number of New Users 16,667 16,667 16,667 50,000

Annual Per User Cost* $326 $333 $348 N/A

Total Annual Cost (Inflated) $5,433,333 $5,552,867 $5,799,880 $16,786,080

Total Annual Cost (Present Value) $5,433,333 $5,303,598 $5,290,853 $16,027,784

* Annual costs are inflated per the difference between OMB Circular A-94's Nominal and Real 3-Year Treasury Interest Rates; costs are discounted per OMB A-94's 3-year Nominal Rate on Treasury Notes and Bonds

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This approximate $16 million investment can be offset with a benefits realization of over $36 million over the same 3-year period

Return on Investment (ROI): 232%

Cumulative Net Present Value (NPV): $20.2 million

Payback is achieved in Year 1

In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner

– i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

Benefits (Net Present Value) FY07 FY08 FY09 Total

Total Annual Benefit (Present Value) $11,424,322 $11,151,535 $13,663,048 36,238,906

Total Annual Cost (Present Value) $5,433,333 $5,303,598 $5,290,853 16,027,784

Net Present Value $5,990,989 $5,847,938 $8,372,195 20,211,122

Cumulative Net Present Value* $5,990,989 $11,838,927 $20,211,122 N/A

*Payback is achieved in Year 1 (FY07) when cumulative NPV reaches ~$6.2 million

Return on Investment (ROI)*

Total Annual Benefit (Present Value) $36,238,906

Total Annual Cost (Present Value) $16,027,784

ROI 226%

*ROI is calculated as a savings to investment ratio, which is consistent with OMB guidance for the Exhibit 300

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The total amount of financial benefits that could be realized from implementing the “basic” teleworker-at-home solution is derived from a number of sources

Each type of savings and benefits are based on prior industry research which are referred to in Appendix A– The improved productivity calculation is based on a recent study that found teleworkers work on

average 1 additional hour on days they telework – The increased employee productivity is the largest benefit since it accounts for 50 hours per year

per teleworker, while the reduction of 3 missed work days per year per teleworker accounts for just 24 hrs per employee per yr

Several of these benefits, such as employee retention, correspond to more than one value factor

Benefits (Present Value) FY07 FY08 FY09 Total

Reduced Employee Absence Savings $3,682,483 $3,594,553 $3,585,916 10,862,952

Real Estate Footprint Savings N/A N/A $2,538,311 2,538,311

Employee Retention Savings $70,000 $68,329 $68,164 206,493

Improved Employee Productivity $7,671,840 $7,488,653 $7,470,658 22,631,151

Total 11,424,322 11,151,535 13,663,048 $36,238,906

See Appendix A for details on how the value of benefits were calculated

VMM Value Factors Corresponding Telework Benefits

Government Operational/Foundational Value Reduced Employee Absence Savings


Government Operational/Foundational Value Employee Retention Savings

Direct User (Customer) Value Improved Employee Productivity

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While an actual risk analysis was not performed, this sample BCA assumes that risk could have a more noticeable impact on the realization of financial benefits

VMM requires that the probability and impact of each risk factor on both cost and value be considered. This provides analysts with information necessary to determine the interaction between impact and probability and predict how that interaction will change the value and cost of the investment under consideration

Examples of risk that could affect the “teleworker-at-home” solution are:– Technology Issues (e.g., connectivity, performance of legacy client-server applications remotely, and security)

– Access to / availability of IT support

– Difficulties working and communicating with co-workers in the office

– Inflexible agency-based operating procedures

– Too few at-home days utilized for program to be effective

– Participants in telework program are not well suited for working at an alternative work site

In order to illustrate the impact of risk on cost and value, this BCA assumes that a detailed risk analysis has been performed with the following outcomes:

– There is a 5% impact (increase) on the total costs: $16.0 million $16.8 million

– There is a 15% impact (decrease) on total value: $36.2 million $30.8 million

Causes Value to Decrease

Causes Cost to Increase

Likelihood of Occurring

Causes Value to Decrease

Causes Cost to Increase

Likelihood of Occurring

-5%5%25%Low

-15%15%30%Medium

-25%25%50%High

Value ImpactCost ImpactProbabilityNarrative Risk

Level

NOTIONAL

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Table Of Contents

Introduction

Methodology









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Implementing an “Ideal” Telecommunication Services solution for 25,000 employees at an agency with 50,000 staff can yield over $31 million of benefits in a 3-year period

VA

LU

E

Value Factors Corresponding Benefits

Government Operational/Foundational Value Reduced Employee Absence Savings




Government Operational/Foundational Value Broadband Savings

Key Metrics:

Total Benefits Realized (Present Value): $31.1 million

RIS

K*




CO

ST

$15.6 million: Total Lifecycle Cost




Telecommunications Services

Components in this BCA:

•Residential Broadband Service•Calling Card (for long distance calls)

*In this BCA, potential risks were identified but their impact on value and cost were not calculated

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Cost analysis shows that approximately $15.6 million over 3 years is required for implementation of a “Basic” telecommunication services solution

A calling card was selected as the best telecommunication option for several reasons– Provides practical, inexpensive way for agencies to pay for teleworkers’ long distance charges– Cell phones may be more appropriate for some teleworkers who work from multiple locations,

but calling cards meet the needs of a typical home-based teleworker

Broadband access is widely viewed as critical to the success of telework– Provides faster data communication and enables timely transfer of larger data files– Provides for both data communications and voice communications, so teleworkers are able to

conduct telephone calls while transferring data – Allows use of collaboration tools, video conferencing, etc., which can be difficult if not

impossible to use over dial-up

FY07 FY08 FY09 TotalAnnual Number of New Users 8,334 8,333 8,333 25,000Annual Per User Cost* $634 $648 $677 N/ATotal Annual Cost (Inflated) $5,283,756 $5,399,351 $5,639,535 $16,322,642Total Annual Cost (Present Value) $5,283,756 $5,156,973 $5,144,580 $15,585,309

As detailed in the table at right, the per user cost of $634 is based on the agency providing a calling card and broadband access to each teleworker

*Annual costs are inflated per the difference between OMB Circular A-94's Nominal and Real 3-Year Treasury Interest Rates; costs are discounted per OMB A-94's Nominal 3-Year Rate on Treasury Notes and Bonds Annual Service Fees

Calling Card $14 Broadband $620 Sub Total $634Total Per User $634

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Value analysis shows that the $15.6 million investment can be offset by over $31 million in benefits from a variety of sources

Nearly $13 million of benefit in time savings related to broadband, which nearly pays for the investment itself

– Estimates are based on technical performance superiority of broadband, as compared to dial-up

Over $101 million in financial benefits can be earned by this investment – four-fifths of which is assumed to be shared agency-wide

– 20 percent to telework

– 80 percent to agency initiatives, such as infrastructure upgrades / maintenance and COOP compliance

