the math behind (and beyond) digital transformation

© Copyright 2017 Pivotal Software, Inc. All rights Reserved. Version 1.0

Jon Erickson, VP, Director, TEI, Forrester Consulting, [email protected] Dormain Drewitz, Sr. Director, Product Marketing, Pivotal Software, @dormaindrewitz February 2018

The Math Behind (and Beyond) Digital Transformation

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Agenda

■  Defining Transformation

■  Measuring Business Value

■  The Role of Directional Metrics

■  Making Metrics Known

Making the once impossible trivial.

DEFINING TRANSFORMATION

Comcast

Problem: With a huge focus on customer experience and 1mn customer interactions per day, Comcast wanted to build an intelligent virtual agent into their mobile app.

Solution: Accenture helped ramp up the team quickly, adding over 22 people with expertise in Cloud Native App Dev, Virtual Agents, ML/AI, and data.

●  Leveraged a layer of services running on Pivotal Cloud Foundry: Platform includes customer context & platform services, common data platform, real-time services, connections to data services and NLP, AI/ML, and decision engine

●  Accenture’s existing experience with Comcast’s PCF-based service layer

Benefit: MVP in 8 weeks https://content.pivotal.io/springone-platform-2017/reimagining-customer-experiences-utilizing-pivotal-cloud-foundry-jason-michener

Measuring Business Value

Key Concepts

Value Stream Mapping

●  Lean Manufacturing principles ●  Builds consensus by engaging multiple stakeholders ●  Provides measurable goals for process improvement

Value Stream Mapping: Activity Ratio

Activity Ratio = Process Time/Lead Time

Example:

●  Idea to production lead time = 6 months (1040 hours) ●  Development time for a single feature = 2 week sprint (80 hours) ●  Activity ratio = 7.7%

Value Stream Mapping

Process Improvement Practice

Cost and Risk Impact

Developer Self-Service Lower operational costs and no ticket delays

Small Releases Faster completion and validation, easy to pivot

Combined Teams Simpler sta ng and estimating. Less finger-pointing.

Defect Visibility Fewer defects and less rework

Reduce Variability Predictability builds con dence and enables ongoing improvements

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E.G.: Developer Self-service ●  Shift from “push” to “pull” ●  Automate creating environments,

updating network changes, adding capacity

●  Developers deploy apps

https://youtu.be/04QFKBt6LCI

“Wait-time for a new environment went from 90 days to 15 minutes”

– Andy Zitney, Allstate

10 © 2018 FORRESTER. REPRODUCTION PROHIBITED.

Agenda

›  Introduction

›  What is TEI?

›  Executive summary

›  Analysis

›  Financial summary

›  Question and answer

Please note: This slide presentation is an abridged, graphical, and complementary representation of a case study. For a full explanation of methodology and details on model calculations, please refer to the full case study (The Total Economic Impact of Pivotal Cloud Foundry 2017)


What is TEI? Background and methodology

12 © 2018 FORRESTER. REPRODUCTION PROHIBITED. Source: The Total Economic Impact Of Pivotal Cloud Foundry, October 2017

“Next-level” business case justifications are increasingly important for technology investments

TCO ROI TEI

IT impact IT costs IT cost savings

Business impact

User efficiency Business effectiveness

Risk/ uncertainty

Risk mitigation Risk versus reward

Strategic impact

Scalability Flexibility

What is an effective business case?

Base: 825 IT decision-makers at North American enterprises


Forrester took a multistep approach to evaluate the impact of Pivotal Cloud Foundry

Start

Due diligence

Customer interviews

Create composite

Create financial model

Write case study

Review and finalize


Disclosures The audience should be aware of the following: ›  This document is an abridged webinar version of a full case study (Forrester Total Economic Impact of Pivotal Cloud

Foundry, October 2017). ›  The study is commissioned by Pivotal and delivered by the Forrester Consulting group. ›  Forrester makes no assumptions as to the potential return on investment that other organizations will receive. Forrester

strongly advises that readers should use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Pivotal Cloud Foundry.

›  Pivotal reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

›  The customer names for the interviews was provided by Pivotal. ›  Forrester does not endorse Pivotal.


Executive summary High-level findings


Forrester has determined the following three-year impact from the Cloud Foundry investment

Based on an analysis of Pivotal Cloud Foundry customer feedback and quantified benefit, cost, risk, and flexibility factors.

$22 million NPV

135% ROI

Within 12 months PAYBACK


Analysis Customer journey and key results


Forrester interviewed 4 Pivotal Cloud Foundry customers

COMPANY #1

COMPANY #2

COMPANY #3 Financial services,

100 developers and 300 applications

COMPANY #4 Wireless communications,

200 developers and 300 applications

Telecommunications, 1,500 developers and 400 applications

Consumer electronics, 350 developers and around 250 major applications


CHALLANGES

Long release cycles

Developer and operations inefficiency

Market pressure to improve customer experience

The customers shared experiences before and after using Pivotal Cloud Foundry

OBJECTIVES Smooth deployment processes and speed up release cycles. Simplify both developer processes and platform operations processes at the same time. Provide developer and operations productivity improvements

KEY RESULTS A combination of platform and process changes, which led to substantially reduced release cycles

Productivity gains for both developers and operations staff

Cost savings associated with streamlined environments

The Customer Journey


Interviewees shared the following key results from the Pivotal Cloud Foundry investment

“Customers care a lot about responsiveness. . . . Roughly $20 to $30 million in revenue was at risk if we didn’t

respond with a new technology.” ~Chief information officer, financial services

“On the operational side, with patching there was always a much higher margin for error

when you’re touching servers. With PCF, we don’t have those type of errors.”

