A Forrester Total Economic Impact Study Prepared For VMware The Total Economic Impact Of VMware vcenter Operations Management Suite

Transcription

1 A Forrester Total Economic Impact Study Prepared For VMware The Total Economic Impact Of VMware vcenter Operations Management Suite Project Director: Amit Diddee December 2012

2 TABLE OF CONTENTS Executive Summary... 2 VMware vcenter Operations Improves IT Productivity, Reduces Capital Expenditures, And Increases Availability.. 2 Disclosures... 4 TEI Framework And Methodology... 6 Analysis... 8 Interview Highlights... 8 Costs...10 Benefits...14 Flexibility...24 Risk...25 Financial Summary...27 VMware vcenter Operations: Overview...28 Appendix A: Composite Organization Description...30 Appendix B: Total Economic Impact Overview...31 Appendix C: Glossary...32 Appendix D: Supplemental Material...33 Appendix E: Endnotes , Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to About Forrester Consulting Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit Page 1

3 Executive Summary In May 2012, VMware commissioned Forrester Consulting to examine the total economic impact and potential return on investment (ROI) large IT organizations may realize by deploying VMware vcenter Operations Management Suite (vcenter Operations), designed to automate and simplify the performance, capacity, and configuration management of virtualized IT infrastructure. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of vcenter Operations on their organizations based on the experiences of actual vcenter Operations customers interviewed by Forrester. Each interviewed company earns revenues in excess of $1 billion annually and employs tens of thousands of people. VMware vcenter Operations Improves IT Productivity, Reduces Capital Expenditures, And Increases Availability Our interviews with vcenter Operations customers and subsequent financial analysis found that organizations similar to these companies achieved the risk-adjusted ROI, costs, and benefits shown in Table 1. See Appendix A for a description of the composite organization used to normalize the costs and benefits described by each of the interviewees. Page 2

4 Table 1 Three-Year Risk-Adjusted ROI 1 ROI Payback period (months) Total benefits (PV) Total costs (PV) Net present value 123% 7.4 $3,022,564 $1,356,544 $1,666,020 Source: Forrester Research, Inc. Benefits. Each of the companies we interviewed experienced the following benefits, which are a composite of those experienced by the interviewed companies: o o o A 67% gain in IT productivity. Forrester found that organizations using vcenter Operations can expect a total 67% increase in IT productivity from time and effort savings in activities related to virtual machine (VM) performance and configuration management, incident resolution and ticket management, and compliance monitoring activities. Forrester calculates the total financial benefit derived from these productivity gains to equal more than $850,845 per year. A 30% reduction in capital expenditure. Forrester found that organizations can expect 30% cost savings from not having to purchase additional server hardware to meet increased capacity requirements each year as a result of vcenter Operations to optimize existing server utilization. An organization like the composite organization can expect to save approximately $93,450 per year. Additional business benefits. vcenter Operations customers also described a range of additional business benefits that were more difficult to quantify but equally important. These included: o o o o Improved visibility via clear performance metrics and detailed reporting. Fewer security threats. Increased server availability and fewer outages. Lower risk of violating compliance regulations. Costs. Forrester learned that the key cost components of a vcenter Operations deployment are 1) hardware purchases; 2) vcenter Operations license subscription and support costs; 3) VMware professional services costs; 4) internal implementation costs; and 5) ongoing administration costs. The total present value (PV) of the riskadjusted costs for the three-year period of analysis amounts to $1,356,544, more than one-third of which is paid over three years in the form of maintenance costs. Readers of this study should note that these costs only apply to the full suite of vcenter Operations and not the individual components that constitute the vcenter Operations Management Suite. Page 3

5 Figure 1 Three-Year Risk-Adjusted Benefits 30% Productivity gain associated with incident resolution and ticket management efficiencies Productivity gain from improved VM configuration management 54% Productivity gain from improved performance management 1% 2% Productivity gain associated with ensuring compliance 13% Reduced capital expenditure from improved capacity management Source: Forrester Research, Inc. Many of the customers cited the following reasons as the primary drivers for implementing vcenter Operations: The need to move from time-consuming, error-prone, reactive management of the virtual infrastructure to a more proactive and automated process. Traditional physical server management tools were deemed to be largely ineffective for managing large and complex virtual infrastructures; other products were judged to be overly complicated and unreliable. The need to improve resource utilization rates and decrease costs associated with annual purchases of costly physical servers. Disclosures The reader should be aware of the following: The study is commissioned by VMware and delivered by the Forrester Consulting group. Page 4

6 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 VMware vcenter Operations Management Suite. VMware 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 were provided by VMware. Page 5