The potential benefits of this investment all map to one or more of VMM’s value factors, including

– Government Operational/Foundational Value

– Government Financial Value

– Direct User (Customer) Value


Benefits (Present Value) FY07 FY08 FY09 TotalReduced Employee Absence Savings $1,841,168 $1,797,205 $1,792,886 5,431,260Real Estate Footprint Savings N/A N/A $1,269,106 1,269,106Employee Retention Savings $35,000 $34,164 $34,082 103,246Improved Employee Productivity $3,835,767 $3,744,177 $3,735,180 11,315,123Broadband Savings $4,397,414 $4,292,414 $4,282,099 12,971,927

Total 10,109,349 9,867,960 11,113,354 $31,090,663

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There are a variety of risks to be considered which could impact the “telecommunications services” investment

Potential RisksPotential Risks Potential Mitigation StrategiesPotential Mitigation Strategies

Technology Issues (e.g., connectivity, performance of legacy client-server applications remotely, security, data security)

Access to / availability of IT support Operational impacts Difficulty working/communicating with office workers Inflexible agency-based operating procedures Too few telework days used for program to be effective Supervisor resistance to telework Appropriate selection of participants for telework Inadequate preparation Creation of burden on non-participating employees Staff culture / existing expectations Resistance by organizational support functions (e.g.,

HR, IT) Historical resistance by smaller Federal agencies Difficulty in measuring results


Access to / availability of IT support Operational impacts Difficulty working/communicating with office workers Inflexible agency-based operating procedures Too few telework days used for program to be effective Supervisor resistance to telework Appropriate selection of participants for telework Inadequate preparation Creation of burden on non-participating employees Staff culture / existing expectations Resistance by organizational support functions (e.g.,

HR, IT) Historical resistance by smaller Federal agencies Difficulty in measuring results

Senior management leadership Comprehensive security planning Telework-specific training Organize Telework Advisory Group or Program

Management Office Assessing the impact Telework has on timekeeping,

compensation, and other issues Preparing a written Telework agreement for employees

and managers Regularly re-evaluating and modifying the program,

when necessary, to meet changing circumstances Designation of appropriate telework coordinator

Senior management leadership Comprehensive security planning Telework-specific training Organize Telework Advisory Group or Program

Management Office Assessing the impact Telework has on timekeeping,

compensation, and other issues Preparing a written Telework agreement for employees


when necessary, to meet changing circumstances Designation of appropriate telework coordinator

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Table Of Contents

Introduction

Methodology









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Implementing an “Ideal” Enterprise solution for 5,000 employees at an agency with 10,000 staff results in $3.4 million of benefits over a 3-year period based on this study’s analysis

VA

LU

E

Value Factors Corresponding Benefits

Government Operational/Foundational Value Reduced Employee Absence SavingsGovernment Financial Value Real Estate Footprint Savings



Key Metrics:

Total Benefits Realized (Present Value): $3.4 million

RIS

K*




CO

ST

$219,000: Total Lifecycle Cost

FY07 Sub Total: $219,000

FY08 Sub Total: N/A

FY09 Sub Total: N/A

Enterprise Components in this

BCA:

•Web-based application (Multi-tier Unix-based architecture)

*In this BCA, potential risks were identified but their impact on value and cost were not calculated

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Cost analysis shows that $219,000 over 12 months is required to provide an “Ideal” web-based application solution

Since the development is assumed to take place over a 12-month period, all labor costs and hardware purchases are for FY07

Because of the multiple uses of these investments, only a portion of the development costs were charged to the telework initiative

– Since telework’s frequency per OPM is 1 day a week (or 20%), only 20% of the development costs were charged to the telework initiative

– For example, 20 percent may be associated with telework

– The remaining 80 percent of the expense can be shared by agency costs such as infrastructure and COOP compliance

Software and System Administration costs are not included in the total, because the costs can vary widely due to a number of factors

Further detail on assumptions and industry guidelines regarding web application development solutions is provided in Appendix B

FY07 TotalAnnual Number of New Users 5,000 5,000Annual Per User Cost* $10 N/ATotal Per User Cost $50,000 $50,000Labor Costs $168,960 $168,960Total Annual Cost $218,960 $218,960

Labor Calculation:4.00 FTEs

$110

per hour cost of typical contractor web app development labor

12.00number of months required for implementation

7,680.00

total number of labor hours for 4 FTEs for 12 month implementation period

$844,800 Labor Sub Total

($675,840)

less 80% charged to other agncy initiatives, e.g. COOP, infrastructure

$168,960 Labor Total

Annual Service Fees Web App $52 Less 80% ($42)Software Annual Licenses TBDTotal Per User $10

* Annual costs are not inflated since all BCA costs are provided in FY07 dollars

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Value analysis shows that the $219,000 investment can yield substantial financial benefits of $3.4 million

Each type of savings and benefits are based on prior industry research which are referred to in Appendix A– The improved productivity calculation is based on a recent study that found teleworkers work on average 1

additional hour on days they telework – The increased employee productivity is the largest benefit since it accounts for 50 hours per year per

teleworker, while the reduction of 3 missed work days per year per teleworker accounts for just 24 hrs per employee per yr

In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner– For example, 20 percent may be associated with telework– The remaining 80 percent of the expense can be shared by agency costs such as infrastructure and COOP

compliance

The potential benefits of the enterprise investment all map to one or more of VMM’s value factors, including– Government Operational/Foundational Value– Government Financial Value– Direct User (Customer) Value


Benefits (Present Value) FY07 TotalReduced Employee Absence Savings $1,104,744 1,104,744Real Estate Footprint Savings N/A 0Employee Retention Savings $7,000 7,000Improved Employee Productivity $2,301,552 2,301,552

Total 3,413,297 $3,413,297

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There are variety of risks that could reduce the overall value of the “Enterprise” investment

Potential RisksPotential Risks Potential Mitigation StrategiesPotential Mitigation Strategies

Technology Issues (e.g., connectivity, performance of legacy client-server applications accessed remotely, security, and data security)

Access to / availability of IT support Efficacy of training Operational impacts Difficulty working and communicating with office

workers Inflexible agency-based operating procedures Too few telework days utilized for program to be

effective Supervisor resistance to telework program Appropriate selection of participants for telework Timely coordination with unions Creation of burden on non-participating employees Staff culture / existing expectations Resistance by organizational support functions (e.g.,

HR, IT) Difficulty in measuring results

Technology Issues (e.g., connectivity, performance of legacy client-server applications accessed remotely, security, and data security)

Access to / availability of IT support Efficacy of training Operational impacts Difficulty working and communicating with office

workers Inflexible agency-based operating procedures Too few telework days utilized for program to be

effective Supervisor resistance to telework program Appropriate selection of participants for telework Timely coordination with unions Creation of burden on non-participating employees Staff culture / existing expectations Resistance by organizational support functions (e.g.,

