WHITE PAPER Quantifying the Return on Investment from Deploying Configuration Management Solutions

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1 WHITE PAPER Quantifying the Return on Investment from Deploying Configuration Management Solutions Sponsored by: HP Frederick W. Broussard July 2006 EXECUTIVE SUMMARY Global Headquarters: 5 Speen Street Framingham, MA USA P F Managing change is a constant challenge in today's dynamic business environment. Business agility is key, calling for faster provisioning, reprovisioning, and updating of mission-critical software, which not only needs to be up to date but also reliable and secure. Further, despite the increasing complexity and criticality of software, IT departments face growing demands to improve software development productivity and quality or risk having the work outsourced. Additionally, IT departments are being burdened with escalating regulatory compliance and audit requirements. Semiautomated or task-based approaches to software management are no longer sufficient to deal with these challenges, especially with the added demand for IT to align with changing business needs. What is required is the automation of the full software life cycle. One company that is addressing this requirement is HP. The HP OpenView Configuration Management software automates the entire software life-cycle management process from discovery, deployment, and ongoing maintenance to migration and retirement. HP OpenView Configuration Management automatically deploys and manages the entire software stack to a desired state and provides continuous management by monitoring and adjusting to changes in policy. HP claims that dynamic provisioning for initial deployment and automated desired-state management for ongoing compliance lowers costs and reduces software-related problems. The company also argues that continuous software configuration automation improves reliability and repeatability, increases productivity, and reduces security risks, downtime, and customer dissatisfaction. ROI Analyst for HP OpenView Customized business case tools are now available that estimate the ROI and organizational benefits customers can expect from implementing HP OpenView management solutions. The tools are based on data gathered by IDC from HP OpenView customers and industry-standard data provided by Alinean. Please contact your OpenView account representative to learn more about this service.

2 To validate and quantify the business benefits of such software configuration management solutions, IDC conducted in-depth interviews with a number of organizations using the HP OpenView Configuration Management solution. IDC asked detailed questions about the implementation costs in deploying the solution and about the cost savings and other benefits achieved after deployment compared with those realized from the prior use of homegrown and competitive products. IDC found that IT staff productivity for the companies surveyed jumped by an average of 25%, resulting in average cost savings over three years of close to $1 million annually. When normalized for the number of end users supported by the company's IT organization, the savings amounted to $10,169 per 100 users. The IT managers interviewed reported that they had realized substantial savings in staff hours expended on configuration management as well as on patch deployment and management (see Table 1). TABLE 1 Time Savings on IT Staff Activities from Deploying HP OpenView Configuration Management Activity Time Savings (%) Patch deployment and management 51.0 Change management 50.0 Configuration management 48.0 Applications management 25.0 User administration 23.0 Problem management 11.0 Help desk 9.0 Source: IDC, 2006 In addition, increased user productivity from reduced downtime and time lost waiting for help desk and other IT administrative support contributed an average annual savings over three years of $3,696 per 100 users. Downtime dropped by 80% following the deployment of the management software. This reduction in downtime resulted in an average recaptured revenue of $1,794 per 100 users annually that would otherwise be lost due to network, system, and application unavailability. The companies surveyed also saved an average of $16,495 per 100 users from improved IT management efficiency and other economies. The average number of users managed by each full-time employee (FTE) rose from 106 before deploying the management software to 129 afterwards, an increase of 21%. This improved management efficiency yielded average annual payroll savings of $8,662 per 100 users 2 # IDC

