A Frrester Ttal Ecnmic Impact Study Prepared Fr IBM The Ttal Ecnmic Impact Of IBM s Wrklight Platfrm Cst Savings In The Develpment And Maintenance Of Multiplatfrm Mbile Apps Prject Directr: Jan ten Sythff Cntributr: Jn Ericksn April 2013
TABLE OF CONTENTS Executive Summary... 2 IBM Wrklight Decreases The Csts Of Multiplatfrm App Develpment, Integratin And Maintenance... 2 Factrs Affecting Benefits And Csts... 4 Disclsures... 5 TEI Framewrk And Methdlgy... 6 Analysis... 7 Interview Highlights... 7 Csts... 8 Benefits... 10 Flexibility... 14 Risk... 14 Financial Summary... 16 IBM Wrklight: Overview... 17 Appendix A: Ttal Ecnmic Impact Overview... 18 Appendix B: Glssary... 19 Appendix C: Endntes... 19 2013, Frrester Research, Inc. All rights reserved. Unauthrized reprductin is strictly prhibited. Infrmatin is based n best available resurces. Opinins reflect judgment at the time and are subject t change. Frrester, Techngraphics, Frrester Wave, RleView, TechRadar, and Ttal Ecnmic Impact are trademarks f Frrester Research, Inc. All ther trademarks are the prperty f their respective cmpanies. Fr additinal infrmatin, g t www.frrester.cm. Abut Frrester Cnsulting Frrester Cnsulting prvides independent and bjective research-based cnsulting t help leaders succeed in their rganizatins. Ranging in scpe frm a shrt strategy sessin t custm prjects, Frrester s Cnsulting services cnnect yu directly with research analysts wh apply expert insight t yur specific business challenges. Fr mre infrmatin, visit www.frrester.cm/cnsulting. Page 1
Executive Summary Since the launch f Apple s iphne in mid 2007, the use f mbile apps has explded. Tday s enterprise is increasingly mbile and apps enable emplyees t have better access t infrmatin and custmers t access prducts and services. At the same time the range f devices is widening as tablets becme ever mre ppular, Andrid ges frm strength t strength and ther platfrms cntinue t ffer imprtant benefits. The cst f develping and maintaining apps increases with the number f platfrms supprted, the number f apps and the cmplexity f the apps; mre ften than nt enterprises have little cntrl ver them because they are tied t third party develpers. While creating and managing a single app n a single platfrm might be relatively straightfrward in a native envirnment, ding s acrss multiple platfrms and fr multiple apps rapidly becmes cst ineffective. Apps need t: Supprt multiple platfrms and frm factrs. Be cnstantly maintained, imprved and upgraded. Be secure. Have access t cntent and back-end systems. IBM Wrklight is a mbile applicatin platfrm (MAP), sftware which enables crss platfrm app develpment and maintenance. In June 2012, IBM cmmissined Frrester Cnsulting t examine the ttal ecnmic impact and ptential return n investment (ROI) enterprises may realize by deplying Wrklight. The purpse f this study is t prvide readers with a framewrk t evaluate the ptential financial impact f the Wrklight platfrm n their rganizatins. Our financial analysis cmpares the cst f creating and managing a single app in native envirnments and n the Wrklight platfrm. The app is cmplex, in that it needs t cnnect t multiple back-end systems, requires a high level f security, has many different user screens and is supprted acrss fur platfrms. IBM Wrklight Decreases The Csts Of Multiplatfrm App Develpment, Integratin And Maintenance Our interviews with ne existing custmer and subsequent financial analysis fund that the rganizatin we interviewed experienced the equivalent risk-adjusted ROI, csts, and benefits shwn in Table 1. Figure 1 cmpares the initial and annual csts f develping and maintaining a cmplex 4-platfrm app in a native envirnment and n the Wrklight platfrm. Page 2
Table 1 Five-Year Risk-Adjusted ROI, Ttal Benefits, Ttal Csts And Net Present Value Fr The First Cmplex, 4 Platfrm App 1 ROI Ttal benefits (PV) Ttal csts (PV) Net present value 363% $1,158,872 ($250,457) $908,415 Surce: Frrester Research, Inc. Benefits. The rganizatin we interviewed experienced the fllwing benefits: Cst savings f multiplatfrm app develpment and integratin. The Wrklight platfrm enables enterprises t create and integrate apps acrss multiple platfrms with lwer csts than ding s in a native envirnment. These savings cme abut in a number f ways including the ability t reuse the same cde acrss the different platfrms and the fact that the app is created and integrated acrss different platfrms within a single prject. App maintenance and upgrade cst savings. With Wrklight an app can be managed, imprved and upgraded quickly and easily acrss multiple platfrms, a prcess which is cmplicated and cstly in a native envirnment. Users als benefit because imprved apps becme available sner, leading t higher acceptance and usage. Cntent maintenance cst savings. Cntent maintenance becmes significantly easier n the Wrklight