HR, IT) Difficulty in measuring results

Senior management leadership Broadband residential services Comprehensive security planning Telework-specific training Organize Telework Advisory Group or Program

Management Office Assessing the impact telework has on timekeeping,

compensation, and other issues Developing a plan to address the equipment needs of

your organization telework program Preparing a written Telework agreement for employees


when necessary, to meet changing circumstances Willingness of agency to participate Designation of appropriate telework coordinator Coordination with local unions (when applicable) Increased IT support and allocation of resources

Senior management leadership Broadband residential services Comprehensive security planning Telework-specific training Organize Telework Advisory Group or Program

Management Office Assessing the impact telework has on timekeeping,

compensation, and other issues Developing a plan to address the equipment needs of

your organization telework program Preparing a written Telework agreement for employees


when necessary, to meet changing circumstances Willingness of agency to participate Designation of appropriate telework coordinator Coordination with local unions (when applicable) Increased IT support and allocation of resources

31

Table Of Contents

Introduction

Methodology









32

By clearly articulating the financial and non-financial benefits of telework, government leaders can make an effective business case for enhancing the infrastructure and services that support telework

Substantial financial benefits can be realized by implementing an effective telework program (see table)– Reduced absenteeism costs– Reduced real estate costs– Reduced recruitment and retention costs– Improved staff productivity

Telework Business Cases*

Total Investment (Millions)**

Total Benefits

(Millions)**NPV ROI

Teleworker-at-Home Solution /100K staff

$16.0 $36.2 $20.2 ~225%

Telecommunication Services / 50K staff

$15.6 $31.1 $15.1 ~200%

Enterprise / 10K staff

$0.22 $3.4 $3.2 ~1500%

Telework IT enhancements do not just benefit teleworkers, they provide IT benefits to all staff– Improves contingency support– Increases organization flexibility and ability to adjust IT infrastructure and applications to meet

changes in IT needs– Improves communication between staff and between staff and people in other organizations– Easier to use applications with a common interface– Automation of administrative processes

Other non-financial benefits of telework– Compliance with federal mandates– Increased workforce diversity– Reduced traffic congestion and pollution

33

Table Of Contents

Introduction

Methodology









34

BCA 1: Telework programs can save organizations 63% of their absenteeism costs

In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family or personal obligations that can only be met during the business day

– Teleworkers are still able to get some work done, even on days when they have appointments to attend

– Employers can save 63% of the cost of absenteeism per teleworking employee, or $2086 per employee per year. Source: Exploring Telework as a Business Continuity Strategy, 2005 WorldatWork

This calculation assumes that 3 sick days / snow days are saved annually per teleworker




3 # sick days / snow days saved 24 # hrs saved

$46.03 composite telework hourly rate $1,104.74 per person annual savings

8,333 # of teleworkers annually added $9,205,839 annual savings ($7,364,671) less 80% $1,841,168 annual telework-specific savings$5,523,505 total (3-yr) telework-specific savings

35

BCA 1: Substantial real estate savings can be gained through telework and hoteling programs

The cost per rentable square foot of Class B office space in Washington DC is $34 per year

– Federal office space typically is classified as Class B

– Class B office space definition: good location, professionally managed, fairly high-quality construction and tenancy; generally show very little functional obsolescence and deterioration

– Source: Society of Industrial and Office Realtors (SIOR) 2005 Comparative Statistics of Industrial and Office Real Estate Markets

To be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner

– i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades/maintenance and COOP

For the purposes of this example, it is assumed that in Year 3 (FY09), the agency’s lease is up for renewal

– Because half of its staff now teleworks at least once a week, the agency can reduce its per person (and hence overall) square footage allocation by 10%


$34 Rentable square feet per person rate for Washington, DC Class B

office space

230Suggested rentable square feet per person, per GSA Office of

Governmentwide Policy's "Office Space Use" update10% % per person reduction in rentable square feet provided23 reduced rentable square feet per person

8,333 # of teleworkers annually added $6,516,406 annual savings ($5,213,123) less 80% $1,303,283 annual telework-specific savings $1,303,283 total (realized in Year 3) telework-specific savings

36

BCA 1: Telework has proven to be a valuable employee recruitment and retention tool, saving employers staffing costs

According to a 2003 telework study by the Equal Employment Opportunity Commission (EEOC), their total cost of recruiting one employee is $7000

– While this figure would certainly vary from agency to agency, this study assumes that the variance would be minor

– Source: OIG-01-13-AMR Assessment of Reducing Infrastructure Costs Through Increased Use of Telework FINAL




$7,000 cost to recruit one employee

25 # employees retained annually due to telework

$175,000 annual savings

($140,000) less 80%

$35,000 annual telework-specific savings

$105,000 total (3-yr) telework-specific savings

37

BCA 1: Studies have shown teleworkers are more productive than office workers

In a recent study of its extensive telework program, AT&T found that teleworkers report about one additional productive hour in each workday spent at home (about a 12.5% increase, approximately)

– Source: Lessons Learned From The Network-Centric Organization: 2004 AT&T Employee Telework Results

This calculation assumes that each participating employee teleworks one day per week annually, not including two weeks of paid vacation




1.00 # additional hours worked on telework days50 total # telework days per person per year*

$46.03 composite Telework hourly rate

$2,302 per person annual savings

8,333 # of teleworkers annually added

$19,178,832 annual benefit

($15,343,065) less 80%

$3,835,767 annual telework-specific benefit$11,507,300 total (3-yr) telework-specific savings

38

BCA 2: Reduced Employee Absence Savings Calculations

In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family and personal obligations that can only be met during the business day







3 # sick days / snow days saved24 # hrs saved

$46.03 composite telework hourly rate$1,104.74 per person annual savings


39

BCA 2: Real Estate Footprint Savings Calculations











office space




40

BCA 2: Employee Retention Savings Calculations










($140,000) less 80%



41

BCA 2: Improved Employee Productivity Calculations












($15,343,065) less 80%


42

BCA 2: Because staff spend less time waiting for data transmissions when they are provided broadband services, staff are more productive

These savings compare the technical performance of broadband Internet access to dial-up Internet access

The following assumptions about daily email traffic are based on a typical federal email account

– average message size of 60 kilobytes

– average of 25 messages per day

– average total size of 1500 kilobytes (1.5 megabytes) per day


broadband transfer time for 1000 kilobytes (minutes) 0.20average message size (kilobytes) 60average # messages per day 25average total size of daily messages (kilobytes) 1,500estimated daily time spent on broadband downloads 0.25composite telework hourly rate $46.03estimated daily cost of broadband downloads $11.51 dial-up transfer time for 1000 kilobytes (minutes) 2.70average message size (kilobytes) 60average # messages per day 25average total size of daily messages (kilobytes) 1,500estimated daily time spent on dial-up downloads 3.38composite telework hourly rate $46.03estimated daily cost of dial-up downloads $13.62

estimated daily cost savings due to broadband (per person) $2.11# of teleworkers annually added 8,333# of work days in year 250estimated daily cost savings due to broadband (total) $4,397,414.09