3 over the three years. Additional savings came from the elimination of other management tools and outsourcing contracts, better control of software licensing, and reductions in the number of visits to remote sites for repairs. These savings averaged $7,833 a year per 100 users. For the HP customers surveyed, the total annual benefits averaged $31,512 per 100 users, or more than $3.1 million annually (see Table 2). The companies invested an average of more than $1.3 million over three years in deploying the HP OpenView Configuration Management solution, resulting in a net present value for the three-year savings of more than $5.9 million for the companies surveyed, or $58,713 per 100 users. Based on these numbers, the payback period from deploying the HP OpenView Configuration Management solution averaged 8.6 months for the companies surveyed, yielding an average return on investment (ROI) of 439%. TABLE 2 ROI Analysis for Deploying HP OpenView Configuration Management Item Three-year cost of investment Annual cost savings and increased revenue Net present value of three-year savings Payback period Average $1.3 million $3.1 million $5.9 million 8.6 months ROI over three years 439% Source: IDC, 2006 INTRODUCTION The need has never been greater for mission-critical software to be up to date and secure. As a result, software configuration automation is becoming increasingly important. Delivering updates to applications and patches to the operating system must be done as quickly as possible, especially with patches that repair critical vulnerabilities. Security requires that only IT administrators have access to sensitive user data and that only authorized users are accessing critical functions, applications, and data. With software management, individual functions are increasingly giving way to a process-based approach. From CIOs to IT administrators, the entire process for deciding on specific changes or updates to software residing on desktops, laptops, and servers is being addressed within an IT Infrastructure Library (ITIL) framework or other such maturity models as a way to lower costs in administering and managing systems, reduce error rates, and increase system stability IDC #

4 Aligning IT with the business is becoming even more critical, and it is now essential to embed all processes to provide stable systems for end users and to ensure that revenue-generating customers have the underlying technology needed to conduct smooth transactions. Frequently, aligning IT with business involves creating and implementing changes within systems as quickly as possible and without generating errors. This faster pace of provisioning, reprovisioning, and updating mission-critical software is also critical to stay ahead of vulnerabilities arising from viruses, trojans, and other threats. Managing software is further complicated by the growing importance of regulatory compliance and audit requirements and by the increasing complexity and criticality of software. Key personnel, software, hardware, and processes must be audited to verify compliance. Change and configuration software can help when it is used to verify access to systems and provide updates to key systems. For these and other reasons, IT departments can no longer rely on semiautomated or task-based approaches to software management. Solutions are needed that automate the full software life cycle. HP OpenView Configuration Management software, for instance, automates the entire software life-cycle management process from discovery, deployment, and ongoing maintenance to migration and retirement. By automatically deploying and managing the entire software stack to a desired state, HP OpenView Configuration Management enables IT administrators to be aware of server and hardware changes anytime they are being made. The desired state is maintained and enforced through policies selected by the IT administrator. As a result, administrators can quickly respond to changes whether mandated by business issues and needs, general user requirements, compliance needs for key users, or needed revisions to critical hardware or software assets. HP OpenView Configuration Management ensures that each computing device has the right software configuration at all times to support the business. Additionally, the software can be used to reconfigure systems should business needs or operational requirements change. Automating the entire software life-cycle management process ensures that customer service representatives, for example, have stable desktops or laptops so that they can focus on the needs of revenue-generating customers. Updates and patches can be developed, tested, and deployed to desktops with minimal disruption, such as when users are not at their desks. HP claims that dynamic provisioning for initial deployment and automated desired-state management for ongoing compliance lowers costs and reduces software-related problems, especially for larger organizations. The company also argues that continuous software configuration automation improves reliability and repeatability, increases productivity, and reduces security risks, downtime, and customer dissatisfaction. HP OpenView Configuration Management is designed to manage software on virtually any device and operating system as well as on virtually any scale and at virtually any level of complexity or rate of change. This is important because while Windows operating environments dominate the large enterprise client operating environment, the server operating environment can be composed of Linux and Unix operating environments as well as Windows. 4 # IDC