platfrm, with typical savings f 80%. In particular, the middleware layer facilitates security testing, a significant pain pint in native envirnments. Sunk csts fr additinal apps. This analysis has been undertaken fr a single app acrss fur platfrms. The return n investment fr additinal apps n tp f this first ne is higher because varius csts including internal staff set-up csts, dedicated platfrm staff, prfessinal services and hardware are fixed and s d nt increase as additinal apps are develped. Internal staff has been trained, the platfrm is in place and it is already being maintained; the present value f these sunk csts amunts t nearly $53,000. It is up t the enterprise t maximize its investment by ensuring that the platfrm supprts as many apps as pssible, althugh this can be a challenge in large cmpanies with different departments using different apps. Cst savings frm leveraging internal resurces. Enterprises can realize cst savings acrss the life cycle f the app by leveraging internal resurces and thus can rely less n external develpers. Nt nly are internal resurces typically lwer cst, but they als enable a higher degree f cntrl and flexibility. PCs are als supprted. One f the key factrs fr the enterprise t chse Wrklight ver ther MAPs was that it is the nly ne which supprts PCs. This was crucial given that the majrity f the enterprise s mbile wrkfrce still predminantly use laptps. Page 3
Csts. The rganizatin we interviewed experienced the fllwing csts: Sftware licensing csts. The platfrm incurs an initial sftware deplyment investment and nging service and supprt fees. Initial set-up csts. The deplyment f the platfrm incurs internal staff set-up csts such as planning, installatin and training as well as sme prfessinal services csts. Hardware investment and maintenance. The platfrm requires additinal hardware investment as well as the annual maintenance csts theref. Figure 1 Native Versus Wrklight 4-Platfrm Cmplex App Ttal Csts Cmparisn (Nn-Risk Adjusted) $600,000 $500,000 Native Wrklight $400,000 $300,000 $200,000 $100,000 $0 Initial Year 1 Year 2 Year 3 Year 4 Year 5 Surce: Frrester Research, Inc. Factrs Affecting Benefits And Csts Table 1 illustrates the risk-adjusted financial results that were achieved by the rganizatin. The risk-adjusted values take int accunt any ptential uncertainty r variance that exists in estimating the csts and benefits, which prduces mre cnservative estimates. The fllwing factrs may affect the financial results that an rganizatin may experience: The type f app(s) fr which Wrklight is t be used. Frrester has develped an ROI calculatr t help enterprises assess the ptential csts and benefits f different types f apps in terms f the degree f their cmplexity and the number f platfrms that need t be supprted. Therefre these factrs d nt impact risks fr this particular case study, but need t be taken int cnsideratin fr ther deplyments with differing app cmplexity and/r platfrm supprt. Page 4
Apps vary significantly in terms f their degree f cmplexity, frm very simple nes which have few screens/views, n r limited back-end access requirements and limited security requirements t much mre cmplex apps which need t access multiple back-end systems, have high security requirements and have multiple screens/views. The mre cmplex the app, the higher the benefits f Wrklight. The number f platfrms that need t be supprted. The native envirnment is better suited fr an app which nly needs t be supprted n a single platfrm, but the mre platfrms that need t be supprted, the higher the Wrklight benefits becme. The degree t which internal staff are used instead f external resurces acrss the app lifecycle, including develpment, integratin and maintenance. The lwer the dependence n external resurces, the higher the benefits f the Wrklight platfrm. As abve, the ROI calculatr is able t mdify these ratis, and s d nt impact the risks assciated with this particular case study, but need t be cnsidered fr ther cases. The internal staff set-up csts culd be higher if it takes lnger t plan the investment, train staff and implement the platfrm. This depends t sme degree n the legacy infrastructure as well as the way in which native apps are implemented and supprted. The app design and develpment csts f the first app n the Wrklight platfrm may be higher if it takes lnger fr internal IT staff t adapt t the platfrm and learn hw it is best used. This might particularly be the case if staff is in different lcatins and time znes; this risk can be mitigated by gd rganizatin and planning. The cst saving benefits ver the perid may be lwer because f different internal infrastructure such as backend systems and legacy app installatins. Disclsures The reader shuld be aware f the fllwing: The study is cmmissined by IBM and delivered by the Frrester Cnsulting grup. Frrester makes n assumptins as t the ptential return n investment that ther rganizatins will receive. Frrester strngly advises that readers shuld use their wn estimates within the framewrk prvided in the reprt t determine the apprpriateness f an investment in Wrklight. IBM reviewed and prvided feedback t Frrester, but Frrester maintains editrial cntrl ver the study and its findings and des nt accept changes t the study that cntradict Frrester s findings r bscure the meaning f the study. The custmer names fr the interviews were prvided by IBM. Page 5