7 TEI Framework And Methodology Introduction From the information provided in the interviews, Forrester has constructed a Total Economic Impact framework for those organizations considering implementing VMware vcenter Operations. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect an investment decision. Approach And Methodology Forrester took a multistep approach to evaluate the impact that VMware vcenter Operations can have on an organization (see Figure 2). Specifically, we: Interviewed VMware marketing and sales personnel and Forrester analysts to gather data relative to vcenter Operations and the marketplace for vcenter Operations. Interviewed five organizations currently using VMware vcenter Operations to obtain data with respect to costs, benefits, and risks. Designed a composite organization based on characteristics of the interviewed organizations (see Appendix A). Constructed a financial model representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews as applied to the composite organization. Page 6

8 Figure 2 TEI Approach Perform due diligence Conduct customer interviews Design composite organization Construct financial model using TEI framework Write case study Source: Forrester Research, Inc. Forrester employed four fundamental elements of TEI in modeling the VMware vcenter Operations Suite: 1. Costs. 2. Benefits to the entire organization. 3. Flexibility. 4. Risk. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology. Page 7

9 Analysis Interview Highlights A total of five interviews were conducted for this study, involving representatives from the following companies, all of which were VMware customers: One of the largest banks in the US, specializing in credit cards, home loans, auto loans, and banking and savings products. The company operates more than 1,000 banking offices and serves more than 50 million customers in the US, Canada, and the UK. The company also operates a subsidiary that offers online and direct banking services. One of the world s largest aerospace and defense corporations. Operating in several countries and headquartered in the US, this company is primarily known as the leading maker of large commercial jets; it also provides financing and leasing services to both commercial and military/aerospace customers. A fast-growing American provider of diagnostic imaging utilization management services to health insurance providers. The company covers nearly 30 million patients in a variety of health plans and operates from three locations. An American nonprofit managed-care provider that runs one of the largest integrated healthcare systems in the US. The company offers healthcare services through a network of more than 15,000 physicians and operates three dozen hospitals with more than 8,500 beds and almost 600 medical offices. Additionally, the company s health plans cover nearly 9 million people. A leading US telecom services provider serving about 100 million customers. The company provides fixed-line and mobile telephony, broadband and fixed-line Internet services, and digital TV and network services to residential, commercial, and government clients. The five interviews revealed several important insights: There is a need to move from reactive to proactive management. One of most pressing reasons interviewees cited for investing in vcenter Operations was reducing the number of IT service incidents across the company s virtual infrastructure, which result in unplanned downtime and decreased service levels due to poor performance. As many important customer-facing and revenue-generating applications depended on customers highly virtualized infrastructures, unplanned downtime of important applications due to poor CPU, memory, storage, and network utilization by the underlying servers was a costly event. Several customers reported that server outages were a daily occurrence in some areas of the environment prior to deploying vcenter Operations. Traditional tools are inadequate. For IT system administrators overseeing highly complex and virtualized corporate IT infrastructures and supporting mission-critical business applications, managing and optimizing the number, performance, and utilization of both physical and virtual servers is an extremely laborious manual process requiring significant equipment and personnel investment. These administrators mentioned that the use of traditional physical server management tools was largely ineffective for managing their virtual infrastructure and that other products were overly complex and unreliable. Some customers that benefited the most from Page 8

10 vcenter Operations reported that virtual server administration was done manually or by using custom scripts and/or ad hoc tools prior to implementing vcenter Operations. Companies are not utilizing their resources efficiently. Some customers cited the need to reduce IT resource acquisition costs as a motivation factor. Prior to implementing vcenter Operations, they customers didn t have the IT manpower to closely monitor resource consumption and simply bought more costly physical servers each year to accommodate more virtual machines without analyzing where their actual performance and capacity bottlenecks existed. These investments in hardware and software resulted in a proliferation of costly, underutilized servers that made little difference in alleviating performance issues throughout their IT networks. Scale is overwhelming both people and processes. Customers also cited the need to reduce the number of IT tickets or alerts. The proliferation of virtual machines means that firms can use less hardware to support more applications and services; interviewees described the management headaches of having to identify, prioritize, and address the multitude of alerts created throughout their server network by the failure of a single virtual machine on a particular host. Firms need to ensure that their physical and virtual infrastructure are compliant. Ensuring regulatory compliance within a virtual infrastructure was also an important finding from the customer interviews. Customers described the need to simplify the process of ensuring compliance with virtual infrastructure performance and security regulatory guidelines. Composite Organization Based on the interviews with the five existing customers provided by VMware, Forrester constructed a TEI framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The composite organization that Forrester synthesized from these results represents a 5,000-person multinational IT and business process outsourcing firm that implemented VMware vcenter Operations across their physical and virtual infrastructure. For the purposes of this study, this composite organization will be referred to as Reliance Services. (See Appendix A for a detailed description of the composite organization.) Framework Assumptions Table 2 provides the model assumptions that Forrester used in this analysis. Page 9