5 QUANTIFYING THE BUSINESS BENEFITS OF SOFTWARE CONFIGURATION AUTOMATION To validate and quantify the business benefits of software configuration automation solutions, IDC conducted in-depth interviews with a number of organizations using the HP OpenView Configuration Management solution. IDC asked detailed questions about the implementation costs in deploying the solution and the cost savings and other benefits realized. IDC then applied a proprietary ROI methodology to the results to determine the average payback period and ROI realized by the surveyed companies. Survey Demographics For this survey, IDC interviewed IT managers at eight companies of different sizes and from various industries in Europe, North America, and South Africa that had deployed the HP OpenView Configuration Management solution. The companies included service providers and enterprises in financial services, healthcare, high tech, manufacturing, and insurance. The average number of employees was 14,200, though some companies had workforces of 30,000 or more. The IT managers surveyed are responsible for supporting an average of 9,950 desktops and 2,500 laptops and other portable computers throughout their organizations. They also manage an average of 475 servers at 22 sites, running a variety of applications across mixed Windows, Unix, and Linux servers. Managing these devices and servers, and the networks that support them, requires a significant investment in IT management. The average IT management team at these organizations included 425 people with an average loaded salary, calculated over a three-year period, of $73,245. Prior to deploying the HP OpenView management solution, the companies used either homegrown or competitive management products, or both. IDC's ROI Methodology To quantify the business benefits of IT management solutions, IDC has developed an ROI methodology that measures the total costs of deployment and the sum of the savings achieved. The methodology calculates the ROI in a three-step process: 1. Ascertain the investment made in the purchase and implementation of the solution and the associated training and maintenance costs. To get an accurate assessment of the investment in deploying HP OpenView Configuration Management, IDC asked for the deployment, set up, upgrade, and maintenance costs, as well as the total cost of the software and training. This investment included the loaded costs of the incremental staff required to support the HP OpenView Configuration Management software IDC #

6 2. Measure the gains in IT staff and user productivity from deploying the solution, as well as the revenue recaptured from reduced downtime, and the cost savings from increased IT staff efficiency and lower capital and operating expenses.! Productivity savings. IT staff productivity indicates how effectively IT managers and their staff use their time. Besides reducing operations costs, gains in IT productivity can free up staff to implement new initiatives more rapidly, helping to create a competitive edge.! User productivity is increasingly dependent on service uptime as organizations become progressively more network-centric. When users are unable to access network resources, their productivity may be severely impaired. User productivity also suffers when employees have to wait for help desk support or other IT administrative tasks. Since users often are able to move to other business applications when service interruptions or performance degradations occur, only a small fraction of the potential user impact time is counted toward the final ROI result.! Recaptured revenue. Higher service availability also contributes to businesses' top lines because less revenue is lost due to downtime and potential service penalties are avoided. Additionally, downtime can be costly in terms of diminished customer satisfaction and possible loss of a customer's business.! Cost savings. Costs can also be cut by improving IT staff efficiency, which is a measure of how well the IT management organization can achieve economies of scale and reach with its people, tools, and practices. To remain competitive, companies must be able to grow their systems and networks at a faster rate than the IT staff required to support them. Skilled IT professionals continue to be scarce, so companies are expecting existing staff to take on more work and responsibilities. If IT departments are unable to achieve the required economies of scale and reach, they restrain corporate managers' business decisions and discourage aggressive deployment of technology to gain a competitive advantage. 3. Calculate the payback period and ROI for the deployed solution. From the results of the interviews, IDC was able to calculate the average payback period and rate of return from investing in HP OpenView Configuration Management, as well as the net present value of the savings. IDC bases its calculations on a number of assumptions:! Time values are multiplied by burdened salary (salary + 40% for benefits and overhead) to quantify efficiency and manager productivity savings.! Downtime values are a product of the number of hours of downtime multiplied by the number of users affected.! The impact of unplanned downtime is quantified in terms of impaired enduser productivity and lost revenue. 6 # IDC

7 ! Lost productivity is a product of downtime multiplied by burdened salary.! Lost revenue is a product of downtime multiplied by the average revenue generated per hour.! The net present value of the three-year savings is calculated by subtracting the amount that would have been realized by investing the original sum in an instrument yielding a 12% return to allow for the missed opportunity cost. Since not every hour of downtime equates to a lost hour of productivity or revenue generation, IDC attributes only a fraction of the result to savings. As part of the survey, IDC asks each company what fraction of downtime hours to use in calculating productivity savings and the reduction in lost revenue. IDC then taxes the revenue at that rate. Further, because IT solutions require a deployment period, the full benefits of the solution are not available during deployment. To capture this reality, IDC prorates the benefits on a monthly basis and then subtracts the deployment time from the firstyear savings. SURVEY RESULTS In this survey, IDC asked a number of quantitative questions about management processes and the associated time and staffing requirements before and after deploying the HP OpenView Configuration Management solution. IDC asked about the implementation costs as well as the savings realized, including the revenue recaptured because of reduced downtime. Deployment Drivers In this survey, IDC also asked a number of qualitative questions about the reasons for deploying the management solution and how well the solution had met expectations and achieved anticipated business objectives. Financial Services For one financial institution, the need to control its desktops and make sure no private information was misused was the motivation for deploying the HP management software. "We have HIPAA, credit card, and privacy, three tremendously restrictive data compliance standards," the respondent explained. "We have to limit access to 'need to know,' so the software's ability to control the desktop is huge. [The software] has also made us more efficient and given us a competitive advantage." "We implemented [the solution] to deploy software. We were doing an XP rollout. We did the analysis, including TCO [total cost of ownership] for three vendors, and HP was by far the best. It's adaptable and compared to the others we looked at, it followed our methodology better and fit within our Active Directory strategy better." 2006 IDC #