TEI Framewrk And Methdlgy Intrductin Frm the infrmatin prvided in the interviews, Frrester has cnstructed a Ttal Ecnmic Impact framewrk fr thse rganizatins cnsidering implementing Wrklight. The bjective f the framewrk is t identify the cst, benefit, flexibility, and risk factrs that affect the investment decisin. Apprach And Methdlgy Frrester tk a multistep apprach t evaluate the impact that Wrklight can have n an rganizatin (see Figure 2). Specifically, we: Interviewed IBM marketing/sales/cnsultants persnnel and Frrester analysts t gather data relative t Wrklight and the marketplace fr Wrklight. Interviewed ne rganizatin currently using Wrklight t btain data with respect t csts, benefits, and risks. Cnstructed a financial mdel representative f the interviews using the TEI methdlgy. The financial mdel is ppulated with the cst and benefit data btained frm the interviews as applied t the cmpsite rganizatin. Figure 2 TEI Apprach Perfrm due diligence Cnduct custmer interviews Cnstruct financial mdel using TEI framewrk Write case study Surce: Frrester Research, Inc. Frrester emplyed fur fundamental elements f TEI in mdeling Wrklight s service: 1. Csts. 2. Benefits t the entire rganizatin. 3. Flexibility. 4. Risk. Given the increasing sphisticatin that enterprises have regarding ROI analyses related t IT investments, Frrester s TEI methdlgy serves the purpse f prviding a cmplete picture f the ttal ecnmic impact f purchase decisins. Please see Appendix A fr additinal infrmatin n the TEI methdlgy. Page 6
Analysis Interview Highlights A ttal f tw interviews with the same enterprise were cnducted fr this study, invlving representatives frm a large glbal electrnic enterprise which emplys arund 8,400 staff, and is present in 70 cuntries. It develps, prduces and markets electrnic prducts t a range f clients in different vertical industries including aerspace and defense, cmmunicatins and bradcasting. As such, the cmpany has a large direct sales frce which needs t be ptimally equipped t maximize limited time in sales meetings. The IT department enables emplyees t use mbile devices f different platfrms. Initially an ios app was develped in a native envirnment t enable sales staff t have ffline access t all prduct brchures and dcumentatin, but csts quickly escalated largely because a cpy f the active directry had t be made available utside their firewall which IT security culd nt endrse, and resulted in additinal resurces required fr cntent maintenance which wuld need t be replicated as different platfrms are supprted. This was the trigger t lk fr alternative slutins. This initial app has since then been develped n the Wrklight platfrm and is the basis fr ur analysis. Furthermre, there are a number f ther apps which are being develped n the Wrklight platfrm including ne fr tablets t enable clients t dwnlad and read their technical magazine, a similar magazine type tablet app but fr internal use and an app t supprt emplyee use f mbile devices. Further dwn the line additinal use f the Wrklight platfrm will be needed, such as t upgrade a number f simpler apps. It is als wrth mentining that mre pprtunities with apps becme viable as csts have fallen. The interviews uncvered that: There are multiple ways in which the Wrklight platfrm enables cst savings and makes the develpment, integratin and maintenance f a cmplex, multiplatfrm app much easier. It s nt nly the lwer develpment csts but mre the ability t address different platfrms within a single prject at all. The instant update feature nt nly lwers maintenance csts but is als very helpful in increasing acceptance fr the end users because they experience a shrter reactin time in implementing their requirements (smetimes nly a few days instead f a few weeks)... the dependence t d a maintenance cntract with the same specific external resurce which implemented the app in the first place is nt lnger necessary. The unified middleware layer f Wrklight allws the creatin f an access functinality t backend systems which can be reused fr ther prjects. Meanwhile we see at least 20% reuse f this functinality and a mean f 60% reuse. The middleware layer als facilitates security testing f these access functins because many parts f security tests can be skipped while the platfrm security is identical. The use f smartphnes and tablets is increasing, but PCs are still the preferred device fr many. Page 7
