© 2006 Hewlett-Packard Development Company, L.P.The information contained herein is subject to change without notice

ROI Analysis forROI Analysis forROI Analysis forROI Analysis forMidMidMidMid----sized SAP Landscape:sized SAP Landscape:sized SAP Landscape:sized SAP Landscape:HP 9000 to HP Integrity Blades, including upgrade HP 9000 to HP Integrity Blades, including upgrade HP 9000 to HP Integrity Blades, including upgrade HP 9000 to HP Integrity Blades, including upgrade to SAP ERP 6.0to SAP ERP 6.0to SAP ERP 6.0to SAP ERP 6.0

By : Jim SatkoBy : Jim SatkoBy : Jim SatkoBy : Jim Satko

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HP Can Improve your ROI on ITThis study identifies how moving to HP Integrity can save you

money and create a more capable, change-ready infrastructure

Here’s what we did: − Created a cost analysis of a typical HP 9000 server infrastructure

using Alinean’s industry-standard model• Support• Operations• Depreciation

− Created an HP Integrity blade server alternative• Production and non-production environments

− Created cost comparisons across current servers and HP Integrity− Compared ROI relative to your current environment

The results demonstrate the benefits of consolidating your applications to HP Integrity blade servers

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Project Participants, Roles and Recap• ROI Analysis Project Overview

− ROI analysis conducted to assess the costs and benefits of implementing the SAP PA RISC to Integrity Blades Example

• Tool, model and data are all third-party standard information created by leading industry research firms:− IDC – the premier global market intelligence and advisory firm in the

information technology and telecommunications industries. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets, and our management team is comprised of experienced and respected industry luminaries. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

− Alinean – the leading developer of ROI and TCO analysis methodologies andtools. Over 10 years of intense experience in developing ROI and TCO models and tools. Largest database of IT spending and TCO benchmarks. Formed by Gartner alumni and original creators of Gartner TCO Manager/Analyst product line.

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Existing HP 9000 - SAP LandscapeNot SAP 6.0 UC Ready

1 L3000 each w/4 550 MHz CPU and 8GB memorySBX Server

1 L3000 each w/2 550 MHz CPU and 16GB memory

1 rp3440 w/4 1GHz MHz CPU and 16GB memory (Dev DB)Development Server

1 L3000 w/2 550 MHz CPU and 16GB memory

1 rp5470 w/4 875 MHz CPU and 12GB memory (QA DB)QA Servers

1 rp8400 w/16 875 GHz CPU and 32GB memory

1 rp5470 w/8 750 MHz CPU and 16GB memory (fail-over)Database Servers

4 L3000 each w/4 550 MHz CPU and 16GB memory

2 rp5470 each w/4 650 MHz CPU and 16GB memory

1 rp5470 w/4 875 MHz CPU and 16GB memory

Application Servers

Current InvestmentsLandscape Component

Summary:•14 servers with a total of 68 processors•3 cabinets• 68 HP-UX MC licenses• 24 Oracle Licenses

Observations:• Legacy servers

• Inefficient use of space, power• costly maintenance

• Integrity can save money, power, processing time• Expensive to upgrade to ERP 6.0

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Proposed HP Integrity - SAP LandscapeSAP 6.0 UC Ready

1 BL870c 4cpu/8core Blade ServerFailover DB and SBX Server

1 BL860c 2c/4core Blade ServerDevelopment Server

1 BL860c 2c/4core Blade ServerQA Servers

2 BL870c 4c/8core Blade Server (two CPUs used per app)Database Servers

2 BL870c 4cpu/8core Blade ServersApplication Servers

Current InvestmentsLandscape Component

Summary: (PA-RISC vsIntegrity Blades)Total servers: 14 vs 7Total Number of Cores 68 vs 48(Parity = 40, ERP 6.0 = 48)

HP UX License 68 vs 48(Parity = 40, ERP 6.0 = 48)

Oracle DB Licenses 24 vs 17

Observations:• Fewer cores

• Fewer OS and DB licenses• Less power/cooling/space• Lower maintenance/support• Free up staff for other projects

• Faster CPUs – save proc time• Xfer OS & DB licenses – no charge

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Cash Outlay Totals Over 3 Year Analysis Period – Legacy versus Integrity Blades

3 Year Cash Outlay - Legacy vs

Integrity Blades

$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

Year 1

Year 2

Year 3

Total 3 year

Legacy PA RISC

Integrity BladeSoln

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Cumulative Investment versus Cumulative Benefits – Break Even at 15 months!