8 "We have a field service group that deploys applications. It used to be about seven, and it's now down to three. We've also increased user productivity by keeping the desktops and the software running pristinely. Any time you have a help desk call, you have two costs. If the call lasts ten minutes, say, that's time lost on the user's side, too. We're saving about 30 minutes a day with some users, and an average of 10 minutes or so a day for everyone. Also, we've had no viruses on the desktops [since deploying the software]. "With patch management, the ability to do impact analysis is an unbelievably good tool for SOX [Sarbanes-Oxley] compliance and audits. The whole [160] IT staff benefits from that; in fact, the entire bank benefits. The software tells you where you are going to have a problem before the patch is loaded, and it gives you a complete and comprehensive report. With SMS, the reports are poor. You just don't know why [the patches] don't take. With HP, you have the ability to drill down and you know why you had a problem. You know everything." A financial institution in South Africa chose the HP solution, in part, because of the minimal hardware requirement. "If we had gone with SMS, we'd have needed a server on almost every site that we have," the respondent said. "That's about 700 extra servers, plus the people we'd need to support them. Remember, we pay a lot for hardware here in South Africa." "[Because of the management software], we've reduced our internal SLA for repairing a machine from 32 to 8 hours and cut the number of field support engineers needed to fix problems after a software release. We have about six major releases a year. Before, it would take 14 field support engineers a week to fix all the problems. Now we have two, and they do lots of other stuff too." Another financial institution says the HP management software enables it to more quickly deliver the things that help it to increase revenue or become more competitive. "We are managing a little over 500 apps, and we probably save a couple of hours a month per app," the respondent said. "The HP software allowed us to get rid of a custom database and instead leverage the existing Active Directory structure. By using a directory like AD or LDAP, where users are already predefined and we don't have to redefine them, we can save considerable time. We're also leveraging Active Directory to identify groups. Instead of a one-to-one relationship, we use Active Directory to say that this group of predefined users is going to get this application. Before, the people working on electronic software distribution didn't do any enabling of business. Now, they probably spend three weeks out of every month working on [business-enabling] projects." "Users are happier, too. Before, if a machine needed servicing, the user was locked out. With this tool, when a problem happens, they can continue to function. The software installs in the background, so users can continue to work while they are receiving software updates. Also, a new employee would sometimes wait one or two days before they had the right software. Now, a new employee gets it right away. There are probably new employees a month, so that's pretty significant." 8 # IDC