60% f ur emplyees predminantly use their laptps and supprt f Adbe AIR was a key reasn fr chsing Wrklight ver alternative platfrms... (Head f mbile strategy, crprate marketing) Framewrk Assumptins Table 2 prvides the mdel assumptins that Frrester used in this analysis. Table 2 Mdel Assumptins Ref. Metric Calculatin Value A1 Hurs per week 40 A2 Weeks wrked per year 45 A3 External develper hurly cst $130 A4 Fully laded database administratr salary (runded) $104,500*1.3 $136,000 A5 Database administratr hurly cst A4/A2/A1 $77 A6 Cmplex app develpment hurs (native envirnment) 734 A7 Cmplex app develpment csts (native envirnment) A3*A6 $95,388 A8 Cmplex app integratin hurs (native envirnment) 341 A9 Cmplex app integratin csts (native envirnment) A3*A8 $44,330 Surce: Frrester Research, Inc. The discunt rate used in the PV and NPV calculatins is 10% and time hrizn used fr the financial mdeling is 5 years. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult with their respective cmpany s finance department t determine the mst apprpriate discunt rate t use within their wn rganizatins. Csts There are fur different categries f csts: the sftware licensing, the internal staff set up cst (as cmpared t that required in a native envirnment), the hardware csts (bth purchase and maintenance) and the prfessinal services installatin csts. The staff set-up and prfessinal services csts are initial upfrnt csts nly, while the licensing and hardware elements incur bth initial and nging csts. Page 8
Figure 3 IBM Wrklight Platfrm Cst Breakdwn By Categry (Risk Adjusted) Prfessinal services 2% Hardware 5% Internal staff set-up csts 14% Sftware licensing csts 79% Surce: Frrester Research, Inc. Sftware Licensing These are the licensing fees charged by IBM fr the use f its platfrm. In the case f the Wrklight Enterprise Editin, this amunts t $36,600 per applicatin plus $150 per client device installatin at the time f writing. In this case study there were a ttal f arund 500 installatins initially and s the ttal upfrnt licensing cst was $114,100, which includes the first year f subscriptin and supprt. There are nging service and supprt maintenance fees fr the platfrm every year f its use, which are equivalent t apprximately 20% f the deplyment csts, including the cst per device installatin. We have assumed a slight increase year n year f the ttal device installatins and s these csts increase gradually frm $27,470 in the secnd year (the first years service and supprt charges are included in the deplyment license) t $30,646 in the fifth. Please nte these prices were valid at the time this research was undertaken and prices can change every year. Over the whle f the perid sftware licensing accunts fr 78% f the ttal csts. Internal Staff Set-Up Csts This categry is the difference f all the staff csts incurred in terms f planning, training, installatin and precnfiguratin fr Wrklight as cmpared t wrking in a native envirnment. It tk 6 man mnths t cmplete these tasks in the case f Wrklight, but nly half f that time in a native envirnment. It takes mre time t plan and install IBM s platfrm than t plan and wrk with utside develpers in the native envirnment as external third parties largely d this. The difference is the equivalent f a quarter f a year s fully laded salary f a skilled IT administratr, which amunts t $34,542; this is equivalent t 14% f the ttal csts. Page 9
Prfessinal Services And Additinal Hardware Csts The installatin f the Wrklight platfrm required 5 days f prfessinal services at a cst f $6,750. Additinal hardware investments were als incurred, at an initial cst f $7,500 plus annual hardware maintenance csts f arund $1,125. These csts make up the remaining 8% f ttal csts ver the five year perid. Table 3 Ttal Cst Cash Flws (Risk-Adjusted Estimates) Cst categry Initial Year 1 Year 2 Year 3 Year 4 Year 5 Ttal Present value Sftware licensing csts Internal staff setup csts Prfessinal services ($114,100) $0 ($27,470) ($28,478) ($29,535) ($30,646) ($230,229) ($197,400) ($34,542) $0 $0 $0 $0 $0 ($34,542) ($34,542) ($6,750) $0 $0 $0 $0 $0 ($6,750) ($6,750) Hardware ($7,500) ($1,125) ($1,125) ($1,125) ($1,125) ($1,125) ($13,125) ($11,765) Ttal csts (riskadjusted) ($162,892) ($1,125) ($28,595) ($29,603) ($30,660) ($31,771) ($284,646) ($250,457) Surce: Frrester Research, Inc. Ttal Csts The ttal present value f all the csts amunts t $250,457, with abut 65% incurred upfrnt and the rest ver the five year perid. Nearly the initial and nging licensing fees accunt fr fur-fifths f the csts. Benefits The quantifiable benefits included in ur analysis are the cst savings f develping and maintaining a multiplatfrm app n the Wrklight platfrm as ppsed t a native envirnment. These csts have been divided int five parts: app design and develpment; app integratin; app maintenance; cntent maintenance and nging staff maintenance. There are additinal benefits the platfrm which we have nt included int ur financial analysis but shuld be nted as they mean that the numbers we are prviding are cnservative and in sme cases this can make an imprtant difference. Page 10