11 Table 2 Model Assumptions Ref. Metric Calculation Value A1 Hours per week 40 A2 Weeks per year 52 A3 Hours per year (M-F, 9-5) 2,080 A4 Hours per year (24x7) 8,736 Source: Forrester Research, Inc. The discount rate used in the PV and NPV calculations is 10% and time horizon used for the financial modeling is three years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company s finance department to determine the most appropriate discount rate to use within their own organizations. Costs The key cost categories associated with vcenter Operations are: 1) hardware purchases; 2) software license subscription and support costs; 3) VMware professional services costs; 4) internal implementation costs; and 5) ongoing administration costs. These costs are measured on a three-year basis. The following are the cost inputs to the financial analysis: Hardware Purchases While the requirements for vcenter Operations depend on the size and scope of the installation, each implementation typically requires two dedicated servers to host vcenter Operations. Forrester estimates that an organization like Reliance Services should initially budget $40,000 for hardware purchases. vcenter Operations License And Support Licensing, subscription, and support fees are the bulk of the costs associated with the use of vcenter Operations. VMware sells vcenter Operations software licenses in three editions Standard, Advanced, and Enterprise. To obtain the greatest impact, Forrester believes that Reliance Services would need to purchase the Enterprise edition for vcenter Operations, which comes with a support and subscription contract for an additional cost. These associated costs are based on the number of virtual machines and physical servers that will be managed via vcenter Operations. For Reliance Services, VMware estimates the license cost for a 3,500-server (physical and virtual) environment is $756,675 approximately $216 per server. This includes all of the individual vcenter Operations components necessary to deliver the benefits considered in this case study, including performance monitoring and Page 10

12 analytics, capacity optimization and configuration, and compliance management. As support and subscription services are priced at 21% of initial annual license costs, Reliance Services should also expect to pay $158,902 on an ongoing basis to receive product support, product updates, and upgrades. Professional Services Costs Each of the customers that Forrester interviewed relied on VMware professional services teams during the implementation. Forrester believes that Reliance Services will similarly engage professional services consultants from VMware for approximately one full work week on software configuration and other implementation activities associated with the vcenter Operations Management Suite. VMware indicated that the standard cost for such services is $18,000. Internal Implementation Costs VMware customers reported that they allocated internal resources for the duration of the implementation of vcenter Operations for software setup, network and environment integration, and configuration and testing. The implementation time varied greatly depending on the scale, scope, and complexity of the existing environment, but generally lasted approximately 45 days and required the involvement of four professionals. Based on findings gathered from interviews, Forrester estimates that Reliance Services will allocate four FTEs for 45 days. Using a fully loaded compensation rate of $125,000 per year, internal implementation costs total $86,538. Page 11

13 Table 3 Internal Implementation Cost Ref. Metric Initial Year 1 Year 2 Year 3 Total B1 Number of FTEs 4 B2 Days to implement and configure 45 B3 Fully loaded daily salary rate $ Bt Internal implementation cost $86,538 $0 $0 $0 Spread 100% 0% 0% 0% Bto Total (original) ($86,538) $0 $0 $0 ($86,538) Source: Forrester Research, Inc. Ongoing Administration Costs Forrester believes that Reliance Services will dedicate a single IT professional to regular administration and maintenance activities associated solely with vcenter Operations. This professional s fully loaded annual salary is $100,000 and will spent 8 hours per month on this administration and maintenance. Page 12

14 Table 4 Ongoing Administration Costs Ref. Metric Initial Year 1 Year 2 Year 3 Total C1 Number of FTEs 1 1 C2 Hours per month 8 8 C3 Fully loaded hourly salary rate $48.08 $48.08 Ct Ongoing administration $4,615 $4,615 $4,615 $4,615 Spread 0% 100% 100% 100% Cto Total (original) $0 ($4,615) ($4,615) ($4,615) ($13,846) Source: Forrester Research, Inc. Total Costs Table 5 summarizes the costs Reliance Services would incur from implementing and operating vcenter Operations over a three-year time frame. Page 13

