hp_mission_critical_services_roi_benefit_analysis.pdf

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W H I T E P A P E R

H P M i s s i o n C r i t i c a l S e r v i c e s : R O I B e n e f i t A n a l y s i s

Sponsored by: HP

Matt Healey Randy Perry

August 2010

E X E C U T I V E S U M M A R Y

IDC recently investigated the current challenges and opportunities associated with the

support and operation of mission critical business processes. One component of this

process involved an exploration of the range of business values derived from using

HP Mission Critical Services (MCS) to manage the cost of downtime and increase the

efficiency of the IT operation. Using these services to ensure uninterrupted, reliable

operations of today's 24 x 7 IT infrastructure carries measurable benefits across the

enterprise. Specific benefits include the avoidance of revenue loss due to downtimeand lower IT costs. Notable findings from IDC's study of HP MCS solution users

include the following:

` HP Mission Critical Services can reduce the costs of delivering mission critical

business processes by 17%. HP's Mission Critical Services solution is able to

reduce downtime by 7075%, saving companies $23,000 per 100 users

annually.

` Based on the lower cost of x86 servers, many enterprises have begun to run

mission critical workloads on these servers rather than large-scale systems. The

mission critical applications supported by x86 servers serve the flow of goods,

products, revenue, and operational communication internally and the enterprise'sexternal customers, partners, and suppliers.

` Increasingly, x86 servers will need a higher level of operational support.

Traditionally, enterprises ran mission critical workloads on business critical

servers, (e.g., mainframes, HP 9000, Superdomes) to avoid costly downtime and

related losses. However, as x86 servers have become a larger share of the

enterprise datacenter, they are increasingly running mission critical workloads

and thus require mission critical support services. Three of the companies in the

IDC study were running mission critical environments on x86 servers and

recognized significant benefits and ROIs.

` On average, companies in this study were able to recognize an ROI of 438% andpay back the initial investment in HP MCS in six months.

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2 #224529 2010 IDC

S I T U A T I O N O V E R V I E W

Mission critical IT resources drive business productivity, operations, and the extended

corporate infrastructure. Companies lose millions annually as a result of business

interruptions and lost productivity due to downtime associated with mission critical

systems.

For this study, applications/services considered as mission critical included enterprise

resource planning (ERP), point-of-sale (POS) systems, storage area network (SAN),

and email. These mission critical applications effectively serve the flow of goods,

products, revenue, and operational communication internally and the enterprise's

wider ecosystem, including customers, partners, and suppliers.

As companies have become more dependent on IT resources to support business

operations, downtime significantly undermines business operations. Further reacting

to downtime takes significant resources, thus reducing IT staff productivity, which

results in increased overhead that inflates IT budgets. Finally, the costs of downtime

are not only an internal concern, as the servers and applications that populate the IT

infrastructure increasingly represent the digital interface with millions of customers.

M E T H O D O L O G Y

IDC conducted in-depth interviews with eight companies in Canada, Mexico,

Switzerland, and the United States that have invested in HP Mission Critical Services.

See Table 1 for additional information.

T A B L E 1

S t u d y D e m o g r a p h i c s

Number of employees 6,058

Number of IT staff 109

Number of internal end users 5,022

Number of external end users 475

Number of servers managed under MCS 72.2

Storage (TB) managed under MCS 312

Source: IDC, 2010

IDC sampled HP MCS users to determine the solution's costs and benefits, downtime

risk containment, and productivity-impacted performance and costs. The analysis of

IT managers' responses provided a collective measure of how risk management

services can contribute to continuous performance and cost containment across six

industry verticals selected for 24 x 7 demand. Participating industries were

manufacturing, healthcare, insurance, utility, energy, and the public sector.


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2010 IDC #224529 3

B U S I N E S S V A L U E O F H P M I S S I O N C R I T I C A LS E R V I C E S

I T M a n a g e r O b s e r v a t i o n s

IT managers interviewed by IDC reported on the rationales that motivated their move

to HP Mission Critical Services. Overall, reliable 24 x 7 services uptime, fast critical

event response, ready backup, and reduced need to hire staff were the most common

reasons cited. A clear association of mission critical downtime and lost money in

business lines was evident.

