The business value of managed services: Findings from IDC research sponsored by IBM.
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Transcript of The business value of managed services: Findings from IDC research sponsored by IBM.
© 2013 IBM Corporation
The business value of managed servicesFindings from IDC research sponsored by IBM
SSP03192-USEN-00
© 2013 IBM Corporation2
IDC evaluated eight global companies to assess business value provided by IBM Integrated Managed Infrastructure services
The research base included:
The business value of managed services: Findings from IDC research sponsored by IBM
8existing medium and large IBM clients from 5 countries: Canada, France, India, Italy, UK
6 companies were transitioning to IBM from managing their IT assets in-house
2 companies were transitioning to IBM from local service providers
IDC: A key element in enhancing business productivity
is driving down costs, which can help free up the funds
needed to make strategic investments. Businesses
also need a means to more effectively orchestrate
how IT interacts with business processes and critical
application environments.
The solution lies in using managed services.
© 2013 IBM Corporation3
All eight are using IBM to manage servers; five are using IBM to manage server, storage and network infrastructure
Server environment Average
Physical servers managed
150
Virtual servers managed
176
Size Average
Employees 4,888
Internal IT users 3,181
Network environment Average
Location/sites 85
Number of ports 20,000
Storage environment Average
Storage (terabytes) 38
Annual storage growth 30%
Study demographics
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation4
Companies studied gained significant, quantifiable benefits from using managed services
88%24%
42%$229,511
224%
5.5 month
reduction in unplanned downtime from server and network failures
reduction in IT infrastructure cost
increase in IT staff productivity
annual business productivity benefit
three-year return on investment
pay-back period
The business value of managed services: Findings from IDC research sponsored by IBM
Key findings:
© 2013 IBM Corporation5
Study participants realized financial benefits in four key areas
User productivity
$203,111 per 100 users /$6,460,961 overall
IT staff productivity
$20,155 per 100 users /$641,131 overall
Business productivity
$6,256 per 100 users /$199,003 overall
Infrastructure cost reduction
$146,801 per 100 users /$4,669,740 overall
Average annual benefit $376,323 per 100 users / $11,970,834 overall1
1Based on study group average of 3,181 internal IT users
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation6
“We have more applications. Our employees are more
productive because of their ability to use the systems
more. If I were to estimate, I’d say 30 percent.”
– Manufacturer
While reducing costs is the main driver for managed services, increasing user productivity was the leading benefit
The business value of managed services: Findings from IDC research sponsored by IBM
Reducing the frequency and
duration of unplanned downtime
Optimize the business processes driven by affected applications
Free up time so people can do more
Deliver a stable IT platform for new
business applications
Eliminate the annual cost of lost productivity: $56,100 per 100 users /
$1.8 million overall
“Around 50 people would be more productive—I’d say
20–25% more. We’ve also grown rapidly [35% per
year]…you could say that this has helped to avoid additional hiring costs.”
– Bank+
Business value realized
© 2013 IBM Corporation7
Delivering better, higher quality IT services proves to be the real benefit as annual downtime is reduced by 16 hours per user
Average user productivity key performance indicators (KPIs)
Server downtime Before After
(IBM-managed)Savings
89%improvement
# of annual outages 2.7* 1.1 1.6
Total hours per user 12.4 hours 1.3 hours 11.1 hours
Network downtime Before After
(IBM-managed)Savings
86%improvement
# of annual outages 2.3* 1.0 1.3
Total hours per user 6.2 hours 0.9 hours 5.3 hours
The business value of managed services: Findings from IDC research sponsored by IBM
*Compared to 10–12 incidents per year for an average organization
© 2013 IBM Corporation8
All organizations reduced infrastructure total cost of ownership (TCO)—a primary objective for managed services
Six organizations moving from in-house to IBM:
25% reduction in IT infrastucture cost including the costs of both the infrastructure itself and IT support
PLUS savings from consolidating data center operations:– Space savings (actual footprint, construction costs and
other annual costs)– Reduced software license costs by an average $250,000
annually– Eliminated use of third-party consultants– Saved on costs and time needed to train in-house staff
Two organizations moving to IBM from local providers:
20% reduction in IT infrastucture cost
PLUS one organization added resiliency and security
“The big benefits probably come from
having a storage expert, a network
expert, and a server expert. If we did that
(in-house), it probably would be one more
person added, but you wouldn’t have that
breadth of skill. You’d have one guy that knows a little bit of
network, but is he an expert? Probably not.”
– Transportation company
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation9
IBM managed services enabled all organizations to grow their application environments, re-focus IT staff on critical areas
Average IT staff productivity key performance indicators (KPIs)
Before After Savings Improvement
Time to provision a virtual server 40 hours 13.67 hours 26.33 hours 66%
Time to launch a new application 3.75 weeks 2.5 weeks 1.25 weeks 34%
Time to provision additional storage 25.25 days 7.25 days 18 days 71%
Increased IT staff productivity by 42% Delivered IT services more quickly Increased the agility of their organizations Reduced overhead costs
The business value of managed services: Findings from IDC research sponsored by IBM
Business value realized
© 2013 IBM Corporation10
Organizations cite additional IBM value in addressing the growing cost of compliance
“We have more and more audits. What I
would say is that we have more audits
because we are making much more money than we used to. But thanks to IBM services, we are
able to respond to the audits much faster, and
also in a more consistent fashion, with more
regularity.”– Manufacturer
200-500 person-hours per year
savings in the auditing process, due to:
Improved internal regulations
Fewer sites to be audited
Faster response to audit requests
The business value of managed services: Findings from IDC research sponsored by IBM
Business value realized
© 2013 IBM Corporation11
What is the value of agility?