15 Table 5 Total Costs Cost category Initial Year 1 Year 2 Year 3 Total Present value Hardware purchases ($40,000) $0 $0 $0 ($40,000) ($40,000) vcenter Operations license and support ($756,675) ($158,902) ($158,902) ($158,902) ($1,233,380) ($1,151,840) Professional services costs ($18,000) $0 $0 $0 ($18,000) ($18,000) Internal implementation costs ($86,538) $0 $0 $0 ($86,538) ($86,538) Ongoing administration costs $0 ($4,615) ($4,615) ($4,615) ($13,846) ($11,478) Total costs (original) ($901,213) ($163,517) ($163,517) ($163,517) ($1,391,765) ($1,307,856) Source: Forrester Research, Inc. Benefits The customers Forrester interviewed for this study collectively described a range of hard and soft benefits from implementing vcenter Operations, each of which is described in detail below. The most significant benefits were associated with allowing IT personnel to make more efficient use of the time they spend on ensuring optimal resource performance, resolving incidents, fixing configuration problems, and performing change management activities. Because of the significant time savings cited below, some companies interviewed were able to eliminate their VM administrative teams altogether and reallocate individuals previously assigned to VM management activities to more valuable IT activities. Improved IT Productivity Our interview findings indicated many areas where IT staff can improve efficiency and save time. The productivity gain associated with incident resolution and ticket management efficiencies. Forrester also determined that vcenter Operations customers can expect a significant reduction in the time spent on incident resolution activities. vcenter Operations shortened the time to resolve VM-related incidents affecting critical application performance and general business productivity (and, in some cases, virtual server outages) by more than 90%; the overall number of incidents also decreased by 30% as a result of spotting the underlying causes sooner and mitigating their impact. Customers described the benefit of not having to assemble 10 or more professionals and experts from across the IT organization for an average of 5 to 6 hours each time such an incident occurred to collect necessary diagnostic metrics, identify the root cause of the incident, determine the affected systems, triage the severity of any damage, and plan out a course of remediation. Because vcenter Operations provides all the real-time health reporting metrics gathered from the entire virtualized infrastructure Page 14

16 in a single console, customers are able to streamline this process substantially, requiring only one subject-matter expert and a developer for an hour or so to diagnose and remediate operations. One interviewee summed up this benefit best by describing how vcenter Operations provided a phenomenal level of detailed symptomatic data that allowed us to perform a root-cause analysis within seconds instead of days or weeks and saved my team an average of $40,000 by avoiding productivity loss. Forrester estimates that Reliance Services IT team would experience 200 VM-related incidents per year; each would require 10 professionals to resolve. Based on discussions with customer IT support teams, Forrester also believes that Reliance Services can reasonably expect a 20% reduction in the overall number of actionable help desk support tickets due to fewer false positives and fewer genuine VM problems. Applying the 30% reduction in the number of actual incidents and the 90% reduction in the time required to remediate them, including a conservatively estimated 134 hours per month saved from not having to resolve help desk tickets, the resulting productivity gain is valued at $683,462 annually. Page 15

17 Table 6 Productivity Gain Associated With Incident Resolution Efficiencies And Ticket Management Efficiencies Ref. Metric Year 1 Year 2 Year 3 Total D1 D2 D3 D4 D5 D6 D7 D8 Incident frequency per year before vcenter Operations Average resolution time before vcenter Operations (hours) Number of FTEs involved before vcenter Operations Incident frequency per year after vcenter Operations Average resolution time after vcenter Operations (hours) Number of FTEs involved after vcenter Operations Hours saved per month due to fewer help desk tickets Fully loaded average hourly salary $60.10 Dt Productivity gain associated with incident resolution and ticket management efficiencies $683,462 $683,462 $683,462 Spread 100% 100% 100% Dto Total (original) $683,462 $683,462 $683,462 $2,050,385 Source: Forrester Research, Inc. Productivity gain from improved VM configuration management. Interviewees also described how vcenter Operations decreased the effort and cost of patching, provisioning, and maintaining VM configurations. One customer in particular described the challenges of maintaining accurate VM configurations in order to comply with specific corporate regulations: Previously, we used to dedicate a lot of effort to making sure that each of the VMs in our infrastructure was in compliance with our strict security regulations. vcenter Operations allowed me to free up a lot of my staff who were normally tasked with manually checking each VM on a regular basis, correcting any corrupted configurations, and signing off on compliance reports. Page 16

18 Customers noted how vcenter Operations continuously assesses, remediates, and assures that VMs remain properly configured over time. vcenter Operations also improves time-to-service restoration by correlating any configuration changes tracked by vcenter Configuration Manager with performance and capacity issues as they are identified. vcenter Operations also simplifies change management activities. For example, by automatically creating audit and logging reports for daily operations, auditing Active Directory groups and members, and reporting weekly on planned and unplanned changes to key servers, customers reported saving approximately 85% of the time previously dedicated to performing these activities manually. On average, six IT professionals each typically spent 80 hours of time per month on manual activities related to VM provisioning, patching, updating, and configuration management that were automated following the deployment of vcenter Operations. Forrester believes that Reliance Services can expect a similar benefit and save $200,077 based on fully loaded average annual salary rates. Page 17