43

BCA 3: Reduced Employee Absence Savings Calculations


In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family and personal obligations that can only be met during the business day






3 # sick days / snow days saved24 # hrs saved

$46.03 composite telework hourly rate$1,104.74 per person annual savings


44

BCA 3: Real Estate Footprint Savings Calculations











office space




45

BCA 3: Employee Retention Savings Calculations










($140,000) less 80%



46

BCA 3: Improved Employee Productivity Calculations












($15,343,065) less 80%


47

Table Of Contents Introduction

Methodology








– Per Teleworker Cost Build-Up Methodology

– “Basic” and “Ideal” Costs

– Scenarios


48

A comprehensive set of standard cost elements was developed for estimating the costs of telework at 18 federal organizations

In line with established cost estimation methodologies, the Booz Allen team made assumptions and estimates to compensate for several data limitations

– Lower-level organizational information was used for the cost estimates when overall organization’s information was not available – these estimates apply to the lower-level organization only

– Information provided did not cover all the cost elements needed for analysis and the available information differed between organizations – cost assumptions were made to compensate for the missing information

Global and project-specific drivers and assumptions (i.e., assumptions about the current telework environment at each organization) were defined

– Prior year (i.e., sunk) costs are not included in the estimates– All unit costs used in this report are assumed to be in FY 2005 dollars – All cost and benefits estimates in each of the three sample business cases analyses are

provided in FY07 dollars

The cost elements were grouped into the three major categories: teleworker home office, services, and enterprise costs


49

The assumptions used to make the cost estimates were based on standard industry estimates of costs and equipment lifecycles

Hardware technology refresh cycle is based on government and industry standards and varies by product. The article “When to Upgrade” by John Dix, Network World, November 28, 2005 and professional experience were used to estimate the life-cycle of equipment

Each annualized per teleworker cost includes the following components, where applicable: 1) the annualized purchase price; 2) annual maintenance costs; 3) annual lifecycle refresh costs; 4) annual recurring fees; 5) annualized one-time fees

– Since every organization interviewed has a telework program in place, these estimates are designed to capture the annualized costs of previously-made purchases

– In order to provide an annualized estimate for acquisition costs, the initial purchase prices are divided by their respective product lifecycles

Calculation of Maintenance and Lifecycle Refresh Costs

– Recurring (i.e., maintenance) annual costs are assumed to total 15% of the acquisition cost of hardware and 20% of the acquisition cost of software

– Refresh costs are calculated by dividing the acquisition cost of each element by its respective product lifecycle


50

Appropriate methodologies were developed in order to estimate the per teleworker costs for enterprise components

The voice conferencing per teleworker estimate assumes that a teleworker uses an additional two hours a month of teleconferencing services as a result of their telework

The enterprise connectivity per teleworker estimate assumes that each agency’s Internet connection is a DS3, which has an annual recurring cost of $8,650 (per GSA’s Washington Interagency Telecommunications System pricing)

The server cost per teleworker estimate assumes that one server can support 6,000 staff

The help desk support per teleworker estimate assumes that a teleworker is responsible for a 20% increase per year in help desk support costs based on them teleworking 20% of the time (equivalent of 1 day per week of telework)


51

Access to broadband is important for teleworkers due to the increasing size of data files and the development of new applications that take advantage of telecommunications infrastructure

Broadband access is much faster and more efficient than dial-up and is becoming increasingly available to residential users

Emails with attachments are frequently larger than a Megabyte, particularly if they contain graphical content, resulting in lengthy download times for teleworkers with dial-up access

Broadband circuits have the capacity to support new telecommunication capabilities such as VoIP, video streaming, and collaboration, which are inaccessible over dial-up access due to limited bandwidth

Study found most organizations do not reimburse staff for broadband access. If the government would contract directly with carriers for broadband service it would provide more efficient billing and providing teleworkers business class service

53 kbps dial-up line 768 kbps cable/DSL

Size of FileTransfer

Time (Min) Size of FileTransfer Time

(Min)

100 kbytes 0.3 100 kbytes 0.1

500 kbytes 1.3 500 kbytes 0.1

1 Mbyte 2.7 1 Mbyte 0.2

5 Mbytes 13.2 5 Mbytes 1.0

10 Mbytes 26.4 10 Mbytes 1.9

Comparison of Cable/DSL to Dial-Up Data Transfer *

* Data transfer under ideal conditions, protocol overhead and other impairments can more than double transfer times


52

Per Teleworker Cost Build-Up Methodology: Enterprise Connectivity

*1 day per week of Telework = 20%


It is estimated that, during traffic peaks, 20%* of the user base is actively using the enterprise Internet access connection

– The peak traffic is then multiplied by 20%, based on the assumption that staff telework one day a week

See sample calculation below; this calculation resulted in a per person cost of approximately $1 for each organization

Sample Calculation

Bandwidth per Twer (in kb per second - kbps) 5 Assumed

Concurrent Twers 63.04 (20% x 1576 Teleworkers) x 20% = 63.04 Concurrent Twers

Concurrent / Aggregate Bandwidth (in kbps) 315.2 5 kbps x 63.04 Concurrent TWers = 315.20 kbps

% of Current Bandwidth 0.00704578 315.20 kbps / 44736 (DS3 in kbps) = .007% of Current Bandwidth

Current Bandwidth Costs (WITS / FTS) $8,650.00

Per GSA’s Washington Interagency Telecommunications System (WITS) Pricing

Total Cost (Current BW Costs x % of Current BW) $60.95 .007% Bandwidth Use x $8,650 = $60.95 Total per Person Cost

Annualized Cost $731.35 $60.95 x 12 months = Annualized Total per Person Cost

Annualized Cost per Person ~$1.00 Annualized Cost / Total # of Twers

Data used in Sample Calculation

DS3 in kilobytes per second (kbps) 44736 kbps

WITS DS3 Installation Cost $5,300.00

WITS DS3 Recurring Cost $8,650.00

53

Per Teleworker Cost Build-Up Methodology: Voice Conferencing


Regardless of the number of teleworkers, this Per User Cost remains the same across each organization, illustrated by the following calculations which include dramatically different numbers of teleworkers

*Source: The Office of Personnel Management’s (OPM) OPM’s 2005 Report “The Status of Telework in the Federal Government

Organization # 5

Assumed per Minute Rate $0.13 (Per Vendor Quote)

Assumed Ave. Conf. Call Duration (minutes) 60

Ave # of Conf. Calls Due to TW 2

Ave. Duration of Conf. Calls Due to TW (in minutes) 120 60 Minutes x 2 Hrs = 120 Minutes

