Achieving Measurable TCO Reductions ... - hp-user … · • HP-UX 11i/ Integrity Superdome,...
Transcript of Achieving Measurable TCO Reductions ... - hp-user … · • HP-UX 11i/ Integrity Superdome,...
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© 2006 Hewlett-Packard Dev elopment Company , L.P.The inf ormation contained herein is subject to change without notice © 2006 Hewlett-Packard Dev elopment Company , L.P.The inf ormation contained herein is subject to change without notice
Achieving Measurable TCO
Reductions with Integrity Servers
Jürgen Probst
IDC Certified Value Expert™
2 18 April 2007
Agenda
• Customer pain points
• Challenges
• What is in an Economic Value Analysis?
• Tool details
• TCO examples
• References and Next Steps
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Customer pain points
• IT environment is too expensive to manage and maintain
• Too many applications, too much customization and too many underutilized servers
• Struggle to meet service level agreements and fast response times for critical workloads
• Can’t implement new projects fast enough
• Need to reduce headcount every year, but the work never seems to go away
• Compliance demands are evolving and not sure how to react
• Infrastructure is at risk to security breaches and viruses
IT budgets have little left for innovation
Maintenance & Operations
71%
Only 9% or less of budget is left for
innovation
Innovation
Performance Enhancement
9%
20%
4 18 April 2007
Challenge #1: Internal labor continues to garner majority of IT budgets
Labor and equivalents consumes over 56% of current IT budgets
Alinean - 2006
Average Total Cost of Ownership - 2006
Data Center, Servers andClient Computers
15%
Purchased Software18%
Purchased Services16%
Data and VoiceCommunication 7%
Application and Software
Development 19%
Facilities and Overhead 4%
Operations and Administration
21%
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Adaptive enterprise cuts people TCO
• One of the largest food companies in the world
• Running the world’s largest SAP instance
• a single vendor for its IT systems worldwide: HP
• HP-UX 11i/ Integrity Superdome, rx7620, rx4640 and HP ProLiant DL380/DL580
• “As numerous TCO studies have shown, people are the big cost. And when you compare the total number of people —staff, consultants, outsourcing, contractors— we rely on far fewer people than other companies our size.”
Vandy Johnson, senior director of I.S. Operations
• The reason is that its standardized infrastructure requires fewer people to manage it.
6 18 April 2007
Challenge #2: IT is Consumed with Keeping Lights on versus Innovation
Majority of spending keeping the lights on
Only 14% is left for innovation
Alinean – 2006
M igration and
Upgrade s
25%
Innovation
and New
Functions
14%
Operations -
M anagem ent
and
M aintenance
61%
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Challenge #3: IT Projects Remain Risky without Proven ROI
Almost half of all IT projects fail or fail to meet schedule, budget or feature requirements
Less than 1 in 4 are successful anddeliver on expected financial goals
Successful,
but not to
ROI
standards
28%
Successful
and Meeting
ROI Goals
22%
Cancelled
17%
Issues with
Budget,
Schedule and
Functionality
33%
Alinean - 2006
8 18 April 2007
The need for an Economic Value Analysis
Over 90% require business value analysis for some/all of Investments
Over 85% say demand for business value analysis has increased or remained the same
Over 82% of projects $50,000 and higher require business value analysis
65% of buyers indicate that they do not have the knowledge or tools needed to do ROI and Business Value calculations
75% have no formal processes or budgets in place for measuring the value of IT projects
68% do not measure ROI and value derivation on IT projects 6 months after the work is completed
Demand for Business Value Analysis (past 12 months)
Increased
41%
Decreased
8%
Same
48%
Don't Know
3%
Sourcse: IDC | Alinean, 2006
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Tim Donar
Acxiom Corporation
The tool was able to show some areas that we had not looked at before and how our company compares to others in our industry segment.
10 18 April 2007
What is in an Economic Value Analysis?