9 Healthcare A university teaching hospital has increased user uptime and halved the deployment time for new applications with the HP management software. "Whenever we can increase the time that doctors can see their patients, or see more patients, that's huge for us," the respondent said. "And we've increased uptime by 5%." "Before, we had multiple incidents weekly where live nursing units were down for 30 minutes or more. We don't see any of that now. If we got 100 calls before on the old product, we now get 30 or 40. Every application [is delivered] at night when 90% of the workforce isn't here. During the night, we verify and guarantee that each PC is up and available for the doctor in the morning." "With the comfort level we have in the development and deployment of applications, it's much easier to plan and project rollouts and deployments. The tool has also allowed us to increase the warranty time on our boxes from three to five years, saving us about $150,000 a year." Another healthcare firm was able to win government business because of the HP management solution. "We have a contract with the Department of Defense, where we have to meet certain requirements for patch levels on all of our PCs," the respondent noted. "We could never have won that contract without [the HP management solution] because there's no way we could have met the requirement." Service Provider A Central European service provider was able to pay for the HP management solution just from the savings in its outsourced PC maintenance costs. "Before, the cost was $8 million a year for 15,000 PCs," the respondent said. "Now we pay $2.5 million a year for 9,000 PCs, including service and spare parts." The company has also reduced the number of help desk calls and staff members. "We had 16 people on the help desk before. Now we have 12 people answering calls, and they are maybe 10 15% more efficient because of [the HP management software]. We have an interface into our configuration database so the help desk people can see the hardware configuration of each PC and what software is installed. Because of this, we have 30% first-call resolution." "Before we did not resolve anything remotely. It would take one or two business days to solve a problem. Today 40% of the help desk calls can be resolved remotely. We also manage licenses better. We know what licenses we have and how much hardware is needed. I think that we save $100,000 a year from this alone." High Tech A multinational high-tech firm deployed the HP management solution initially to improve security. "That was the time when viruses were really going crazy and we needed a way to patch our machines," the respondent said. "We're avoiding having to update machines manually, so we can now get a patch out worldwide in about two days. We figured that we paid for [the management solution] in less than three security sweeps of our machines." 2006 IDC #

10 "We started with the basic tools for software inventory and distribution and each year tacked on functionality. We're now implementing an image strategy, where we lay down the operating system on the bare metal and build the image on the machine by using layers of applications. When we get the imaging capabilities deployed, it will take 10 to 15 minutes to image a machine. It currently takes about an hour. We get about 500 new machines a year in headquarters alone, so the savings will be considerable." "Another thing that [the management solution] has enabled us to do is implement a technology refresh. We've been able to implement a policy of 'one machine per user' because we know what they have and whether people are installing things that they shouldn't be. We also know exactly how many copies of software we have. So if someone comes and audits us, we can show them exactly how many licenses we have installed and how much we paid for them." Insurance One U.S. insurance firm deployed the HP management solution to lower troubleshooting costs by reducing the number of users with administrative rights and gaining greater control over its server environment. "Before, anyone could install an app, and who knows how they installed it," the respondent said. "When it broke, we got called. People would just make changes in the middle of the day, and we couldn't do anything about it. Now, we're saving two to three hours a month just at the help desk level. We've also tripled the number of servers and haven't needed to hire anyone, so I think we're getting a good ROI." "Some of the configuration management we're now doing is helping other teams with license reclamation, maybe saving $50,000 a year. We've also avoided about 10 hours per quarter of travel time. Once or twice a year we have to roll out a hot fix. It's probably about six to eight hours of work now. Before, it was at least double." Determining the ROI and Payback Period From the results of the interviews, IDC was able to determine the average ROI and payback period that the surveyed companies realized from deploying the HP OpenView Configuration Management solution, based on increases in IT staff productivity and user productivity, other cost savings, and the recapture of previously lost revenue. IT Productivity To determine the increase in IT staff productivity from deploying the management software, IDC asked questions about staff time needed for various activities related to configuration management, before and after implementation of the HP software. The IT productivity of the companies surveyed jumped by an average of 25%, resulting in an average cost savings over three years of close to $1 million annually. When normalized for the number of end users supported by the company's IT organization, the savings amounted to $10,169 per 100 users (see Figure 1). The IT managers interviewed reported that they had realized substantial savings in staff hours expended on change and configuration management as well as on patch deployment and management. 10 # IDC

11 FIGURE 1 Average Annual Savings from Deploying HP OpenView Configuration Management Other economies (25%) IT productivity (32%) IT efficiency (27%) Recaptured revenue (6%) User productivity (12%) Total = $35,512 per 100 users Source: IDC, 2006 Time savings on patch deployment and management after deploying the management software averaged 51%. On average, the companies also spent 50% less time on change management. Additionally, there were average time savings of 48% in configuration management. Deploying the management software also saved the companies an average of 25% in time spent on managing applications, as well as 23% on user administration, 11% on problem management, and 9% on help desk management. User Productivity User productivity is impaired when employees wait for help desk and other IT administrative support and when system downtime prevents access to needed applications and information. To determine the impact of HP OpenView Configuration Management on user productivity, IDC asked about time lost waiting for support, before and after deploying the software, as well as the before and after number of downtime incidents and amount of downtime. IDC also inquired about the percentage of users affected and the estimated revenue lost per hour of downtime. Downtime among the companies surveyed dropped by 80% following the deployment of the management software. This reduction in downtime resulted in an average recaptured revenue of $175,751 annually. Increased user productivity from reduced downtime and time lost waiting for help desk and other IT administrative support contributed an average annual savings over three years of $362,097, or $3,696 per 100 users IDC #