Total # of TWers at Org 1,576 Source*

Monthly Cost $24,585.60 $.08 x 120 Minutes x 1576 TWers = $15,219.60

Annualized Cost $295,027.20 $15,219 x 12 Months = $181,555.20

Per User Cost $187.20 $181,555 / 1576 TWers = $115.20

Organization # 9

Assumed per Minute Rate $0.13 (Per Vendor Quote)

Assumed Ave. Conf. Call Duration (minutes) 60

Ave # of Conf. Calls Due to TW 2

Ave. Duration of Conf. Calls Due to TW (in minutes) 120 60 Minutes x 2 Hrs = 120 Minutes

Total # of TWers at Org 18,604 Source*

Monthly Cost $290,222.40 $.08 x 120 Minutes x 18,604 TWers = $178,598.40

Annualized Cost $3,482,668.80 $1798,598.40 x 12 Months = $2,143,180.80

Per User Cost $187.20 $2,143,180.80 / 18,604 TWers = $115.20

54

Per Teleworker Cost Build-Up Methodology: Standard and Enhanced Help Desk Support

Standard Help Desk Support: The $100 per teleworker help desk support cost is based on the average annual per teleworker cost of a contractor-operated help desk that supports 15,000 staff at a large cabinet-level department

Enhanced Help Desk Support Costs: Per the basis of estimate above, a help desk provided solely for teleworkers would cost $100 per teleworker on an annual basis

Estimated TW Help Desk Costs

$100.00 assumed average annual Help Desk cost per user

20.00% increase in HD costs due to TW*

$20.00$100 x 20% - $20 (annual per user increase cost due

to TW)

*1 day per week of Telework = 20%


Enhanced TW Help Desk Costs

$100.00 assumed average annual Help Desk cost per user

55

Per Teleworker Cost Build-Up Methodology: “Basic” Web Application Development Cost

Basic Web-Based Application Development Solution: Total Cost of $256,500

– Two-tier Microsoft-based architecture (less scaleable, more affordable)

– 4 yr lifecycle

– Tier 1: web front end =

2 servers at $20,000 each $40,000

1 load balancer $25,000

Software license cost not included since it can vary widely due multiple vendor solutions available and due to an application’s specific requirements, e.g. business rules, data manipulation

– Tier 2: web app =

Network switch $25,000

2 servers at $50,000 assumed) $100,000

– Annualized cost of $64,125 ($256,500 / 4)

– Annual 15% hardware maintenance $28,500; Annual 20% software maintenance $38,000

– Supports up to 200 concurrent teleworkers which is scaleable to 5000 teleworkers who access it once a week on average

– Per teleworker cost of $13 (not including software and labor costs)


56

Per Teleworker Cost Build-Up Methodology: “Basic” Web Application Development Cost (cont.)

Labor costs are not included here since they vary widely due to the scale and scope of development work, however some guidelines are below:

– 2-8 staff per development is range, with 3-5 being the median

– $110 per hour is typical outsource cost for web development work

– Timeframe: small application = 2-3 months; large application = 6 months – 1 year

– System Administrator is needed to manage each application


57

Per Teleworker Cost Build-Up Methodology: “Ideal” Web Application Development Cost

Ideal Web-Based Application Development Solution: Total Cost of $526,500

– Build 1 component (that uses a 3-tiered component-based architecture) that can used by multiple apps and can serve multiple requests simultaneously much more cost effective

– Multi-tier Unix-based architecture (more scaleable and robust)

– 4 year lifecycle

– Tier 1: web front end =

2 servers at $20,000 each $40,000

1 load balancer system $25,000

Software license cost not included since it can vary widely due multiple vendor solutions available and due to an application’s specific requirements, e.g. business rules, data manipulation

– Tier 2: middle tier =

2 servers at $100,000 each $200,000

– Tier 3: web application =

Network switch $25,000

2 servers at $50,000 $100,000


58

Per Teleworker Cost Build-Up Methodology: “Ideal” Web Application Development Cost

Ideal Web-Based Application Development Solution (cont.): Total Cost of $526,500

– Annualized cost of $131,625 ($526,500 / 4 )

– Annual 15% hardware maintenance $58,500; Annual 20% software maintenance $78,000

– Supports up to 200 concurrent teleworkers which is scaleable to 5000 teleworkers who access it once a week on average

– Per teleworker cost of $26 (not including software and labor costs)

– This per teleworker cost must be doubled to $52 to account for redundancy (again, this does not include software and labor costs)

Labor costs are not included here since they vary widely due to the scale and scope of development work, however some guidelines are below:

– 2-8 staff per development is range, with 3-5 being the median

– $110 per hour is typical outsource cost for web development work

– Timeframe: small application = 2-3 months; large application = 6 months – 1 year

– System Administrator is needed to manage each application


59

Per Teleworker Cost Build-Up Methodology: Collaboration Resources, i.e., Live Communication Server 2005 Costs

Centrally managed and secured resources such as instant managing, document sharing, and virtual meeting tools are made available to teleworkers

Microsoft Live Communication Server (LCS) 2005: Total Cost of $251,000

– This sample solution assumes a teleworker base of 20,000

– 3.5 yr lifecycle

– Annualized cost of ($251,000 / 3.5) $72,000

– 2 load balancers (for redundancy) at $25,000 $50,000 subtotal

– Array of 4 servers at $30,000 each $120,000 subtotal

– $3150 LCS licensing cost per server $12,600 (does not include federal government discount, which could result in significant savings)

– Annual 15% hardware maintenance $28,000

– Annual 20% software maintenance $37,000

– Supports 4000 concurrent teleworkers, which is scaleable to 20,000 teleworkers teleworkers who access it once a week on average

– Client Access License (CAL) if $31 but Microsoft does not charge this amount if the customer has valid MS Exchange licenses (which we assume each organization has)

– Per teleworker cost of $4


60

Per Teleworker Cost Build-Up Methodology: Remote Email Access Costs

Microsoft Outlook Web Access (OWA) Solution: Total Cost of $233,000

– This sample solution assumes a teleworker base of 20,000

– 3.5 yr lifecycle

– Annualized cost of $67,000 ($232,500 / 3.5)

– 2 load balancers (for redundancy) at $25,000 $50,000

– Array of 4 ISA servers at $30,000 each $120,000

– $2000 - $4000 ISA total servers licensing cost (varies) $3000 assumed

– Annual 15% hardware maintenance $34,000

– Annual 20% software maintenance $26,000

– Supports 4000 concurrent teleworkers, which is scaleable to 20,000 teleworkers who access it once a week on average


It is estimated that, during traffic peaks, 20%* of the teleworker base is actively using remote email

The peak traffic is then multiplied by 20%, based on the assumption that staff telework one day a week


61

Per Teleworker Cost Build-Up Methodology: VPN Costs

Standard VPN Solution: Total Cost of $25,000

– 3 yr Lifecycle

– Annualized Cost of $8300 ($25,000 / 3)

