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Ex Libris Alma TCO/ROI

April 2011

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Why Use Financial Tools like ROI?

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Why Use Financial Tools like ROI?

“It used to be that the way you put together a library budget was to look at like-institutions and then argue for a little more. Now my provost is saying to me, “If I give you ‘X’ dollars, what is the return on investment to the University?”

—T. Scott Plutchak, Librarian,University of Alabama at Birmingham

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Using Financial Tools for Effective Decision Making

• Using financial tools will help you answer key questions and improve the quality of your decision• Return on Investment (ROI)

• Do the benefits really justify the cost?• How long will it take to recover our investment?

• Total Cost of Ownership (TCO)• What is the true total cost of ownership over time?

• These tools are not new – they have been used for decades by organizations of all kinds

• Applying them to IT services is simply good business practice

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What’s In It For You?

• Demonstrate a ‘business approach’

• Minimize risk and costs through informed, higher quality decision

• Build stronger business cases for proposals

• A more strategic approach, aligning with institutional goals

• Help ensure successful outcomes for the library

• Increased credibility with administration

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How to Measure ROI & TCO?

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Return On Investment (ROI)

• Purpose: ROI is a calculation that attempts to determine the actual or perceived future value of an investment

• In its most basic form ROI is calculated as follows: ROI = (Benefits – Costs)/Costs

Net Present Value (NPV) - calculates the profitability of the project

Internal Rate Return (IRR) - determines if the expected return is greater than the cost of funds used to finance the project

Internal Rate Return (5 year)

Benefit - Cost

Cost

(over 5 years)

Net Present Value (5 years)

Benefit - Cost

(discounted)

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Total Cost of Ownership (TCO)

• Definition: all costs of owning and operating a system over its expected useful life

• Benefits:• Accounts for not only the initial investment, but all the other

costs associated with further use of the system (including hidden costs)

Yet both may have a similar TCO over the period analyzed!

System A

Have a lower acquisition cost, but

higher ongoing maintenance costs

System B

Have a higher acquisition cost, but

lower ongoing maintenance costs

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Ex Libris Alma - TCO, ROI and DIV

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The Cloud Delivers Fast Time to Value

53% of software projects cost189% of original estimate

Average 51% ROIWithin 12 Month

On-Premise Software Cloud-based Service

AutomatedUpgradesLarge Operating

Expenses

Large CapitalExpense & High Risk

UpgradeExpense

No CapitalExpenses

Cloud Computing Value

Val

ue

Val

ue

Time

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The Cloud Delivers Lower TCO

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Alma Delivers Optimized Library Services

Realize value of all systems (ease of integrations)

Lower the total cost of ownership Manage information, not servers

Extend the range of services Augment the library’s value Improve user experience

Optimize collection usage Leverage collaboration Increase productivity (simplified

workflows)

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>30%

Decrease Cost, Maximize Benefit, Demonstrate Value

DIV

Demonstrated Institutional Value

ROI

Return On Investment

TCO

Total Cost of Ownership

Efficiency Effectiveness Value

• Improved user experience

• Optimized collection usage

• Increased staff productivity

• Maximized collaboration

• Improved teaching and learning processes

• Increased faculty research productivity

• Delivery of new value-added services

• No HW/SW investment • No maintenance for

HW/SW, databases, updates, upgrades

• No IT resources needed

• Reduced administration

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Alma ROI and TCO Analysis Tool

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Purpose of the ROI Analysis Tool

The Alma ROI Analysis Tool helps to:

• Quantify investments

• Measure value

• Justify costs

• Analyze hidden cost factors

• Validate internal analysis

• Define ROI assumptions

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1

2

34

5

61. Infrastacture2. System Admin3. Library Opeartions4. Collection Utilization5. Learning Impact6. Research Impact

Alma ROI and TCO Tool – Areas of Analysis

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Real Example of ROI Analysis

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Real Example of ROI Analysis – Cont’d

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Reduce IT

Unified Resource

Management

Cloud service

Increase Productivity

Optimize Collection

Usage

Minimize Admin

Extend Services

Decrease Complexity

& Silos

Alma Delivers Reduced TCO and Accelerated ROI

Optimized workflows &

sharable data

User-driven collection

development

100%

>30%

>50%

>10% >10%

Collaborative & Open platform

Ease of use and

integration

>40%

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When to use

Commitment Required

Engagement Approach

Ex Libris Offers Three Approachesto the ROI Conversation

You want examples and benchmark data

None

Leverage ROI Benchmarks and customer cases to highlight value

1 Low Calorie

Library Value Discussion

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You want a customized ROI analysis for your institution, your project

Committed (multiple discussions with various stakeholders)

Walk-through ROI methodology

Direct engagement with account team

5-Course Meal

Detailed ROI Analysis

You need to provide a high level ROI back to the management / administration

Minimal (1-2 discussions)

Account team assists with ROI Analysis Tool (utilizing tool’s assumptions)

2 Light Lunch

ROI Analysis Tool

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THANK YOU!