12 Cost Savings Additional savings came from increases in IT efficiency resulting from deployment of the management software, elimination of other management tools, and reductions in the number of visits to remote sites for repairs. To determine increases in IT efficiency, IDC asked questions about the average number of users supported by each staff member, before and after deploying the HP OpenView management solution. IDC also asked about the IT staff salaries. For the companies surveyed, the average number of users managed by each FTE rose from 106 before deploying the management software to 129 afterwards, an increase of 21%. With an average first-year loaded salary of $69,702, and annual increases of 5%, the payroll savings from increased management efficiency averaged $824,431 a year over the three years, or $8,662 per 100 users. Additional savings came from the elimination of other management tools and outsourcing contracts, better control of software licensing, and reductions in the number of visits to remote sites for repairs. These savings averaged $767,473 a year. Taken together, the savings from improved IT management efficiency and cost reductions yielded an average total savings of close to $1.6 million a year, or $16,495 per 100 users. Payback and ROI Overall, the companies invested an average of more than $1.3 million over three years in deploying the HP OpenView management solution, including purchase and installation, IT support, training, and maintenance. For the HP customers surveyed, the total benefits averaged more than $3.1 million annually, or $31,512 per 100 users. IDC accounts for the opportunity costs realized by not having invested the initial amount in some other instrument yielding a 12% return. This results in a net present value for the three-year savings of more than $5.9 million for the companies surveyed, or $58,713 per 100 users. Based on these numbers, the payback period from deploying the HP OpenView Configuration Management solution averaged 8.6 months for the companies surveyed, yielding an average ROI of 439%. CHALLENGES AND OPPORTUNITIES HP faces a challenge from vendors that are emulating the desired-state focus of the HP OpenView Configuration Management software. While imitation can be flattering, it threatens what has made HP OpenView Configuration Management unique among its competitors. HP will have to continue distinguishing itself from the competition. As for opportunities, the release of the Windows Vista client operating environment will allow organizations to review how they manage clients and how all processes within organizations may be streamlined or simplified. This review can lead to IT departments buying more solutions from HP if the company presents the business case that its entire product line of servers, desktops, and laptops is intended to simplify management, is easy to acquire, and is tailored to help organizations deploy Windows Vista when the organizations are ready. 12 # IDC

13 HP can also benefit from its broad product line of hardware, software, and services for the entire customer base, from large organizations to small firms. HP's ProLiant server line, Compaq laptop and desktop computers, and installation, training, and maintenance services can be bundled to meet multiple price and pain points and for easy and quick installation for high ROI and fast payback. Further, HP's ability to bundle client and server hardware, infrastructure software, and professional services into a single offering provides the company with a competitive advantage, especially with its change and configuration management solutions. Finally, HP's good name brand could be leveraged, especially in midsize organizations, where smaller vendors can provide solutions but don't have HP's name brand and global reach. CONCLUSION In today's dynamic business environment, IT departments need management solutions that automate the full software life cycle to ensure that mission-critical software is up to date, reliable, and secure. To validate and quantify the business benefits of such solutions, IDC conducted in-depth interviews with organizations of different sizes and from various industries that had deployed HP OpenView Configuration Management software. IDC asked a series of questions on specific IT administrative processes, and the associated time and staffing requirements, before and after deploying the management software. The survey found that deploying the management software generated considerable savings from increased user productivity, reduced downtime, and higher IT staff productivity and efficiency. These savings covered the cost of deploying the software in a short period of time, after which the companies continued to enjoy the cost savings, creating a sizable ROI. For the companies surveyed, the payback period from deploying the HP OpenView Configuration Management software averaged 8.6 months, yielding an average ROI of 439%. 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 2006 IDC. Reproduction without written permission is completely forbidden IDC #