– Cisco VPN concentrator

– Includes end teleworker licenses

– Supports 1500 concurrent teleworkers, which is scaleable to 37,500 teleworkers


Clientless SSL VPN Solution: Total Cost of $350,000

– 3 yr Lifecycle

– Annualized Cost of $117,000 ($350,000 / 3)

– includes hardware and software and maintenance)

– supports 5000 concurrent teleworkers, which is scaleable to a teleworker base of 125,000 teleworkers


It is estimated that, during traffic peaks, 20% of the teleworker base is actively using VPN

The peak traffic is then multiplied by 20%, based on the assumption that staff telework one day a week


62

Per Teleworker Cost Build-Up Methodology: “Limited” vs. “Full Costs

To account for the fact that in each scenario, the current solution provides limited versions of the components we identified, we have reduced the per teleworker costs to appropriate percentages

Explanation of 10% PDA Access – provided for executive staff only

Explanation of 10% Mobile Phone - provided for executive staff only

Explanation of 10% Mobile Phone Access - provided for executive staff only

Explanation of 25% Peripherals – assumes printer only

Explanation of Web Interfaces – different architecture, redundant system

Component

Full (100%) Per

Teleworker Cost

Limited Per Teleworker

Cost

Percentage

PDA $288 $29 10%

10% PDA Access

$651 $65 10%

Mobile Phone

$144 $14 10%

Mobile Phone Access

$651 $65 10%

Peripherals $238 $60 25%

Web Interfaces

$52 $13 N/A


63


Methodology










– Scenarios


64

Basic and Ideal Costs – Home Office

Components DescriptionBasic

SolutionIdeal

solution

PC Laptop PC & Docking Station - Provides basic computer capabilities to teleworkers, including mobility and access to enterprise software; Assumes use of same PC for office and home

$2,072 $2,072

Peripheral Support

Printer / Copier / Fax - Provides common office functionality away from office to perform job functions (assumes “All-in-One” device)

$238 $238

Network Interface

Broadband Router - Provides connectivity interface for broadband Internet access, which is required for accessing enterprise network

$68 $68

Mobile Telephone

Mobile Telephone - Provides mobile voice communication allowing co-workers and customers to easily contact the teleworker (OPTION 1)

$144* $144*

Security Resources

Firewall Solution - Enterprise hardware and/or software solution provides secure connectivity services, application policy enforcement, and attack protection

$307 $307

Authentication Device - Devices that provide extra secure layer of teleworker authentication beyond teleworker id / password policies (e.g. secure hardware tokens)

$42 $42

Advanced Authentication Device - Devices that provide high layers of teleworker authentication and encryption for secure and classified access (e.g., fingerprint readers, biometrics)

$30

Collaboration Tools

Web Cam - Integration of video streaming with enterprise collaboration tools allows for virtual meetings with co-workers and customers

$90

PDA Devices PDA Devices - Messaging devices (e.g., Blackberry, Treo) allowing mobile voice and data communication with co-workers and customers (OPTION 2)

$288*

*Only one of the 2 options needs to be provided for remote telephone communications equipment

The Annual Cost Per Teleworker Per Alternate Site Component Including Maintenance Costs


65

Basic and Ideal Costs – Services


SolutionIdeal

solution

Data Communications

Enterprise Connectivity – Network connectivity to support teleworker expansion from enterprise to Internet (e.g., DS3, OC-3) (Ideal solution assumes enterprise has redundant network connectivity for backup connectivity and disaster recovery (including wireless, satellite, etc.)

$1 $1

Home Office Connectivity – Broadband access connectivity from teleworker home office to Internet for enterprise access (e.g., DSL, cable) (Ideal solution assumes that teleworker access costs are covered by government)

$620 $620

Voice Communications

Voice Conferencing - Audio bridge services available to teleworkers for multi-party voice calls with co-workers and customers

$187 $187

Mobile Telephone Access - Usage costs for mobile voice services covered by Government

$651* $651*

Calling Card - Cost allowance provided to teleworkers for long distance voice charges

$14* $14*

Telephone Line - Additional land line to enable separate voice communication from home office

$494* $494*

Help Desk Support

Help Desk Support - Use of existing resources to provide hardware / application support and troubleshooting services to enterprise and teleworkers (Ideal solution assumes enhanced help desk support for teleworkers to maintain SLAs and KPIs)

$20 $100

Technical Training

Technical Training - Information such as telework technology policies, IT troubleshooting techniques, and technical capabilities of home office provided to teleworkers and managers of teleworkers

$300 $300

PDA Access PDA Access - Usage costs for mobile voice / messaging services covered by government

$651

*Only one of the 3 options needs to be provided for telephone communications access

3 O

PT

ION

S

The Annual Cost Per Teleworker Per Services Component Including Maintenance Costs


66

Basic and Ideal Costs - Enterprise


SolutionIdeal

solution

Secure Network Access

VPN / Firewall Solution – Infrastructure (hardware / software) provides secure remote access for teleworker connectivity to enterprise network (includes enterprise network interface and software for teleworker clients) (Ideal solution assumes clientless, browser-based solutions (e.g., SSL VPN) that reduce administrative efforts and expand range of accessing devices)

$6 $1

Application / Administrative

Access

Remote Email Access – Centrally managed solution provides for secure remote access to enterprise email system (e.g., Outlook Web Access, Lotus iNotes)

$3 $3

Terminal Emulation System – Centrally managed solution (e.g., Citrix) that provides teleworker secure remote access to non-web enterprise applications and data without the need for separately installed client applications (only thin client software required) (Ideal solution assumes fully redundant enterprise system for backup / disaster recovery)

$433 $433

Web Interface - Multi-tier architecture that provides capability to remotely access enterprise web applications and limited administrative functions (e.g., time cards, expense reports) (Ideal solution assumes fully redundant system allowing remote access to additional admin functions such as travel planning, training, support services, etc.)

$13* $52*

Collaboration Resources

Collaboration Resources - Centrally managed and secured resources such as instant managing, document sharing, and virtual meeting tools are available to teleworkers

$4

*Web Interface total does not include labor costs or software licensing costs. Please see Appendix for more detail.