One IT manager's perception of the importance of HP MCS to IT function and

enterprise operations was driven by ERP applications: "It's about availability we do

have it around our ERP systems systems that run business critical applications."

For others, nonstop access mandated zero unplanned downtime and required reliable

support that ensured business would flow. "We have mission critical applications that

have to be up and going 24 x 7. If the applications aren't up, we lose money." Another

respondent echoed the time-sensitive aspect of mission critical support, noting that

HP MCS tackled prompt recovery "so that if we really have a mission critical problem,

we have a backup ready and a faster response."Combining cost-effective staffing

with downtime avoidance, an IT manager offered, "Instead of hiring more people, we

decided to enter into a support contract for mission critical services to get a little

higher level of support."

H P M C S B e n e f i t s

Staff Productivity

IDC analysis found that IT staff productivity improvements reduced the costs to

maintain mission critical systems by $125 per user on average among these HP MCScustomers. In addition, HP MCS reduced IT staff time devoted to sustaining and

completing mission critical tasks by 17% overall. Problem management/investigation

and help desk consumed by far the largest percentage of staff. These implications for

staff productivity translate into IT headcount and hiring. See Figure 1 for additional

information.


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F I G U R E 1

O v e r a l l C o s t R e d u c t i o n

Source: IDC, 2010

Mission Critical User Productivity

Beyond the obvious lost productivity due to downtime, additional impacts on user

productivity occur as those affected frequently spend time accessing help desk

services rather than performing other business tasks.

Overall, IDC found that HP MCS helped enterprises reduce user downtime by 77%.

IDC calculated that this group of HP MCS customers saved $201 per user annually in

lost productivity. In addition, help desk calls were reduced by 58%, saving another

$47 per user. See Table 2 for additional information.

In this study, the average annual user productivity benefit per 100 users totaled

$21,511.

0 10 20 30 40 50

Application management

Managing and monitoring missioncritical infrastructure

Managing and supporting physicaland virtual servers

Change management/releasefor production

Incident management/resolution

Help desk

Problem management/investigation

(% cost reduction)


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T A B L E 2

D e t a i l s o f D o w n t i m e C a l c u l a t i o n s

Before MCS After MCS % Change

Downtime hours per month

Internal users 0.96 0.22 77

External users 0.27 0.1 61

Unplanned incidents per

month

1.62 1.3 20

Planned downtime (hours

per month)

16 4 75

Percentage of internal users

affected

22 10 56

MTTR (hours per incident) 4.75 3.5 26

Source: IDC, 2010

Revenue Impacts: Impact of Downtime on Business

IDC found an average reduction of 61% in external, revenue-generating downtime

hours after a move to HP MCS. On average, companies saved $652,000 in retained

revenue. IDC reduces revenue savings to operating profit by applying a 15% profit

margin, which enables revenue gains to be combined with cost savings for thepurpose of financial analysis. This translates to an average allocation to operating

profit of $1,186. IT managers were clearly aware of downtime's impact on revenue

generation.

When downtime did occur, rapid service recovery amplified the value of support for

mission critical systems. A participating IT manager shared his calculations, offering

that "an hour of downtime is pretty critical. If one of our servers goes down midday,

and we have lots of submissions going through, the impact could be in the range of

$10,000 per hour."A full-day outage of mission critical services, those that generate a

continual stream of revenue, can seriously impact a company's bottom line. A

participant highlighted this, commenting that "if mission critical systems go down for

one day, it will cost us $500,000$800,000. We have a million customers. If we aredown and cannot deliver our services, then our customers do not pay us."

Avoiding multiple critical incidents through proactive attention to services saved

enterprises from revenue losses that added up quickly. Calculations provided by a

respondent highlighted revenue loss in his firm. He noted, "We have maybe three outages

per year that affect revenue. These outages could be several hours, but the businesses

are able to recover some of that revenue but we still lose about $200,000."


