Consolidating on iseries

Transcription

1 Avneesh Saxena VP, Computing Systems Consolidating on iseries

2 CIO Challenges Today Restructuring Emerging Applications Drive Costs Down Security Performance Mobility Capacity Increase Responsiveness Provide Better Services Heterogeneity Consumptionbased Costing Distributed Systems Outsourcing Down Down Down P&L Contribution Deliver Services

3 Falling Budgets & Growing Competition put Pressure on Revenue Growth APEJ Server Market, Unit Shipments ('000) % 8.6% 8.2% 8.6% 9.4% 9.8% 8.9% 8.5% 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Revenue (US$M) Unit Shipments Revenue (US$M) % of the Total IT Spending 0 Source: IDC Asia/Pacific, April 03

4 Competitive differentiation Strategic Vs Tactical Spending High Low Tactical Infrastructure Servers Hardware Cost Competitive edge Strategic Business Critical Servers High

5 Optimizing Your Cost at All Levels Competitive differentiation High Low Legacy Servers New Ideas Strategic Tactical True competitive edge Business Critical Servers Infrastructure Servers High Return On Investment

6 IT Infrastructure Trends Costs of Business Availability of Service 99.9% Deployment Time Systems per Staff $ Hours 15 $$ Always On Days 50 Server (or service) Utilization 10-20% to 40%+ IS Managers per server Solution Deployment Redeployment time and costs Availability of Service not Server Increased Pressures on Time-to- Market for new or improved service Server Utilization 10% %+ Source: IDC March 2003

7 Utility Computing, the Next Transition IT Infrastructure Efficiency Client/server Internet Utility computing Mainframe Minicomputer Source: IDC 2003

8 Utility Computing Evolution Phase 1: Consolidation Phase 2: Sharing Compatible Resources, Automation Phase 3: Share All Resources, Virtualization

9 IDC Demand-Side Study

10 Discussion Points Understanding TCO Vs ROI ROI Imperatives Key Findings

11 ROI Vs TCO ROI For determining whether or not to acquire software or services or invest in an IT project -the question is if Compares the costs before and after within the same customer For vendors trying to educate the market on the financial benefits of their product or service TCO For determining which hardware or solution to implement- the question is which Compares the costs experienced by one customer to another customer For vendors trying to educate the market on the price competitiveness of their product

12 The ROI Imperative What is ROI? Most common measure to judge attractiveness of an investment Examines the impact on the organization s business as a result of implementing change ROI = Payback = Net Present Value Initial Cost/Investment Investment Annual value of benefits X365 Days

13 What we Count in a ROI Analysis Equipment Costs (hardware and software) Initial purchase (lease), installation,(internal and external) Annual Upgrades, maintenance Other factors growth, life span, resale Staffing costs Operations costs related to installation, operations and support of the technology Productivity costs time spent not doing their job (i.e. training, travel, downtime) Other Costs User and Staff training Downtime

14 Downtime Can be Crucial Significant savings were realized through productivity improvements and a decrease in lost revenue both linked to better uptime/availability. Downtime Revenue Loss Calculation Hours per month multiplied by % of servers affected -12% Productivity loss factor -.32 Average revenue loss per hour - $43,799 50% tax rate on revenue 12 months in a year

15 The Three Key Areas of ROI Increasing productivity increasing the percent of time employees spend in activities contributing to the business Reducing costs reducing overhead and non-cogs (cost of goods sold) expenses usually generated through increased efficiency Hard Savings salary X productive time X reduction factor Soft Savings lower turnover, lower downtime, better customer service, higher customer satisfaction Generating revenue creating new revenue sources, reducing time to market, reducing lost revenue

16 Server Consolidation on iseries Pays Back in Less Than 1 year 3-Year ROI for Server Consolidation (per 100 users) Years Annual cost savings $ 180,909 Net Present Value (NPV) $ 302,052 Total investment $ 141,227 ROI = NPV/Investment 213.9% Payback = (Investment/ First year cash flow) 261 days Discount Rate 12%

17 Half of the Savings Were in Hard Dollars User productivity 14% Downtime revenue 22% Savings Areas IS productivity 13% Cost reduction 51% Three-year savings of $542,728 per 100 users. Average annual savings are $180,909 51% of savings were generated through consolidation reducing the hardware, software and staffing associated with reducing servers by 40%

18 The Costs Benefits of Consolidation Increase Each Year $1,400,000 $1,200,000 Average Total Costs per 100 Users $1,000,000 $800,000 $600,000 $400,000 Windows and Linux on x86 Windows and Linux on iseries $200,000 $0 Year 0 Year 1 Year 2 Year 3

19 Why - Because the Benefits far Outweigh the Additional Investment Total 3 Year Savings Analysis Per 100 Users Year 1 Total Average % of total Cost Reduction $ 108,846 $ 275,915 $ 93,398 52% IT productivity $ 24,288 $ 71,750 $ 24,288 13% User productivity $ 23,200 $ 73,350 $ 24,829 14% Unplanned Downtime $ 41,201 $ 121,714 $ 41,201 23% Total Savings $ 197,534 $ 542,728 $ 180, % Investments $ 41,720 $ 141,227 $ 47,076

20 IT managers Spend More Time Supporting Business Initiatives IT managers Time 60% 50% 40% 30% 20% 10% 0% Before After Availability User Support Operations Server Support Desktop Support Business Support It staff 4% more efficient overall Overall time spent in low level IT support tasks reduced by 70% Time dedicated to activities adding business value increased 21%

21 Hard savings Pass Investments in the First Year of Consolidation $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 ($20,000) ($40,000) ($60,000) Hard Savings VS Investment Savings from consolidated hardware and software exceed investment Biggest savings occur in year one as servers are reduced by 40% Savings from reduced IT staffing costs run nearly equal to investment Investments Outsourcing IS efficiency HW/SW

22 Key Performance Criteria Before After Cost Impact Users per server % reduction in the number of servers needed generates $93,000 per 100 users Users/IT Staff Manageability means that 22% fewer hours are required to support iseries which saves $73,000 per 100 users Unplanned Downtime (hrs per month) Downtime is reduces by 90% which reduces lost productivity by $25,000 per 100 users per year

23 Similar Results were Observed in an IDC TCO Study 5-year TCO Comparison US$ ('000) iseries/as400 x86 Unix Key Highlights iseries sites had 3.5 servers per IT staff compared with 2.2 for Unix and 1.3 for x86 Study found 5 times lesser downtime for iseries ERM solutions than for comparable Unix server based ERM and 16 times lesser than comparable x86 server Small Companies Large Companies Source:Server Cost of Ownership in ERM customer sites, IDC

24 Take Away Points TCO and ROI are important decision factors in the IT acquisition process Windows and Linux Server consolidation on IBM iseries reduces the total costs of the server environment and generates a positive ROI Reducing integration costs Reducing hardware, software and service costs Reducing annual maintenance and support costs Lower downtime Longer lifespan Higher productivity and efficiency

25 Study demographic 6 respondents in North America, Europe and Asia Pacific 4 manufacturers, 1 professional services,1 hospitality Smallest 100 employees Largest 1,600 employees Study Participants Number of employees 725 Annual revenues $270 Million IT staff 11 Workloads 10 Servers before 34 Servers after 20

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