Figure 4 IBM Wrklight Platfrm Benefits Breakdwn By Categry (Risk Adjusted) Onging IT staff maintenance 13% App design and develpment 10% App test, integratin, and ther prject csts 12% App cntent maintenance 34% App maintenance/ upgrade 31% Surce: Frrester Research, Inc. Cst Savings Of Wrklight Multiplatfrm App Develpment And Maintenance There are fur areas wherein the Wrklight platfrm enables csts savings acrss the lifecycle f a multi-platfrm app: App design and develpment: In terms f the design and develpment f the app, there are tw imprtant ways in which cst savings are created. First f all the majrity f the cding f the app sftware can be reused acrss all the different platfrms; in a native envirnment the scpe fr this is much mre limited. Mrever a single multiplatfrm app is develped in ne prject n the Wrklight platfrm, while in a native envirnment the prject csts are replicated fr each f the platfrms. The cst savings f designing and develping a cmplex app acrss fur platfrms in Wrklight amunt t $117,198 (we estimate that the csts f develping this app in native envirnments wuld be arund $352,934). These benefits are gained at the initial stage, prir t the launch f the app. App integratin: The Wrklight platfrm greatly eases the app integratin prcess, and, as fr app develpment, it is dne in a single prject, whereas in a native envirnment each f the platfrms wuld require individual integratin exercises. The cst savings f integrating the app amunt t $138,279 (we estimate that the csts f integrating this app in native envirnments wuld be arund $177,320). One f the reasns fr this significant saving is that much f this wrk has mved internally. These benefits are gained at the initial stage, prir t the launch f the app. Page 11
Cntent maintenance: The Wrklight platfrm als facilitates cntent maintenance fr each year f the life f the app. Fr cmplex apps, these csts fall by 80% and result in annual cst savings f $102,874. Cntent maintenance benefits accunt fr 34% f the ttal benefits, and is the largest categry. App maintenance: The maintenance f apps, including bug fixing, feature and functin additins and ther elements f upgrading, are greatly facilitated by the Wrklight platfrm. In a native envirnment these have t be dne separately fr the different platfrms and typically incur significant third party csts. Annual maintenance cst savings amunt t $94,400 fr each f the five years (we estimate that the annual maintenance csts f a cmplex fur platfrm app wuld amunt t arund $156,000). These benefits accunt fr 31% f the ttal benefits. Staff Maintenance Cst Savings This benefit categry captures the difference in nging staff csts f maintaining the Wrklight platfrm versus nging internal staff csts f managing third parties and/r internal IT requirements in a native envirnment. In the case f a fur platfrm cmplex app, this results in annual cst savings f $41,040. Table 4 Ttal Benefits Cash Flws (Risk-Adjusted Estimates) Benefits categry App design and develpment App test and integratin App maintenance/ upgrade App cntent maintenance Onging IT staff maintenance Ttal benefits (risk-adjusted) Initial Year 1 Year 2 Year 3 Year 4 Year 5 Ttal Present value $117,198 $0 $0 $0 $0 $0 $117,198 $117,198 $138,279 $0 $0 $0 $0 $0 $138,279 $138,279 $0 $94,400 $94,400 $94,400 $94,400 $94,400 $471,998 $357,848 $0 $102,874 $102,874 $102,874 $102,874 $102,874 $514,368 $389,972 $0 $41,040 $41,040 $41,040 $41,040 $41,040 $205,200 $155,574 $255,477 $238,313 $238,313 $238,313 $238,313 $238,313 $1,447,043 $1,158,872 Surce: Frrester Research, Inc. Page 12
Higher ROI Of Subsequent Apps/Sunk Csts Our analysis includes the csts and benefits assciated with the first app develped n the Wrklight platfrm. Any additinal apps develped n the platfrm will enjy significantly higher ROIs because there are sunk csts which d nt increase with the number f apps. These sunk csts amunt t $53,057 as a net present value and s can be added t the ttal benefits amunt fr subsequent apps develped n the platfrm. Faster Time-T-Market/Upgrade By develping and integrating apps acrss all the different platfrms at the same time, typically it becmes available sner acrss all the platfrms. Furthermre, bug fixes, additinal features and functins and imprved UIs assciated with upgrades and imprved versins becme available much faster, typically days instead f weeks. This is in large part because nce the platfrm has been internally certified and security cleared all future iteratins f the app(s) d nt need the same level f security scrutiny. This has the