“The information system is more stable ... We constantly have new applications in the business ... The value for all these changes depends on the magnitude of the change and is cumulative. So, if you look at all the changes we are implementing on all the platforms over the next 10 years, the value of being able to react more quickly would be worth millions of euros.”– European-based company
Decreasing unplanned downtime and increasing IT productivity delivers bottom-line business benefits
Average business productivity
Category Average
Revenue increase from increased agility
$173,333
Reduction in lost revenue + $974,220
Total annual revenue increase = $1,147,553
Operating margin (assumed) x 20%
Annual business productivity benefit $229,511
Stable platform supports a more agile business, improves responsiveness to market
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation12
IDC’s analysis shows that IBM Managed Infrastructure Services delivered payback in under six months and ROI of 224%
Three-year ROI analysis per 100 users
Benefits (discounted) $888,085
Investment (discounted) $274,326
Net present value (NPV) $613,759
ROI = NPV / investment 224%
Payback 5.5 months
Discount factor 12%
The three-year ROI analysis
illustrated in the table shows that,
on average, the organizations in
this study spent $274,326
(discounted) per 100 users and
received $888,085 per 100 users
in benefits (discounted) for a net
present value of $613,759. The
companies saw payback in 5.5
months and an ROI of 224%.
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation13
Over three years, the companies will see a net benefit of $747,000 per 100 users
Investment
Benefits
Cumulative cash flow
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
$(100,000)
$(200,000)Initial
deploymentYear 1 Year 2 Year 3
$(7,229)
$(124,911) $(124,911) $(124,911)
$(433,434)$(433,151)
$(262,382)
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
$(100,000)
$(200,000)Initial
deploymentYear 1 Year 2 Year 3
$(7,229)
$(124,911) $(124,911) $(124,911)
$(433,434)$(433,151)
$(262,382)
$(747,004)
Three-Year Cost Benefit Analysis per 100 users
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation14
Selecting a managed services provider: what to look for
Critical requirements identified by managed services buyers
Does the service provider have deep skills? Broad skills? Around-the-clock coverage?
Is all service labor based? What processes are automated?
Skills and resources
Is there a formal governance model incorporating program and project management?
What management tools and dashboards are provided?
Control and support
How will the provider reduce risks and meet service delivery targets related to: Availability? Performance? Provisioning?
Are there contractual SLAs with financial goals?
Quality of service
Can the provider build a business case? Provide actual ROI assessments?
Effective return on investment (ROI)
Are the basics covered (firewalls, intrusion detection)?
How will regulatory requirements be addressed locally? Across multiple geographies?
Robust security capabilities
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation15
Your customized solution
Platform Monitoring
Middleware Monitoring
Groupware Monitoring
Call Center Services
Monitoring
Management1
Reporting
BaseServices
Services Management
Database Monitoring
Dashboard
Storage Monitoring
IBM’s approach is to modularly build a solution tailored exactly to individual client requirements
1Management includes monitoring. 2Advanced Pack includes services like Cluster Management, Engineering Services, High Availability, etc.
Advanced Pack
Advanced Pack2
Capacity Reporting &
Management
Platform Management
Advanced Pack
Network Management
Advanced Pack
Backup Management
Advanced Pack
Database Management
Advanced Pack
Middleware Management
Advanced Pack
Groupware Management
Advanced Pack
Security Management
Advanced Pack
Storage Management
Network Monitoring
Base SLA
Incremental SLA
Pick the components you want• Monitoring• Management• Reporting
Pick the level of service you need• Basic• Advanced• Base or incremental SLA
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation16
IBM Integrated Managed Infrastructure Services has the scale, scope, tools and expertise to manage client environments
0.77MCalls/web chat/e-mails per month
137,091 Midrange Tivoli Endpoints
631 Mainframes
4.8M Batch jobs per week
2,270,000 Mainframe MIPS
82,089Intel servers
53,657Unix servers
41,000Middleware instances
900Business applications
1,560SAP instances
325Siebel instances
140 Pb Managed Storage
1,104,340Lotus Notes mailboxes
13,095 Oracle
63,191 SQL Oracle
8,964 IBM DB2
2,407 Sybase
87,657Database instances
811,050Microsoft Exchange mailboxes
The business value of managed services: Findings from IDC research sponsored by IBM
© 2013 IBM Corporation17
Next steps
1. Read the full IDC report
2. Visit ibm.com/services/managed
3. Engage with an IBMer to discuss your needs
© 2013 IBM Corporation18
Trademarks and notes
© IBM Corporation 2013
IBM, the IBM logo, ibm.com, XIV, Global Technology Services, System x, AIX, DB2, Lotus Notes and Tivoli are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml.
IT Infrastructure Library is a registered trademark of the Central Computer and Telecommunications Agency which is now part of the Office of Government Commerce.
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