~75%
~25%
Lower costs through:
Virtualization; optimized asset utilization, availability & control lowers cost & risk of unplanned downtime
Security; prevent, detect, and contain
Availability; clustering, disaster tolerance & recovery, dynamic tunables
Management; seamless single asset view & control
Direct one-timeCosts• Hardware – 7%• Software – 9%• Support – 9%
+ On-going Costs• Communications – 3%• IT Operations &
Administration – 25%• Facilities – 2%• Changes – 4%• Availability – 21%• Security – 12%• Application
Development – 8%
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Andre VerschuerenCentea, Belgium
• Our TCO reduction project was completed spot on target.
• Today, we see the same high availability and excellent support service quality at significantly lower costs.
• The cost calculations outlined in HP’s TCO reduction plan proved to be accurate.
• We are very pleased with the results of our server consolidation project.
12 18 April 2007
Cost and benefits….
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Alinean ROI tools leader
• Original pioneers of ROI, TCO and value measurement tools since 1994
• Predecessor company created Gartner TCO Manager family of tools
• Exclusive partnership with IDC
• Proprietary research methodologies to quantify cost-benefits of IT projects
• Proprietary database of financial and IT performance for 20,000worldwide companies
The Alinean Value Products
• Value Finder
− Prospect discovery
− Find high value accounts
• Peer to Peer Comparison
− Develop a strategic conversation
− Consult with customer about benchmark opportunities
• ROIAnlayst− Strategic business case plan
− Project implementation plan
− Project TCO vs. alternatives
− Project ROI to move from old to new systems.
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Typical ROIT
16 18 April 2007
TCO comparison for an Enterprise SAP customer
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Two possible new solutions
• Decentralized Solution
− 10 x HP DL580 G3, 2.83 GHz, 4 CPUs – Red Hat Linux
− 2 x HP DL580 G3, 2.83 GHz, 2 CPUs – Red Hat Linux
− 135 x HP Integrity rx6600, 1.6GHz, 2 CPUs – HP-UX 11i
− 4 x HP Integrity SD, 1.6GHz, 32 CPUs – HP-UX
• Centralized VSE Solution
− 10 x HP DL580 G3, 2.83 GHz, 4 CPUs – Red Hat Linux
− 2 x HP DL580 G3, 2.83 GHz, 2 CPUs – Red Hat Linux
− 9 x HP Integrity SD, 1.6GHz, 64 CPUs – HP-UX 11i
18 18 April 2007
Total IT Costs (direct)
TCO Comparison (cumulative 5 -year)
Solution A: Decentralized
Solution
Solution B: Centralized
Solution
Difference
(A - B)
Difference
(A - B)%
Server Hardware $23,619,895 $30,401,754 ($6,781,859) -28.7%
Server Software $22,624,006 $11,360,848 $11,263,158 49.8%
IT Operations $6,742,149 $4,791,343 $1,950,806 28.9%
IT Administration $690,991 $497,800 $193,191 28.0%
Facilities $1,239,460 $925,685 $313,775 25.3%
Change Costs $11,204,048 $11,163,646 $40,402 0.4%
Total IT Costs $66,120,549 $59,141,076 $6,979,473 10.6%
IT Operations include: Service desk, Performance and availability management, User admin, OS support, Break-fix management, Software deployment, Application management (provisioning and scheduling), Systems management, Disk and file management, Storage management, Security management, Database management and administration
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ROI Analysis
20 18 April 2007
ROI Analysis with 286%ROI Analysis (Solution B) Initial Year 1 Year 2 Year 3 Year 4 Year 5
Benefits (to Solution B from Current (AS IS))
$0 $15,824,032 $46,771,657 $46,955,585 $47,356,870 $47,355,805
Cumulative Benefits $15,824,032 $62,595,689 $109,551,274 $156,908,144 $204,263,949
Costs (Solution B) $19,015,581 $15,324,710 $6,102,765 $4,161,064 $4,161,064 $4,161,064
Cumulative Costs $19,015,581 $34,340,291 $40,443,056 $44,604,120 $48,765,184 $52,926,248