added benefit f driving user acceptance and dwnlads and usage. Nte that these benefits have nt been included in ur financial analysis. Lwer Dependence On External Resurces In a native envirnment typically enterprises use third parties in the develpment, integratin and maintenance at least t sme degree. It is generally unecnmical fr cmpanies t have internal resurces specialized in writing apps in all the different native languages. Once a third party has develped an app, typically the enterprise will be dependent n this partner fr at least sme f the integratin and maintenance and indeed they will be tied t them fr such supprt, which can incur significant csts. Furthermre third party develpers may nt always be available and s fixes, updates r ther maintenance tasks may take lnger/and r incur additinal csts. The Wrklight platfrm enables apps t be develped in nn-specialized languages (HTML5, CSS and Java) and s leverage in-huse develpers and furthermre severs the link t third parties (even when enterprises still chse t wrk with external resurces fr app develpment). Nte, hwever, that the platfrm als supprts the use f native and hybrid languages. Supprt Fr PCs One f the key selling pints f the Wrklight platfrm was its supprt fr PCs. 60% f the mbile wrkfrce f the enterprise still predminantly use laptps. By making apps available n Adbe AIR in this case, these users were able t benefit frm the app using their laptps. End-T-End Security The Wrklight platfrm lwers security risks assciated with the use f mbile apps in native envirnments and has multiple security capabilities and features including device prvisining, user authenticatin, app authenticatin and features which facilitate app upgrades and access t the latest releases. Additinal benefits are enabled when Wrklight is integrated with IBM s mbile device management platfrm IBM Endpint Manager fr Mbile Devices. Ttal Benefits The ttal benefits amunt t $255,477, initially, equivalent t the difference in app develpment and integratin between native and Wrklight. Once the app is up and running the benefits equate t the difference in annual app maintenance, app cntent maintenance and nging IT staff csts between the native envirnment and the Wrklight Page 13
platfrm and amunt t $238,313 every year. The ttal benefits ver the whle perid equates t $1,158,872 as a net present value. Flexibility Flexibility, as defined by TEI, represents an investment in additinal capacity r capability that culd be turned int business benefit fr sme future additinal investment. This prvides an rganizatin with the right r the ability t engage in future initiatives but nt the bligatin t d s. There are multiple scenaris in which a custmer might chse t implement Wrklight and later realize additinal uses and business pprtunities. Flexibility wuld als be quantified when evaluated as part f a specific prject (described in mre detail in Appendix A). Flexibility is a fundamental element f the Wrklight platfrm. While it des nt cme int play within this case study, it is very clear that using the platfrm fr additinal apps ver and abve the first as described in this study, results in even higher returns n investment. These are described in the abve sectin (higher ROI f subsequent apps). Risk Frrester defines tw types f risk assciated with this analysis: implementatin risk and impact risk. Implementatin risk is the risk that a prpsed investment in Wrklight may deviate frm the riginal r expected requirements, resulting in higher csts than anticipated. Impact risk refers t the risk that the business r technlgy needs f the rganizatin may nt be met by the investment in Wrklight, resulting in lwer verall ttal benefits. The greater the uncertainty, the wider the ptential range f utcmes fr cst and benefit estimates. Quantitatively capturing investment and impact risk by directly adjusting the financial estimates results in mre meaningful and accurate estimates and a mre accurate prjectin f the ROI. In general, risks affect csts by raising the riginal estimates, and they affect benefits by reducing the riginal estimates. The risk-adjusted numbers shuld be taken as realistic expectatins since they represent the expected values cnsidering risk. The fllwing implementatin risks that affect csts are identified as part f this analysis: The internal staff set-up csts culd be higher if it takes lnger r mre effrt fr the planning, training and installment f the Wrklight platfrm. Sme legacy infrastructure may be mre difficult t integrate with the platfrm, while staff t be trained may be less experienced in the use f similar technlgies. The csts f develping and integrating the first app n the platfrm may als be higher. Different enterprises have different back-end infrastructures sme f which may be harder (r easier) t integrate with the new app. The fllwing impact risks that affect benefits are identified as part f the analysis: The cst savings the Wrklight platfrm enables may be lwer, even fr a given type f app (i.e., degree f cmplexity and number f platfrms supprted). This can cme abut in many different ways, including: The degree t which develpment, integratin and maintenance wrk is mved internally. The make-up f the app, which may require mre develpment effrt, but needs nt cnnect t s many back-end systems. Page 14