The Annual Cost Per Teleworker Per Enterprise Component Including Maintenance Costs


67


Methodology










– Scenarios


68

The organizations that participated in the study were grouped into 5 scenarios based on how much additional infrastructure was required to provide the basic and ideal telework IT environment

Scenario A organizations provide basic telework infrastructure including home office support, services, and enterprise access, but additional IT infrastructure is required to bring them up to the ideal environment

Scenario B organizations provide some basic telework infrastructure including some home office support and services and full enterprise access. However additional IT infrastructure is required to provide all basic and ideal telework technologies to teleworkers

Scenario C organizations provide some basic telework infrastructure including some home office support, services, and enterprise access. However additional IT infrastructure is required to provide all basic and ideal telework technologies to teleworkers

Scenario D organizations provide a few basic telework infrastructure components and services for the home office but limited if any enterprise access. Substantial IT infrastructure improvements are required to provide basic and ideal telework technologies to teleworkers

Scenario E organizations provide few if any basic telework infrastructure, so significant IT infrastructure improvements will be required to provide basic and ideal telework technologies to teleworkers


69

Network infrastructures and the ability to scale resources and support for expanded telework programs vary across the federal government

Per

Us

er C

os

t

*Cost varies depending on which voice communication option is chosen

**Cost of upgrading from basic solution to ideal solution

***Cost of upgrading from current to ideal solution

Scenario E

Basic

Ideal

Scenario D

Basic

Ideal

Scenario C

Basic

Ideal

Scenario B

Basic

Ideal

Scenario A

Basic

Ideal

LE

VE

L O

F A

DD

ITIO

NA

L H

OM

E O

FF

ICE

, S

ER

VIC

ES

, AN

D E

NT

ER

PR

ISE

C

OM

PO

NE

NT

S R

EQ

UIR

ED

Critical Home Office, Services, and Enterprise components available to support teleworking

Critical Home Office, Services, and Enterprise components available to support teleworking

All necessary Home Office, Services, and Enterprise components are provided to support teleworking, including some enhanced capabilities

All necessary Home Office, Services, and Enterprise components are provided to support teleworking, including some enhanced capabilities

Minimal Services and Enterprise components available to support teleworking ; No Home Office resources or support available

Minimal Services and Enterprise components available to support teleworking ; No Home Office resources or support available


Scenario A Per User Cost

Scenario B Per User Cost

Scenario C Per User Cost

Scenario D Per User Cost

Scenario E Per User Cost

Basic* $0 $2,171 – $2,952

$2,244 – $3,025

$2,323 – $3,104

$3,040 – $3,821

Ideal** $512*** $1,420 $1,420 $1,420 $1,420

70


Methodology










– Scenarios


71

Government decision makers need information for comparing cost, benefit (both financial and non-financial) and risk that quantifies projected results in a meaningful and accurate manner

In July 2001, Social Security Administration (SSA) and General Services Administration (GSA) engaged Booz Allen Hamilton and Harvard University’s Kennedy School of Government to develop an effective methodology to assess the value of electronic services (e-Services)

The resulting Value Measuring Methodology (VMM)* was developed to be flexible, scaleable, and customizable

– Its guiding principles and consideration of risk, value and cost are universally applicable in the government environment

– This methodology enables important insight into the true business value of many types of investments

The groundbreaking VMM approach provides a means to quantify financial and non-financial value using five factors

– Direct User (Customer) Value– Social (Non-direct User/Public) Value– Government Operational/ Foundational Value– Government Financial Value– Strategic/Political Value

What Could Make Costs Go Up or

Performance Slip From Projected Levels?

How muchwill it cost to buy?

How much will it cost to operate and

maintain?

What benefits will the investment provide to all interested parties?







maintain?



maintain?



VMM Key Considerations


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An enterprise-level capital planning process will help enhance telework program efficiencies, benefits, and overall strategic value


Direct Financial Benefits

Improved employee availability

Opportunities for real estate savings

Increased recruitment and retention potential

Potential for increased employee productivity while teleworking and during office closures

Indirect Financial and Other Benefits

Enhanced organizational process efficiencies

Continuity of Operations (COOP) readiness for public health, weather, and other emergencies

Accessible, modernized applications that allow staff to perform their work regardless of location

Adaptable applications that support changing business needs of organizations

Legislative Compliance and alignment with ongoing Congressional interest

Coordinated standards for technology configuration

Reduction of traffic congestion and pollution

Compliance with OPM and GSA guidance

Enhanced public image (“employer of choice”)

Increased work opportunities for people with disabilities

Direct Financial Benefits

Improved employee availability

Opportunities for real estate savings

Increased recruitment and retention potential

Potential for increased employee productivity while teleworking and during office closures

Indirect Financial and Other Benefits

Enhanced organizational process efficiencies

Continuity of Operations (COOP) readiness for public health, weather, and other emergencies

Accessible, modernized applications that allow staff to perform their work regardless of location

Adaptable applications that support changing business needs of organizations

Legislative Compliance and alignment with ongoing Congressional interest

Coordinated standards for technology configuration

Reduction of traffic congestion and pollution

Compliance with OPM and GSA guidance

Enhanced public image (“employer of choice”)

Increased work opportunities for people with disabilities

Ad

dit

ion

al

Ben

efit

s

Shared Costs, Risks, and Benefits with Other Enterprise Initiatives

Telework Program

Disaster Preparedness &

Continuity of Operations

Enterprise Modernization

Multi-use Tools and

Capabilities

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The sample BCAs provided in this document can be customized to fit agencies’ changing business requirements and staff sizes

Adjust the benefits calculation assumptions to fit your agency’s particular operating environment, for example:

– Increase the number of employees retained annually due to telework,

– Decrease the percent reduction in real estate footprint

Add or subtract costs of components from sample BCAs as appropriate, by:

– Adding applicable unit costs to cost estimate from the pages that follow

– Increasing or decreasing the investment window, e.g. 1 year, 5 years

Customize the risk analysis as appropriate

– More potential risks could be identified

– Probability and impact of occurrence vary from agency to agency


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In the course of this government-wide study, we have developed a comprehensive and current collection of the costs associated with a telework program

These costs can be leveraged when developing estimates for telework-related BCAs

The following three pages provide unit costs for each of the components that typically make up a telework program

– These costs are grouped into three major categories: teleworker-at-home, services and enterprise

The Appendix provides additional detail on costs for:

– Enterprise connectivity– Voice conferencing– Help Desk– Web application development– Collaboration resources– Remote email access– VPN

Services

Home Office

Enterprise


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The cost of equipment to support a teleworker in the home office varies from $2,072 for a laptop to $42 for authentication equipment

Component Description / Purpose / Assumptions Annualized Unit Cost (per user)

Laptop & Docking Station

Provides mobility and access to enterprise software; Assumes use of separate office and home computers, new laptop without application or OS software; 3-year refresh cycle

$2,072

Printer / Copier / Fax Provides common office functionality away from office; Assumes new integrated device with 3.5 year refresh cycle

$238

Broadband Router Provides connectivity interface for broadband Internet access but does not include Internet service; Assumes new router with 4 year refresh cycle

$68

Web Cam Allows for virtual meetings via video streaming and collaboration tools; Assumes new web cam with 3.5 year refresh cycle

$90

Mobile Telephone Provides mobile voice communication; Assumes new phone with 2 year refresh cycle; connectivity fee not included (refer to “Services” section)

$144

PDA (Blackberry, Treo)

Messaging devices for mobile communication; Assumes new device with 2 year refresh cycle; connectivity fee not included (refer to “Services” section)

$288

PC Software Operating system, application, and security software required for new laptops (e.g., Windows XP, MS Office Suite, Anti-virus, Spyware, etc.); Assumes new user license and 3 year refresh cycle

$628

Authentication Device

Devices that provide additional identification of the user beyond the typical user id and password (e.g., secure tokens; fingerprint readers); This report uses the RSA SecurID device because this device is often used in the federal government. Assumes a new device with a 4 year life cycle

$42

Firewall Solution Enterprise hardware / software solution provides secure connectivity services, application policy enforcement, and attack protection; Assumes new appliance with 3.5 year refresh cycle.