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Equally significant, HP MCS allowed IT managers to conserve cumulative costs

resulting from travel, help desk incident support, training, staff headcount, etc., that

could be invested in the corporate bottom line.

ROI Analysis

IDC conducted a three-year ROI analysis based on the responses of the studyparticipants. IDC's methodology for ROI analysis involves assessing the discounted

cash flows generated by the investment over a three-year period. Our standard

discount rate, which typically is the cost of capital, is 12%. This is sufficiently high to

cover most organizations' cost of capital plus any additional risk associated with

higher than average investment or delayed recognition of benefit. The investment in

HP MCS consists of the initial costs for installation support of the hardware and

software, installation, up-front training, annual support and maintenance, and annual

fees. The deployment of HP MCS generally required less three months.

Over a three-year period companies saw discounted benefits of $94,975 per 100

users and average investment of $17,648 per 100 users, resulting in an ROI of 438%

and a payback period of six months. See Table 3 for additional information.

T A B L E 3

T h r e e - Y e a r R O I A n a l y s i s p e r 1 0 0 U s e r s

Benefit (discounted) $94,975

Investment (discounted) $17,648

NPV $77,327

ROI 438%

Payback period 6 months

Discount rate 12%

Source: IDC, 2010

C H A L L E N G E S / O P P O R T U N I T I E S

IT staff managing mission critical downtime juggle ERP, POS systems, SAN, and

email that need reliable server and application functionality and prompt support to

avoid critical failures. Adopting HP MCS problem management and help desk support

for physical and virtual servers, applications, and critical incident resolution not only

diminished potential downtime costs but also amplified the collective value of IT

infrastructure, IT staff, and wider enterprise productivity. Cumulative cost mitigation

not only ensured revenue collection from external users (uninterrupted cash flow) but

also was shown to contribute to operating profit and conserved annual investment.

Payback from HP MCS emerged where funds or productivity corresponded to


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capturing more for the enterprise's bottom line and to reinvestment in core business

beyond downtime and lost business calculations. According to HP MCS users, the

solution presented wide-ranging opportunities:

` Reduced costs, including reduced hardware and travel costs, avoided FTEs, and

lower training costs

` Increased ability for IT to manage change

` More proactive versus reactive management of the IT infrastructure, detecting

problems before they occur

` Shortened time to restore production environment

` Increased ability to detect problems remotely

IDC believes that in evaluating support services for mission critical systems, IT

managers need to consider the full range of their hardware and software

infrastructure and not limit their attention to mainframes, HP 9000, and Superdomeswhen addressing mission critical solutions. Diagnosing critical incidents in virtualized

infrastructures must include the x86, blades, and ProLiants to avoid downtime

hazards. Fully optimizing virtualized diagnostic and management tools offers controls

that defend against system failures. Moving from a reactive stance to a proactive

stance grants better insight into both physical and virtual infrastructures while

conferring additional benefits in tighter planning, purchasing, and processes once

staff time is less constrained by critical events.

C O N C L U S I O N

HP MCS users' responses indicated measurable ROI derived from preventing mission

critical downtime. Calculating cumulative benefits underscored the full measure of

maintaining ERP, POS systems, SAN, and email for internal and external users.

Uninterrupted 24 x 7 IT functionality sustained cash flow, optimized users' productive

man-hours, and ensured return on IT infrastructure overhead.

C o p y r i g h t N o t i c e

External Publication of IDC Information and Data Any IDC information that is to be

used in advertising, press releases, or promotional materials requires prior written

approval from the appropriate IDC Vice President or Country Manager. A draft of the

proposed document should accompany any such request. IDC reserves the right to

deny approval of external usage for any reason.

Copyright 2010 IDC. Reproduction without written permission is completely forbidden.

Diagnosing criticalincidents in virtualizedinfrastructures mustinclude the x86, blades,and ProLiants to avoiddowntime hazards.

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