The initial quality f the app, which may have required n fixes r upgrades, therefre lwering the app maintenance cst benefits. The make-up f the back-end cntent, which may nt require frequent updating and/r stringent security. IBM ffers Wrklight Develper Editin, a try and buy apprach which can help enterprises reduce many f these risks by learning and experimenting with it prir t investing. Table 5 shws the values used t adjust fr risk and uncertainty in the cst and benefit estimates. The TEI mdel uses a triangular distributin methd t calculate risk-adjusted values. T cnstruct the distributin, it is necessary t first estimate the lw, mst likely, and high values that culd ccur within the current envirnment. The risk-adjusted value is the mean f the distributin f thse pints. Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Table 5 Cst And Benefit Risk Adjustments Csts Lw Mst likely High Mean Internal staff set-up csts 95% 100% 108% 101% Benefits Lw Mst likely High Mean App lifecycle cst savings 78% 100% 105% 94% Surce: Frrester Research, Inc. Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Page 15
Financial Summary The financial results calculated in the Csts and Benefits sectins can be used t determine the return n investment, and net present value fr the rganizatin s investment in Wrklight. These are shwn in Table 6 belw. Table 6 Cash Flw Risk-Adjusted Initial Year 1 Year 2 Year 3 Year 4 Year 5 Ttal Present value Ttal csts ($162,892) ($1,125) ($28,595) ($29,603) ($30,660) ($31,771) ($284,646) ($250,457) Ttal benefits $255,477 $238,313 $238,313 $238,313 $238,313 $238,313 $1,447,042 $1,158,872 Ttal $92,585 $237,188 $209,718 $208,710 $207,653 $206,542 $1,162,397 $908,415 ROI 363% Running ttal $92,585 $329,774 $539,492 $748,202 $955,855 $1,162,397 Surce: Frrester Research, Inc. Figure 5 Financial Analysis (Risk-Adjusted) $1,400,000 $1,200,000 Ttal csts Ttal ben efits Running ttal $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 -$200,000 Initial Year 1 Year 2 Year 3 Year 4 Year 5 Surce: Frrester Research, Inc. -$400,000 Page 16
IBM Wrklight: Overview IBM Wrklight is a mbile applicatin platfrm (MAP), a sftware slutin t enable cmpanies t develp, cnnect, run and manage mbile applicatins acrss different device platfrms and frm factrs. Wrklight is a key cmpnent f IBM s recently annunced IBM MbileFirst prtfli, which marries deep expertise with a cmprehensive set f mbile sftware and clud-based services. Wrklight cmprises f five different cmpnents as fllws: IBM Wrklight Studi An Eclipse-based IDE, allwing develpers t perfrm all the cding and integratin tasks that are required t develp a fully peratinal applicatin. IBM Wrklight Server The Java-based server is a scalable gateway between applicatins, external services, and the enterprise backend infrastructure. The server cntains security features t enable cnnectivity, multisurce data extractin and manipulatin, authenticatin, direct update f web and hybrid apps, analytics and peratinal management functins. IBM Wrklight Device Runtime Cmpnents Client-side runtime cde that embeds server functinality within the target-envirnment f deplyed apps. IBM Wrklight Cnsle A web-based UI dedicated fr the nging mnitring and administratin f the Wrklight Server and its deplyed apps, adapters and push ntificatins. IBM Wrklight Applicatin Center An enterprise app stre that helps rganizatins gvern the distributin f prductin-ready mbile apps acrss the enterprise, elicit and rganize user feedback. The Wrklight Applicatin Center can als be used by develpment teams t autmate the distributin f pre-release sftware versins and analyze feedback by versin and device, accelerating cycle time. The platfrm addresses a number f different issues which cmpanies face when develping and managing mbile applicatins, in particular enabling mbile apps t be created fr multiple platfrms, managed and maintained cnsistently, leveraging in-huse resurces and upgraded quickly and efficiently. Page 17