$307


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Services include the cost of enterprise connectivity and support services such as help desk and training

Component Description / Purpose / Assumptions Annualized Unit Cost (per

user)

Enterprise Connectivity Percentage of network connectivity from enterprise to Internet used by teleworkers

$1

Teleworker Connectivity

Network connectivity from teleworker home office to Internet for enterprise access (e.g., Dial-Up, DSL, cable)

$620

Voice Conferencing Audio bridge services provided by external carrier for multi-party voice calls $187

Calling Card Cost allowance provided to teleworkers for long distance voice charges $14

Managed VPN Secure network connectivity from teleworker home office to enterprise; VPN service managed by external carrier

$80

Mobile Telephone Access

Usage costs for mobile voice services (i.e., cell phone plan) $651

PDA Access Usage costs for mobile voice / messaging services $651

Telephone Line Additional land line to enable separate voice communication from home office; Allows dial-up users to maintain simultaneous network connectivity

$494

Help Desk Support Hardware / application support and troubleshooting services to teleworkers $20

Technical Training Information such as telework technology policies and procedures, IT troubleshooting techniques, and technical capabilities of home office

$300


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The enterprise resources that most directly support the teleworker are access and security facilities, such as terminal/access servers and virtual private network systems

Component Description / Purpose / Assumptions Annualized Unit Cost (per user)

Remote Access Server Provides enterprise access point for teleworkers utilizing dial-up network connectivity; Assumes new server with 4 year refresh cycle

$2

VPN System Provides secure access point for teleworker connectivity to enterprise network; Includes end user licenses; Assumes new concentrator with 3 year refresh cycle

$6

Enterprise Systems* Hardware and software required to support enterprise applications accessed by teleworkers; Assumes that there are no significant changes to existing enterprise applications to support telework

$0

Terminal Emulation System

Provides teleworker with remote access to enterprise applications and data (i.e., Citrix); Client software for teleworker PC is included in cost; Assumes new software with 3 year refresh cycle

$433

*Negligible additional cost due to telework because the enterprise systems are already in place to support each organization's existing operations


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A composite General Schedule profile for teleworkers was developed in order to more accurately calculate the potential worker productivity gains

Step 5 is assumed for all GS levels

The % breakouts are based in part on the real GS distribution across government and in part on the survey data collected in the course of this study which indicates that very senior and junior employees are less likely to telework.

Employees in lower GS levels (7 and below) may not be afforded the opportunity to telework due to their junior status and/or short tenure, while employees in higher GS levels (13 and above) may not be allowed to or may choose not to telework due to managerial duties and/or office-based work demands


Level*% Weight

DC Hourly Rate

Plus Fringe**

Plus Overhead***

Loaded Hourly Rate

Composite Rate

GS-7 5.00% $19.91 $6.54 $3.17 $29.62 $1.48GS-9 20.00% $24.36 $8.00 $3.88 $36.25 $7.25GS-11 30.00% $29.47 $9.68 $4.70 $43.85 $13.15GS-12 40.00% $35.32 $11.60 $5.63 $52.55 $21.02GS-13 5.00% $42.00 $13.80 $6.70 $62.49 $3.12Total 100.00% N/A N/A N/A N/A $46.03

Fringe Benefits 32.85% OMB Circular A-76 Attch C (B.f.1.)

Overhead 12.00% OMB Circular A-76

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In addition to OMB’s 19 risk categories, there are a number of telework-specific risks that should be considered when developing a telework-related BCA

Telework RisksTelework Risks Mitigation StrategiesMitigation Strategies


Space availability (at telecenters) in an emergencyAccess to / availability of quality equipmentAccess to / availability of IT supportEfficacy of trainingOperational impactsReactions of co-workersInflexible agency-based operating proceduresToo few at-home days authorized for program to be effectiveSupervisor behaviorAppropriate selection of participants for teleworkTimely coordination with unionsInadequate preparationCoerced management participationAutomated monitoring of employee performance (e.g.,

monitoring an employee’s key strokes and time on/off a computer via electronic devices)

Creation of burden on non-participating employeesPotential for low utilization rate of telecentersStaff culture / existing expectationsResistance by organizational support functions (e.g., HR, IT)Historical resistance by smaller Federal agenciesDifficulty in measuring results


Space availability (at telecenters) in an emergencyAccess to / availability of quality equipmentAccess to / availability of IT supportEfficacy of trainingOperational impactsReactions of co-workersInflexible agency-based operating proceduresToo few at-home days authorized for program to be effectiveSupervisor behaviorAppropriate selection of participants for teleworkTimely coordination with unionsInadequate preparationCoerced management participationAutomated monitoring of employee performance (e.g.,

monitoring an employee’s key strokes and time on/off a computer via electronic devices)

Creation of burden on non-participating employeesPotential for low utilization rate of telecentersStaff culture / existing expectationsResistance by organizational support functions (e.g., HR, IT)Historical resistance by smaller Federal agenciesDifficulty in measuring results

Senior management leadershipLong-term IT and capital planning for teleworkBroadband residential servicesComprehensive security planningTelework-specific trainingOrganize Telework Advisory Group or Program Management

OfficeAssessing the impact Telework has on timekeeping,

compensation, and other issuesDeveloping a plan to address the equipment needs of your

organization Telework programPreparing a written Telework agreement for employees and

managersRegularly re-evaluating and modifying the program, when

necessary, to meet changing circumstancesWillingness of agency to participateDesignation of appropriate telework coordinatorCoordination with local unions (when applicable)Increased IT support and allocation of resources

Senior management leadershipLong-term IT and capital planning for teleworkBroadband residential servicesComprehensive security planningTelework-specific trainingOrganize Telework Advisory Group or Program Management

OfficeAssessing the impact Telework has on timekeeping,

compensation, and other issuesDeveloping a plan to address the equipment needs of your

organization Telework programPreparing a written Telework agreement for employees and

managersRegularly re-evaluating and modifying the program, when

necessary, to meet changing circumstancesWillingness of agency to participateDesignation of appropriate telework coordinatorCoordination with local unions (when applicable)Increased IT support and allocation of resources


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