19 Table 7 Productivity Gain From Improved VM Configuration Management Ref. Metric Year 1 Year 2 Year 3 Total E1 Number of IT FTEs 6 E2 E3 Hours per month spent assessing and remediating VM configuration states Reduction in time spent assessing and remediating VM configuration states 80 85% E4 Fully loaded average hourly salary $40.87 Et Productivity gain from improved VM configuration management $200,077 $200,077 $200,077 Spread 100% 100% 100% Eto Total (original) $200,077 $200,077 $200,077 $600,231 Source: Forrester Research, Inc. Productivity gains from improved performance management. Reliance Services can also expect productivity gains from simplified and centralized monitoring and performance management. According to the customers that Forrester spoke with, vcenter Operations automated the collection and analysis of real-time VM system metrics data, an activity that took up considerable administrative time and effort on a regular basis to determine the root cause and source of VM performance problems. Based on findings from the interviews, Forrester believes that four IT professionals at Reliance Services can save half of the average 30 hours spent per month by each on real-time virtual server performance monitoring activities. Taking into account fully loaded average annual salary estimates, the annual benefit to an organization like Reliance Services is $29,423. Page 18

20 Table 8 Productivity Gain From Improved VM Performance Management Ref. Metric Year 1 Year 2 Year 3 Total F1 Number of IT FTEs 4 F2 Hours per month spent monitoring and administering VMs 30 F3 Reduction in time spent monitoring and administering VMs 50% F4 Fully loaded average hourly salary $40.87 Ft Productivity gain from improved VM performance management $29,423 $29,423 $29,423 Spread 100% 100% 100% Fto Total (original) $29,423 $29,423 $29,423 $88,269 Source: Forrester Research, Inc. Productivity gain associated with compliance management. Customers also achieved efficiencies in their regulatory and internal IT policy compliance activities by implementing vcenter Operations. Because of vcenter Operations built-in policy-based configuration management features, customers experienced a 45% reduction in the time and effort spent to ensure compliance, including verifying that systems comply with corporate security policies, remediating noncompliant machines, creating quarterly regulatory compliance reports, and verifying compliance against vsphere, Microsoft, and Linux hardening guidelines. Further time savings were reported specifically during annual audits, during which customers were able to save time spent on reporting critical event log anomalies and on all installed software and versions. Forrester estimates that an organization like Reliance Services will normally assign two IT professionals for approximately 20 hours a month to compliance management activities. Taking into account fully burdened salary rates, Forrester calculates the value of the productivity savings in this area to be $8,827. Page 19

21 Table 9 Productivity Gain Associated With Ensuring Compliance Ref. Metric Year 1 Year 2 Year 3 Total G1 Number of IT FTEs 2 G2 Hours per month spent on reporting 20 G3 Reduction in time spent on reporting 45% G4 Fully loaded average hourly salary $41 Gt Productivity gain associated with ensuring compliance $8,827 $8,827 $8,827 Spread 100% 100% 100% Gto Total (original) $8,827 $8,827 $8,827 $26,481 Source: Forrester Research, Inc. Reduced Capital Expenditure From Improved Capacity Management Another key area of benefit reported by vcenter Operations customers was the cost savings from not having to purchase additional server hardware due to having better insight into server utilization and virtual infrastructure capacity requirements over time. vcenter Operations capacity analytics and optimization capabilities allowed customers to identify overprovisioned resources, increase VM density, and proactively identify future capacity shortfalls. vcenter Operations allowed customers to create complex what-if scenarios to model future capacity requirements and regularly right-size their virtual infrastructures without the need to build custom spreadsheets or scripts or rely on general rules of thumb. Forrester estimates that customers will be able to leverage these capacity management insights and capabilities to 1) run an equivalent number of VMs in their current environment on approximately 10% fewer physical servers and 2) reduce the amount of excess server capacity they need to purchase each year to meet their growth needs by 30%. Reliance Services would be able to decommission 167 servers from its environment in the first year and and subsequently only need to purchase seven additional servers (instead of the usual 10) to meet capacity demand by more accurately predicting actual resource requirements. Assuming a $35,000 price tag for each new server and a $5,000 estimated depreciated value of a used server, Forrester calculates the initial benefit to be $938,333 and subsequent annual benefits to amount to $105,000. Page 20

22 Table 10 Reduced Capital Expenditure From Improved Capacity Management Ref. Metric Year 1 Year 2 Year 3 Total H1 Number of VMs 1,500 1,500 1,500 H2 Number of physical servers 2,000 1,833 1,833 H3 H4 H5 H6 H7 H8 Servers virtualized before vcenter Operations Servers virtualized after vcenter Operations Number of physical servers decommissioned Annual increase in servers to meet capacity Reduction in server purchases due to vcenter Operations Number of servers needed to purchase with vcenter Operations 43% 45% 45% 45% 45% 45% % 30% 30% H9 Average cost of a server $35,000 H10 Average depreciated cost of a server $5,000 Ht Reduced capital expenditure from improved capacity management $938,333 $105,000 $105,000 Spread 100% 100% 100% Hto Total (original) $938,333 $105,000 $105,000 $1,148,333 Source: Forrester Research, Inc. Additional Unquantified Benefits Some customers reported ancillary benefits in addition to those described above. Because of the difficulty in measuring these benefits and accurately estimating their financial value, Forrester decided not to quantify these benefits and to leave it to the reader to include in the final results if he or she so wishes: Increased availability. Several customers that Forrester interviewed described marked reductions in the number and frequency of major unplanned virtual server outages. Through optimized resource usage, continuous Page 21