Appendix A: Ttal Ecnmic Impact Overview Ttal Ecnmic Impact is a methdlgy develped by Frrester Research that enhances a cmpany s technlgy decisin-making prcesses and assists vendrs in cmmunicating the value prpsitin f their prducts and services t clients. The TEI methdlgy helps cmpanies demnstrate, justify, and realize the tangible value f IT initiatives t bth senir management and ther key business stakehlders. The TEI methdlgy cnsists f fur cmpnents t evaluate investment value: benefits, csts, risks, and flexibility. Benefits Benefits represent the value delivered t the user rganizatin IT and/r business units by the prpsed prduct r prject. Often prduct r prject justificatin exercises fcus just n IT cst and cst reductin, leaving little rm t analyze the effect f the technlgy n the entire rganizatin. The TEI methdlgy and the resulting financial mdel place equal weight n the measure f benefits and the measure f csts, allwing fr a full examinatin f the effect f the technlgy n the entire rganizatin. Calculatin f benefit estimates invlves a clear dialgue with the user rganizatin t understand the specific value that is created. In additin, Frrester als requires that there be a clear line f accuntability established between the measurement and justificatin f benefit estimates after the prject has been cmpleted. This ensures that benefit estimates tie back directly t the bttm line. Csts Csts represent the investment necessary t capture the value, r benefits, f the prpsed prject. IT r the business units may incur csts in the frm f fully burdened labr, subcntractrs, r materials. Csts cnsider all the investments and expenses necessary t deliver the prpsed value. In additin, the cst categry within TEI captures any incremental csts ver the existing envirnment fr nging csts assciated with the slutin. All csts must be tied t the benefits that are created. Risk Risk measures the uncertainty f benefit and cst estimates cntained within the investment. Uncertainty is measured in tw ways: 1) the likelihd that the cst and benefit estimates will meet the riginal prjectins, and 2) the likelihd that the estimates will be measured and tracked ver time. TEI applies a prbability density functin knwn as triangular distributin t the values entered. At minimum, three values are calculated t estimate the underlying range arund each cst and benefit. Flexibility Within the TEI methdlgy, direct benefits represent ne part f the investment value. While direct benefits can typically be the primary way t justify a prject, Frrester believes that rganizatins shuld be able t measure the strategic value f an investment. Flexibility represents the value that can be btained fr sme future additinal investment building n tp f the initial investment already made. Fr instance, an investment in an enterprise wide upgrade f an ffice prductivity suite can ptentially increase standardizatin (t increase efficiency) and reduce licensing csts. Hwever, an embedded cllabratin feature may translate t greater wrker prductivity if activated. The cllabratin can nly be used with additinal investment in training at sme future pint in time. Hwever, Page 18
having the ability t capture that benefit has a present value that can be estimated. The flexibility cmpnent f TEI captures that value. Appendix B: Glssary Discunt rate: The interest rate used in cash flw analysis t take int accunt the time value f mney. Althugh the Federal Reserve Bank sets a discunt rate, cmpanies ften set a discunt rate based n their business and investment envirnment. Frrester assumes a yearly discunt rate f 10% fr this analysis. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult their respective rganizatin t determine the mst apprpriate discunt rate t use in their wn envirnment. Net present value (NPV): The present r current value f (discunted) future net cash flws given an interest rate (the discunt rate). A psitive prject NPV nrmally indicates that the investment shuld be made, unless ther prjects have higher NPVs. Present value (PV): The present r current value f (discunted) cst and benefit estimates given at an interest rate (the discunt rate). The PV f csts and benefits feed int the ttal net present value f cash flws. Payback perid: The breakeven pint fr an investment. The pint in time at which net benefits (benefits minus csts) equal initial investment r cst. Return n investment (ROI): A measure f a prject s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus csts) by csts. A Nte On Cash Flw Tables The fllwing is a nte n the cash flw tables used in this study (see the example table belw). The initial investment clumn cntains csts incurred at time 0 r at the beginning f Year 1. Thse csts are nt discunted. All ther cash flws in Years 1 thrugh 3 are discunted using the discunt rate (shwn in Framewrk Assumptins sectin) at the end f the year. Present value (PV) calculatins are calculated fr each ttal cst and benefit estimate. Net present value (NPV) calculatins are nt calculated until the summary tables and are the sum f the initial investment and the discunted cash flws in each year. Appendix C: Endntes 1 Frrester risk-adjusts the summary financial metrics t take int accunt the ptential uncertainty f the cst and benefit estimates. Fr mre infrmatin n Risk, please see page 14. Page 19