• Purchasing the last 8 cores and OS licenses at ERP 6.0 deployment further improves the ROI • Calculations are list price. Discounts also improve ROI.

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TCO Assumptions

• Software:− HPUX Licenses and Oracle Licenses transferable to Integrity Blades solution at zero cost− No other application SW costs included in example − No application or SW upgrade costs included in example− SAP version remains the same in migration from PA-RISC to Integrity Blade solution

• Hardware− All hardware system costing at list price

• Facilities costs− Power is $0.099 per kW/hr− Cooling is $0.099 per kW/hr− Data Center cost is $68.75 per square foot

• IT Administration and Operation costs− Based on third-party standard information created by leading industry research firms− Average number of servers per IT operations staff FTE is 11.63− Average number of server per IT administration staff FTE is 101.54

• Change costs are about 5% of total costs− Includes: Planning, Training, Validation, Deployment

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TCO Summary

• Reduce SW costs by more than 50%• Reduce facilities costs (power, cooling, space) by more than 80% - Go Green!

• Non-discounted Integrity Blade HW purchase price plus 3 yr Blade HW maintenance about commensurate with 3yr maintenance of legacy HW

25.1%$576,251$1,721,605$2,297,856Total IT Costs

0.0%($93,384)$93,384$0Change Costs

81.6%$94,551$21,300$115,851Facilities

50.0%$24,956$24,952$49,908IT Administration

54.7%$237,287$196,186$433,473IT Operations

53.3%$687,744$603,240$1,290,984Server Software

-92.0%($374,903)$782,543$407,640Server Hardware

IT Costs

Difference

(A-B)%

Difference (A-B)

Solution B SAP w/Oracle on HP Integrity Blades running HP-UX

11i

Solution A SAP w/Oracle on HP

RISC running HP-UX 11i

TCO Comparison Cumulative 3 Year

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TCO BreakdownSoftware and Operations Costs Exceed Hardware

TCO Bar Chart

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Hardware

Softw

are

IT Ops

IT Adm

inFa

cilities

Chan

ge

Legacy

Integrity Blade Soln

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Financial Summary

• 3 year cumulative hard benefits ($avings) of $1,975,868

• Payback period of 15.0 month(s)

• Return on Investment (ROI) of 34%

• Risk Adjusted Return on Investment (RA ROI) of 18%

• Net Present Value (NPV) savings of $266,716

• Internal Rate of Return (IRR) of 25%− Based on the costs and benefits of the proposed project using discounted cash flow

analysis and factoring in a risk-adjusted discount rate of 9.5%

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Cash Outlay Over 3 Year Analysis Period – Legacy versus Integrity Blades

• Operations cost drop over 60%

• Software support drops over 60%

• Hardware support costs become negligible

$-

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

$800,000.00

Year 1 Year 2 Year 3

3Year Costs - Legacy PA RISC Servers

Change

Facilities

Admin

Operations

SW Support

SW

HW Support

HW

$-

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

$1,200,000.00

Year 1 Year 2 Year 3

3 Year Costs - Integrity Blades

Change

Facilities

Admin

Operations

SW Support

SW

HW Support

HW

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Investment Summary

These numbers do not include discounts or trade-ins.