Cash Flow ($19,015,581) $499,323 $40,668,892 $42,794,521 $43,195,806 $43,194,741
Cumulative Cash Flow ($19,015,581) ($18,516,258) $22,152,633 $64,947,154 $108,142,960 $151,337,701
ROI 286%
Risk Adjusted ROI 204%
NPV Savings $91,224,118
IRR 103%
Payback period (including deployment period)
17 month(s)
Risk Adjusted Discount Rate 13.5% Calculated with 9.5% discount rateand 4% project risk = 13.5% hurdle rate
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Payback with an overall deployment schedule of 9 months
22 18 April 2007
TCO Analysis Consolidation and VSE on HP-UX
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Solution A: HP Integrity (non-VSE)
• 26 x rx6600 1.6GHz 24MB 8 cores with HP-UX 11i
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Solution B: HP Integrity (VSE)• 2 x rx6600 1.6GHz 24MB 8 cores with HP-UX 11i
• 4 x rx8640 1.6GHz 24MB 32 cores (16 iCAP) with HP-UX 11i
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Total IT Costs (direct)
TCO Comparison (cumulative 3 - year)
Solution A SAP on HP Integrity HP-UX 11i (non
VSE)
Solution B SAP on HP
Integrity HP-UX 11i (VSE)
Difference (A - B) Difference (A - B)%
Server Hardware $1,406,044 $2,258,344 ($852,300) -60.6%
Server Software $4,953,937 $3,110,550 $1,843,387 37.2%
IT Operations $839,316 $234,987 $604,329 72.0%
IT Administration $111,408 $28,800 $82,608 74.1%
Facilities $99,519 $90,084 $9,435 9.5%
Change Costs $1,276,394 $1,219,613 $56,781 4.4%
Total IT Costs $8,686,618 $6,942,378 $1,744,240 20.1%
26 18 April 2007
Total TCO Comparison
TCO Comparison (cumulative 3 - year)
Solution A SAP on HP Integrity
HP-UX 11i (non VSE)
Solution B SAP on HP
Integrity HP-UX 11i (VSE)
Difference(A - B)
Difference (A -B)%
Total IT Costs (direct costs) $8,686,618 $6,942,378 $1,744,240 20.1%
Total Business Operating Costs (indirect costs)
$208,143 $200,463 $7,680 3.7%
Total Business Strategic Costs (indirect costs)
$8,181,940 $7,910,869 $271,071 3.3%
Total $17,076,701 $15,053,710 $2,022,991 11.8%
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References and Next step
28 18 April 2007
Prior to migration Following migration Benefits
• Ten HP N class servers running HP-UX
• Oracle Financials and other business critical applications
• O/S patch and upgrade installation requires two days
• Two HP rp8400 servers running HP-UX using virtualization
• Same application suite
• O/S patch and upgrade installation completed in four hours
• 25 percent reduction in direct TCO – including operational and facility-related costssuch as floor space, power, cooling
• Greater performance, enhanced flexibility, easier management
• Reduced downtime, maintenance costs reduced by orders of magnitude
Centea: TCO reduction spot on target
HP differentiators
• Comprehensive TCO reduction proposal
• TCO reduction plan implemented without compromising availability or critical system support services
Centea, a member of the KBC banking group, provides complete financial services to customer across Belgium.
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Business Value Assessment Workshophttp://www.hp.com/go/enterpriseroi
DAY ONE
(1/2 day - 9am to 1pm)
Introduction Review Expectations Present Objectives of Day one and Day two
Presentation Financial Business Value
Assessment of Customers IT EnvironmentPresent the different tool possibilities, reports Go through the assessment questionnaire
Review Day one
DAY TWO
(1/2 day - 9am to 12pm)
Present Analysis results and commentsWalkthrough financial analysis reportsOpen discussion on results
Next ActionsSummarize Areas for improvement and provide suggestions
Wrap up
Comment: Day one afternoon for the ROI
team to analyze and prepare reports based on the information provided by the
customer during the “Assessment of Customers IT Environment”.
30 18 April 2007
Thank you