~VP of IT, wireless telecommunications


Forrester created a composite organization representative of customer interviewees

$21 Billion ANNUAL REVENUE

20 million customers

500 Developers

Telecommunications

50 Operations staff

5,000 applications


The customers quantified key benefits from the Pivotal Cloud Foundry investment

Operations Productivity Improvement

reduction in resources allocated to development operations (DevOps) due to the implementation of

PCF.

Developer Productivity Improvement

developer wait time was significantly reduced

Reduction in environments and

associated software costs

eliminated unnecessary and duplicative environments.


Operations Productivity Improvement

BENEFIT 1 - $5.7 million over three years •  Prior to implementing PCF, the composite organization had 50

operations staff working on development operations tasks.. •  Since Pivotal Cloud Foundry automates many operational tasks

related to deployment, the composite organization could repurpose several of these development operations staff members.

•  As a result, organizations require fewer development operations resources with Pivotal Cloud Foundry.

Reduction of Operations staff Fully loaded salary Risk adjustment

10-30 FTE’s $150,000 ▼20%


Developer Productivity Improvement

Prior to using PCF, these developers were spending 20 hours per week coding.

With PCF, the developers are able to focus on producing code for deployment, thereby allowing them to develop more applications, plug-ins, and pieces of code to be tested and eventually released.

With PCF, developers are expected to spend 25, 27, and 30 hours per week coding over the next three years, respectively; this represents an improvement of 25% to 50% in time spent coding as adoption increases.

Developer Productivity Improvement Number of developers 500 Hours spent coding prior to PCF 20 Hours spent coding with PCF 30 Additional hours of coding per week 10 Hourly rate $84.13 Risk Adjustment ▼5% Total benefit $17,500,000


Reduction In Environments And Associated Software Costs

.After implementing PCF, the composite organization was able to consolidate its application development cycle by eliminating the need for several nonproduction phases like the test, stage, load, and demo environments. . Therefore, the organization was able to reduce the number of the nonproduction environments and the virtual machines (VMs) associated with these environments

Reduction in Environments: 30% of total benefits


Shortened release cycles

Improved customer satisfaction

Software quality improvement

Additionally, there are benefits to using Pivotal Cloud Foundry that the customers couldn’t quantify


Customers incurred different cost to use Pivotal Cloud Foundry

•  PCF cost. Customers interviewed paid an annual subscription for their use of PCF. Subscription costs were calculated based on the total number of application instances running on the PCF platform, the standard Pivotal pricing model.

•  Professional services. Pivotal offers a consulting service called Pivotal Labs. Pivotal Labs provides an immersive environment to help its customers successfully implement continuous delivery and other DevOps practices to promote and ensure more successful outcomes from using PCF.

•  Internal resources. Costs for both operations management and change management agents..


TEI analyses also includes flexibility and risk factors

FLEXIBILITY IMPACT RISK IMPLEMENTATION RISK Cloud Foundry provides an organization with the ability to engage in future initiatives for additional benefit

Business/technology needs may not be met by investment in Cloud Foundry, resulting in lower benefits

Proposed investment in Cloud Foundry may deviate from expected requirements, resulting in higher costs

•  Additional use cases for PCF •  Build new applications that

were not previously feasible.

•  Lower adoption leading to reduced operations and developer savings

•  Longer time to reduce existing environments

•  Higher change management costs due to platform complexity


Financial summary Three-year model


Three-year model summary results

ROI 135%

NPV $22 million

Payback Within 12 months

The Role of Directional Metrics

Key Concepts

IT Transformation Metrics Matter

@dormaindrewitz

Comcast: Measure the valuable metrics before and after

Source: https://www.youtube.com/watch?v=pfqSsjwCOqA @dormaindrewitz

CSAA Insurance: Measure the valuable metrics

Source: https://schd.ws/hosted_files/cfeu17/8e/cf_summit2017-csaa.pdf @dormaindrewitz

Directional Metrics for Your Digital Transformation

●  Don’t depend on the “business case”

○  But celebrate the successes

●  Shortened Release Cycles

○  Course-correction Superpower

○  Includes patching

●  Reduction in Downtime

○  Retiring from the Firefighter business

@dormaindrewitz

Making Metrics Known

Key Concepts

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Metrics That Matter are Visible ●  Answering the question “how are we

doing”

●  Small number of highly visible metrics

●  Easy to understand

●  Constant reinforcement from senior leadership through middle management

●  Education

https://twitter.com/DrPepperSnapple/status/803976948888256512

Top down boldness

John Heveran, Liberty Mutual, https://content.pivotal.io/springone-platform-2017/john-heveran @dormaindrewitz


Question and answer

the math behind (and beyond) digital transformation

Technology