$93,384$0$0$93,384$0Total Operating Expenditure

$0$0$0$0$0Server Hardware Cost - Operating Expense (IT)

$0$0$0$0$0Server Software Cost - Operating Expense (IT)

$93,384$0$0$93,384$0IT Change Cost - Operating Expenditure (IT)

Operating Expenditure

$1,385,783$204,619$204,619$204,619$771,926Total Capital Expenditure

$603,240$201,080$201,080$201,080$0Server Software Cost - Capital Expense (IT)

$782,543$3,539$3,539$3,539$771,926Server Hardware Cost - Capital Expense (IT)

Capital Expenditure

$1,479,167$204,619$204,619$298,003$771,926Total Investment

TotalYear 3Year 2Year 1InitialInvestment Summary

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Direct Benefits and Investment Overview

•To implement the proposed project will require a 3 year cumulative investment of $1.479M plus initial expenses:

− $ 772K in initial expenses

− $1386K in capital expenditures

− $ 93K in operating expenditures

•Hard benefits include $1.97M in cumulative 3 year in IT cost reductions

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Revisit Deal with Discounts and Trade-Ins

• Using 20% Hardware discount

• Using Trade-in of legacy PA-RISC servers−$18,000 trade-in dollars applied to new sale

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Cash Outlay Totals Over 3 Year Analysis Period – Legacy versus Integrity Blades

3 Year Cash Outlay - Legacy vs Integrity Blades

w/Discount

$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

Year 1 Year 2 Year 3 Total 3

year

Legacy PA RISC

Integrity Blade Soln

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Cumulative Investment versus Cumulative Benefits – Break Even down to 14 months!

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TCO Summary w/Integrity Blade Discounts and Trade-In

• Reduce overall 3 yr costs by more than 32%• Over $738K savings over 3 years• Reduce facilities costs (power, cooling, space) by more than 80% - Go

Green!

• Discounted Integrity Blade HW purchase price with trade-in plus 3 yr Blade HW maintenance about commensurate with 3yr maintenance of legacy HW

32.1%$738,441$1,559,415$2,297,856Total IT Costs

0.0%($93,384)$93,384$0Change Costs

81.6%$94,551$21,300$115,851Facilities

50.0%$24,956$24,952$49,908IT Administration

54.7%$237,287$196,186$433,473IT Operations

53.3%$687,744$603,240$1,290,984Server Software

-52.2%($212,713)$620,353$407,640Server Hardware

IT Costs

Difference

(A - B)%

Difference

(A - B)

Solution B SAP w/Oracle on HP Integrity Blades running HP-UX

11i

Solution A SAP w/Oracle on HP

RISC running HP-UX 11i

TCO Comparison Cumulative 3 Year

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Financial Summary with Discounts and Trade-In

• 3 year cumulative hard benefits ($avings) of $1,995,948

• Payback period of 14.0 month(s)

• Return on Investment (ROI) of 50%

• Risk Adjusted Return on Investment (RA ROI) of 35%

• Net Present Value (NPV) savings of $428,906

• Internal Rate of Return (IRR) of 40%− Based on the costs and benefits of the proposed project using discounted cash flow

analysis and factoring in a risk-adjusted discount rate of 9.5%

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Investment Summary with Discounts and Trade-In

$93,384$0$0$93,384$0Total Operating Expenditure

$0$0$0$0$0Server Hardware Cost - Operating Expense (IT)

$0$0$0$0$0Server Software Cost - Operating Expense (IT)

$93,384$0$0$93,384$0IT Change Cost - Operating Expenditure (IT)

Operating Expenditure

$1,223,593$204,619$204,619$204,619$609,736Total Capital Expenditure

$603,240$201,080$201,080$201,080$0Server Software Cost - Capital Expense (IT)

$620,353$3,539$3,539$3,539$609,736Server Hardware Cost - Capital Expense (IT)

Capital Expenditure

$1,316,977$204,619$204,619$298,003$609,736Total Investment

TotalYear 3Year 2Year 1InitialInvestment Summary

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Direct Benefits and Investment Overview – with Discounts and Trade-In

•To implement the proposed project will require a 3 year cumulative investment of $1.362M plus initial expenses:

− $ 610K in initial expenses

− $1224K in capital expenditures

− $ 93K in operating expenditures

•Hard benefits include $1.99M in cumulative 3 year in IT cost reductions

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