23 performance monitoring, and early detection and resolution of performance issues and capacity shortfalls, vcenter Operations reduced the average frequency of outages from five incidents per month to three. This does not include the nearly tenfold reduction in outages that one particular customer experienced and which was directly attributable to vcenter Operations: vcenter Operations was instrumental in driving down both the number of unexpected downtime incidents and the mean time to repair. We went from experiencing 20 to 30 incidents a month, each one involving a number of (IT) team members spending 3 to 4 hours to analyze and repair affected systems, down to five incidents a month with a mean time to repair of 1 hour, all as a result of vcenter Operations. When you take into account the cost of the number of customers you were not able to serve during the outage and the cost per minute in terms of loss of operations, vcenter Operations probably saved our company hundreds of thousands of dollars within the first few months of use. Because of the high degree of variability in quantifying the value of fewer outages, driven largely by the types of systems and applications affected, Forrester decided not to quantify the business impact of downtime avoided as a result of vcenter Operations. However, readers should evaluate the actual benefits that their organizations are likely to experience from the reduction of unplanned outages by considering the direct and indirect costs of such outages, including loss of revenue, regulatory fines, legal fees, loss of stock value, and damage to company reputation. Improved visibility. One of the customers that Forrester interviewed mentioned that with vcenter Operations, we have quick and organized access to a unified view of the physical and virtual environments. vcenter Operations allows customers to collect and report back a wide variety of real-time performance metrics, which provide an up-to-date picture of the health of the environment in a single interface. This data, more substantial in terms of quantity and quality than that which can be captured through manual processes or even similar but less integrated solutions, allows for the automatic prioritization of the size and severity of application and server slowdowns, making it easy for IT professionals to recognize which resources, physical and virtual, require immediate attention. Improved reporting. Customers also appreciated the vcenter Operations features that allowed them to quickly create ad hoc information dashboards showing real-time performance, capacity, and configuration change events. One interviewee noted that he was able to create such dashboards as requested by management at a moment s notice. This would previously have taken his IT team several days of development and testing activities. Reduced security threat. Some customers also perceived a potential improvement in security due to the consistent application of configuration management policies on all corporate servers, closing potential security loopholes that could be exploited. Reduced risk of violating compliance regulations. Customers also reported that vcenter Operations configuration compliance features allowed them to more easily conform to a range of industry regulations for security and customer information control. These included operating system and VM hardening guidelines (to reduce the risk of unauthorized access), security best practices, and regulatory mandates such as Sarbanes-Oxley, payment card industry (PCI), and health industry (HIPAA) requirements. Page 22

24 Total Benefits Table 11 summarizes the benefits Reliance Services would be presented with upon implementing vcenter Operations over a three-year time frame. Page 23

25 Table 11 Total Benefits Benefit category Initial Year 1 Year 2 Year 3 Total Present value Productivity gain associated with incident resolution efficiencies and ticket management efficiencies Productivity gain from improved VM configuration management Productivity gain from improved VM performance management Productivity gain associated with ensuring compliance Reduced capital expenditure from improved capacity management $683,462 $683,462 $683,462 $2,050,385 $1,699,668 $200,077 $200,077 $200,077 $600,231 $497,562 $29,423 $29,423 $29,423 $88,269 $73,171 $8,827 $8,827 $8,827 $26,481 $21,951 $938,333 $105,000 $105,000 $1,148,333 $1,018,695 Total benefits (original) $1,860,122 $1,026,788 $1,026,788 $3,913,699 $3,311,047 Source: Forrester Research, Inc. Flexibility Flexibility, as defined in Forrester s TEI methodology, is an investment in additional capacity or agility today that can be turned into future business benefits at some additional cost in the future. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to adopt vcenter Operations and later discover additional value that can be realized by further building on the existing platform and services in-house. While customers Forrester interviewed were unable to provide the data necessary for calculating the monetary value of flexibility options, Forrester does recognize the additional flexibility that an organization gains by switching to a more accurate and less laborious and time-consuming operations management solution. Many of the customers that Forrester interviewed did not use the full range of features and functions offered by vcenter Operations and therefore were only able to report the benefits generated from those parts of the system they were using. Forrester believes that these customers can extract additional benefits from their investments in vcenter Operations by using and leveraging all of the capabilities of the tools included in a complete vcenter Operations implementation. Customers can also expand the footprint of vcenter Operations at their organization. For example, they can quickly scale up their virtual environment without the significant additional effort or cost associated with oversight and management of new resources. This provides the flexibility for an organization to grow and absorb acquisitions or other forms of business expansion. Page 24

