BUSINESS VALUE SPOTLIGHT

Transcription

1 BUSINESS VALUE SPOTLIGHT Using Information Lifecycle Management to Retire Legacy Applications and Slash Information Retention Costs: A Case Study on Adelphia April 2010 Sponsored by: Informatica, Inc. Introduction Change remains one of the constants in business. Mergers, acquisitions, bankruptcies, divestitures, leveraged buyouts, and joint ventures are some of the outcomes. These business changes often cause structural reorganizations, creating a variety of legal, financial, and operational requirements. The result is that business data must be kept available for many years, until all requirements have been processed. Adelphia Communications Corporation filed for bankruptcy in Adelphia had a large IBM mainframe installation so that its business records, kept mainly within the financial application database, would remain available. The cost of keeping this system up and running, even though it did nothing but generate reports, was over $250,000 per year for maintenance and licensing. In addition, Adelphia only had two employees remaining with the skills necessary to retrieve the data in the current application. Adelphia identified a critical requirement to shut down this application to avoid this ongoing cost, yet still keep the legally required information available. Business Value Highlights Industry: Telecommunication/Internet provider Location: Denver, Colorado USA Challenge: To eliminate costs associated with financial applications that are no longer necessary for operation while retaining data that is legally required for query and reporting Solution: Informatica Data Archive Cumulative benefits: $1.2M over 4 years ROI of 211% Payback in 16.1 months Average annual benefits: $250,000 in annual cost reductions $180,000 in IT staff efficiency improvement The company started a pilot project to see if it could archive the data to a file and query the data on demand using much cheaper hardware to avoid the hardware and software fees and personnel costs associated with its financial application system. Adelphia chose Informatica Data Archive, a component of the Informatica application information lifecycle management (ILM) product family, to accomplish this goal. April 2010 #10C6007 Page 1

2 After successfully relocating data and retiring a test application, the company proceeded to perform a full relocation of the data beginning in April The project involved archiving over 10 years of financial data from all modules including Accounts Payable, General Ledger, Payroll, and Fixed Assets. The result was a file-based archive that holds all the necessary application data and can be easily queried and reported against to deliver information as required. This new archiving system is now providing better performance at a fraction of the cost of managing the original mainframe financial applications and computer environment. IDC developed a four-year return on investment (ROI) model based on discussions with Adelphia. The results show a projected ROI of 211% and a payback period of 16.1 months. The net benefit over four years equals over $1.2 million. Overview The company purchased a Windows server for $12,000 to serve as the platform for the archive. Three IT staff members are carrying out the project at 40% of their time, or 1.2 full-time equivalents (FTEs). Additional end users assisted with data validation and reporting. After the archiving is completed, the company will need only two people part-time (less than 0.1 FTE) managing the system on an ongoing basis. The problem that most companies face is they cannot simply retire an application while retaining access to its data. The database structure is often too arcane to query directly, making it difficult to access application data required for legal, financial, and operational reporting. Alternatively, the application database is running in a database management system (DBMS) that is itself expensive to maintain and should also be retired. In addition, as technology continues to change, a company may not have the necessary skill sets to access and maintain the data. A compelling way to maintain retired application data is to utilize software that facilitates data relocation to a cheaper, secure platform that enables access without an expensive relational database management system (RDBMS) license and maintenance fee structure on inexpensive hardware. In the case of Adelphia, which needed to reduce infrastructure costs and offset the loss of application knowledge over time, finding a method to query historical data easily for legal and audit purposes was paramount. Informatica Data Archive allowed the company to build a readonly archive that is kept in a compressed file that is 95% smaller than the original database. The file archive is fully searchable, capable of supporting query activity through standard open database connectivity (ODBC)/Java database connectivity (JDBC) interfaces, and far less costly to maintain than the original fully functioning application database. Benefits While scaling down its operations, Adelphia experienced benefits in two areas: cost reduction and staff (both IT and end-user) efficiency. The proportion of these benefits and the average annual benefit of Informatica ILM are shown in Figure 1. April 2010 #10C6007 Page 2