26 Additionally, as the potential benefits significantly improve the quantity and quality on VM performance, Forrester believes that the range of flexibility options available to an organization is only limited by what it can do with better resource-utilization data. The development of data rich sophisticated applications and tools that empower IT professionals with better data is an example of how organizations can benefit further in the future. Risk Risk is a key component within the TEI model; it is used as a filter to capture the uncertainty surrounding different cost and benefit estimates. If a risk-adjusted ROI still demonstrates a compelling business case, it raises confidence that the investment is likely to succeed because the risks that threaten the project have been taken into consideration and quantified. The risk-adjusted numbers should be taken as realistic expectations, since they represent the expected values considering risk. In general, risks affect costs by raising the original estimates and alter benefits by reducing the original estimates. For the purpose of this analysis, Forrester risk-adjusts certain cost and benefit estimates to better reflect the level of uncertainty that exists for each estimate. The TEI model uses a triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value is the mean of the distribution of those points. For example, in the case of the financial benefit calculation for shorter and fewer outages shown in Table 6 above can be considered the most likely value. This benefit will vary based on several specific factors, including the average frequency and typical duration of outages Reliance Services was experiencing before vcenter Operations implementation. Nearly all of the benefits will vary based on the overall success of the implementation, usage adoption, and other technical factors that are difficult or impossible to forecast before putting vcenter Operations into actual production. These variabilities represent the risk that is captured as part of this study. The following tables show the values used to adjust for uncertainty in cost and benefit estimates. Different costs and benefits estimates have different levels of risk adjustments. In general, Forrester uses a risk-adjustment factor of 120% of the original estimates on the high end, 100% as the most likely, and 50% of the original estimate on the low end. This has the effect of decreasing the benefit estimate to take into account the fact that original benefit estimates could very well be revised downward. Forrester then creates a triangular distribution to reflect the range of expected benefit, with 90% as the mean (equal to the sum of 120%, 100%, and 50%, divided by three). Readers are urged to apply their own risk ranges based upon their own degrees of confidence in the cost and benefit estimates. Page 25

27 Table 12 Cost And Benefit Risk Estimates Ref. Cost category Risk estimate R1 Hardware purchases 103% R2 vcenter Operations license 102% R3 Professional services costs 100% R4 Internal implementation costs 126% R5 Ongoing administration costs 117% Ref. R6 Benefit category Productivity gain associated with incident resolution efficiencies and ticket management efficiencies Risk estimate 96% R7 Productivity gain from improved VM configuration management 82% R8 Productivity gain from improved VM performance management 82% R9 Productivity gain associated with ensuring compliance 74% R10 Reduced capital expenditure from improved capacity management 89% Source: Forrester Research, Inc. Page 26

28 Financial Summary The financial results calculated in the Costs and Benefits sections can be used to determine the return on investment, net present value, and payback period for Reliance Services investment in vcenter Operations. These are shown in Table 13 below. Table 13 Cash Flow: Non-Risk-Adjusted Summary Initial Year 1 Year 2 Year 3 Total Present value Total costs ($901,213) ($163,517) ($163,517) ($163,517) ($1,391,765) ($1,307,856) Total benefits $1,860,122 $1,026,788 $1,026,788 $3,913,699 $3,311,047 Total ($901,213) $1,696,605 $863,271 $863,271 $2,521,934 $2,003,190 ROI 153% Payback period (months) 6.4 Source: Forrester Research, Inc. Table 14 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 12 in the Risk section to the cost and benefits numbers in Tables 5 and 11. Table 14 Cash Flow: Risk-Adjusted Summary Initial Year 1 Year 2 Year 3 Total Present value Total costs ($940,047) ($167,480) ($167,480) ($167,480) ($1,442,486) ($1,356,544) Total benefits $1,685,962 $944,295 $944,295 $3,574,552 $3,022,564 Total ($940,047) $1,518,482 $776,815 $776,815 $2,132,065 $1,666,020 ROI 123% Payback period (months) Source: Forrester Research, Inc. Page 27

29 VMware vcenter Operations: Overview According to VMware, the VMware vcenter Operations Management Suite provides automated operations management using patented analytics and an integrated approach to performance, capacity and configuration management. The vcenter Operations Management Suite enables IT organizations to get better visibility and actionable intelligence to proactively ensure service levels, optimum resource usage, and configuration compliance in dynamic virtual and cloud environments. The key benefits of VMware vcenter Operations Management Suite are: Higher quality of service, fewer incidents and less downtime of infrastructure and application services. Improved team collaboration and increased productivity from better visibility across the entire environment. Infrastructure cost savings and better resource utilization from capacity optimizations. Fewer tools needed to monitor the environment. Continuous compliance with IT policies and regulatory requirements. VMware infrastructure and operations management solutions complement the embedded management capabilities of the vsphere platform including high availability and fault tolerance management to support your IT organization in proactively handling changes to virtualized and nonvirtualized infrastructure. The remaining physical systems in heterogeneous environments are supported by the open and extensible architecture of the vcenter Operations Management Suite, which supports third-party monitoring tools. The vcenter Operations Management Suite provides cross-team views for real-time performance, capacity, and configuration management, enabling IT to be more proactive and to ensure optimal system performance. Performance data can be abstracted to health, risk, and efficiency measures to help IT teams quickly identify escalating performance problems with less effort and before they affect end users. Many virtual machines are overprovisioned, causing the business to incur unnecessary costs. Right-sizing resource capacity CPU, memory, network, and storage to achieve high efficiency usually means sacrificing capacity availability or efficiency. The vcenter Operations Management Suite includes advanced capacity management capabilities that let you analyze and forecast capacity needs so that you deliver the right amount of capacity at the right time. It can help you right-size your virtual machines to increase consolidation ratios, reduce costs, and make better use of your computing power and VMware investment. Configuration changes in the infrastructure or application layer can account for 80% of downtime in IT production environments. Automated provisioning and configuration analysis within the vcenter Operations Management Suite enables your IT team to detect these unwanted changes. With real-time, integrated dashboards of performance, capacity, and configuration change events, you can proactively manage your environment and ensure that service-level agreements are met. You can also set policy controls across all aspects of the data center infrastructure, virtual and physical, to maintain continuous compliance with operational best practices. Page 28

30 With vcenter Configuration Manager, your IT team can ensure the consistency of system images and save time by automating patching and provisioning. vcenter Configuration Manager enables you to apply patches to large numbers of systems and proactively remediate changes within virtualized and nonvirtualized hosts. As a result, your IT organization increases the number of machines it manages per administrator while decreasing the time it takes to manage those machines. Page 29

31 Appendix A: Composite Organization Description Based on the interviews with the several existing users provided by VMware, Forrester constructed a composite company that we will call Reliance Services. Forrester created a Total Economic Impact (TEI) financial framework in order to generate the potential return on investment (ROI) baseline analysis for organizations considering deploying VMware vcenter Operations, an array of operations management and analytics software solutions designed to help ensure service levels, optimize IT resource usage, and manage configuration compliance. This Forrester study illustrates the financial impact of VMware s vcenter Operations suite by aggregating the findings from the customer interviews and portraying a composite organization that has benefited from integrating vcenter Operations into their IT service processes. Reliance Services is a US-based organization employing nearly 5,000 people around the world in eight offices across seven countries on three continents. The company offers a full range of IT and business process services for its clients, which range in size from very small companies to large multinational corporations operating in a wide variety of industries. Reliance Services 45-person IT department, like other corporate functions, operates as a shared service for the company s various technology-driven businesses around the world; among other responsibilities, it is in charge of administering, managing, and maintaining the organization s various applications, servers, databases, and networks, including storage area networks. It regularly manages and administers about 300 applications, 35 of which can be considered highly critical tier one applications, on an infrastructure that consists of approximately 1,500 physical servers and 2,000 virtual machines and more than 1 petabyte of data housed in two data centers. Forrester created this composite company to reflect an organization with the following characteristics: Reliance Services CIO has a particular focus on delivering around-the-clock service uptime assurance. Because IT is a particular enabler of business, the potential harm from frequent service failures is very high. For many of the company s operations, productivity and business development activities are entirely dependent on the availability of corporate , data collection systems, and internal and external customer-facing services. Therefore there is a high need for reliable, nonstop, ultra-high availability, continuously available servers, and uptime for mission critical applications. Reliance Services CIO also has an executive mandate to ensure high profitability and prudent investment. As an internal service organization where margins are thin, it s paramount to contain costs without sacrificing quality or service levels. The CIO has a mandate to get reduce capital expenditures through improved hardware utilization and better capacity planning. There is also a strong impetus to decrease IT infrastructure administration and operational management costs. Increasingly, IT executive management wants to find a solution that will provide actionable intelligence on IT productivity and shift the amount of time and effort spent by staff on routine time-sink activities to more revenue-generating IT projects and directives without affecting normal administration and maintenance activities. In the past several years, the IT infrastructure has grown along with the company, complicating the task of efficient, regularl monitoring. Reliance Services is looking for an automated solution that helps achieve optimal resource utilization, maximizes throughput, minimizes response time, and avoids overload without incurring the substantial capital expenditure costs associated with new hardware. Page 30