3 Figure 1 Averag e An nual Ben efit of Informatica: Total = $430,000 $250,000 $1 80,0 00 Cost Reduction IT Staff Efficiency Source: IDC, 2010 Cost Reduction The primary cost reduction was achieved by retiring a mainframe enterprise server that was costing Adelphia close to $250,000 per year to support. Going forward, the server's hardware and software costs will be minimal. In addition, Adelphia was able to fully retire the financial application, treasury application, and franchise legal application and use standard ODBC/JDBC interfaces to query the Informatica file-based archive and present the staff with the necessary application data on demand. Staff Efficiency Prior to the implementation, three Adelphia IT staff members and one non-it staff member were involved with maintaining and querying the data, which required approximately 50% of their time (equivalent to 2 FTEs). At the conclusion of the migration project, the organization will require only two staff members to maintain the system at less than 5% of their time. The company estimated that these increases in staff efficiency will save it approximately $180,000 annually. Adelphia also noted that data is more readily available since the Informatica deployment because it is in a more current data format that allows access through standard ODBC/JDBC interfaces. The company runs data queries periodically as required and no longer has to export data from the mainframe, convert the file type, and then operate on the data. Previously, the company had only two staff members with the skill base to pull reports from the system. Now almost every employee can easily query data. In addition, the data is in one application rather than multiple applications housed on different hardware. Adelphia will be able to reduce head count by two and more effectively utilize the remaining personnel. April 2010 #10C6007 Page 3

4 As Tony Naes, an Adelphia executive, said in the interview, "Before Informatica, we would export data off the mainframe and load it into a file. That would have to be queried from Access or Excel and was not efficient. Now, we can do that in about five minutes." Informatica ILM Return on Investment IDC conducted an in-depth interview with Adelphia and calculated the following results. Over the next four years, the company will receive a 211% return on the total investments. Four-year benefits total over $1.2 million, and payback occurs in 16.1 months. Table 1 shows the full ROI results. Investment includes Informatica's cost over time, Adelphia's staff's time to implement and test data, a new server, and ongoing IT staff time required to manage Informatica. Table 1 Four-Year ROI Analysis Benefit (discounted) $ 910,628 Investment (discounted) $ 292,570 NPV $ 618,058 ROI 211% Payback 16.1 months Discount rate 12% Source: IDC, 2010 Conclusion As these results show, achieving close to $430,000 in annual cost and IT staff savings makes a lot more sense than maintaining old applications that serve no other purpose than to provide reports and respond to queries. Change remains a constant, and companies migrating from older to newer applications, or consolidating operations from merged companies on a single application and need to retire others, can realize significant cost benefits from using file archiving in this way. Today, thousands of firms are held hostage by old applications that they no longer use but believe they must maintain to preserve access to important financial data. Some companies think that they can simply back up the data and retire those applications, but they are wrong. After a few years the data will be unrecoverable because of technology changes, special characteristics that are application dependent, or other factors that make reading those backup tapes a near impossibility. Companies do not need to lose valuable and legally required data or spend hundreds of thousands of dollars maintaining old, unused applications. By implementing database archiving software, businesses can preserve both the data and its metadata and gain the means to query, report on, and, if necessary, recover old application data. Products such as Informatica Data Archive can free up resources, cut IT costs, and liberate the hostages of archaic applications. April 2010 #10C6007 Page 4

5 Calculation Method IDC performs a three-step process to calculate the ROI and payback period: 1. Measure the benefits from cost reductions and IT staff efficiency since the deployment. 2. Ascertain the total investment made while deploying the solution (hardware, software, FTE requirements for deployment and annual maintenance, customization, training, and consulting). 3. Project the investment and benefit over four years and calculate the ROI and payback for Informatica. The ROI is shown as the four-year net present value (NPV) of the benefit divided by the discounted four-year investment. ROI Table Calculations Benefit (discounted) is the present value of the four-year benefit. Investment (discounted) is the present value of the four-year investment, plus the initial investment during deployment. Given that the ROI model assesses monetary value over time, the present value is applied to the figures above to examine these figures in today's current value. Net present value is the present value of the four-year benefit minus the present value of the four-year investment. ROI is the net present value (the present value of the four-year benefit minus the present value of the four-year investment) divided by the investment (discounted). Payback period is the initial investment divided by the average monthly year 1 benefit. To account for the time value of money, IDC bases the ROI and payback period calculations on a 12% discounted cash flow. Copyright Notice 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. April 2010 #10C6007 Page 5