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Ex Libris Alma TCO/ROI
April 2011
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Why Use Financial Tools like ROI?
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Why Use Financial Tools like ROI?
“It used to be that the way you put together a library budget was to look at like-institutions and then argue for a little more. Now my provost is saying to me, “If I give you ‘X’ dollars, what is the return on investment to the University?”
—T. Scott Plutchak, Librarian,University of Alabama at Birmingham
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Using Financial Tools for Effective Decision Making
• Using financial tools will help you answer key questions and improve the quality of your decision• Return on Investment (ROI)
• Do the benefits really justify the cost?• How long will it take to recover our investment?
• Total Cost of Ownership (TCO)• What is the true total cost of ownership over time?
• These tools are not new – they have been used for decades by organizations of all kinds
• Applying them to IT services is simply good business practice
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What’s In It For You?
• Demonstrate a ‘business approach’
• Minimize risk and costs through informed, higher quality decision
• Build stronger business cases for proposals
• A more strategic approach, aligning with institutional goals
• Help ensure successful outcomes for the library
• Increased credibility with administration
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How to Measure ROI & TCO?
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Return On Investment (ROI)
• Purpose: ROI is a calculation that attempts to determine the actual or perceived future value of an investment
• In its most basic form ROI is calculated as follows: ROI = (Benefits – Costs)/Costs
Net Present Value (NPV) - calculates the profitability of the project
Internal Rate Return (IRR) - determines if the expected return is greater than the cost of funds used to finance the project
Internal Rate Return (5 year)
Benefit - Cost
Cost
(over 5 years)
Net Present Value (5 years)
Benefit - Cost
(discounted)
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Total Cost of Ownership (TCO)
• Definition: all costs of owning and operating a system over its expected useful life
• Benefits:• Accounts for not only the initial investment, but all the other
costs associated with further use of the system (including hidden costs)
Yet both may have a similar TCO over the period analyzed!
System A
Have a lower acquisition cost, but
higher ongoing maintenance costs
System B
Have a higher acquisition cost, but
lower ongoing maintenance costs
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Ex Libris Alma - TCO, ROI and DIV
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The Cloud Delivers Fast Time to Value
53% of software projects cost189% of original estimate
Average 51% ROIWithin 12 Month
On-Premise Software Cloud-based Service
AutomatedUpgradesLarge Operating
Expenses
Large CapitalExpense & High Risk
UpgradeExpense
No CapitalExpenses
Cloud Computing Value
Val
ue
Val
ue
Time
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The Cloud Delivers Lower TCO
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Alma Delivers Optimized Library Services
Realize value of all systems (ease of integrations)
Lower the total cost of ownership Manage information, not servers
Extend the range of services Augment the library’s value Improve user experience
Optimize collection usage Leverage collaboration Increase productivity (simplified
workflows)
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>30%
Decrease Cost, Maximize Benefit, Demonstrate Value
DIV
Demonstrated Institutional Value
ROI
Return On Investment
TCO
Total Cost of Ownership
Efficiency Effectiveness Value
• Improved user experience
• Optimized collection usage
• Increased staff productivity
• Maximized collaboration
• Improved teaching and learning processes
• Increased faculty research productivity
• Delivery of new value-added services
• No HW/SW investment • No maintenance for
HW/SW, databases, updates, upgrades
• No IT resources needed
• Reduced administration
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Alma ROI and TCO Analysis Tool
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Purpose of the ROI Analysis Tool
The Alma ROI Analysis Tool helps to:
• Quantify investments
• Measure value
• Justify costs
• Analyze hidden cost factors
• Validate internal analysis
• Define ROI assumptions
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1
2
34
5
61. Infrastacture2. System Admin3. Library Opeartions4. Collection Utilization5. Learning Impact6. Research Impact
Alma ROI and TCO Tool – Areas of Analysis
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Real Example of ROI Analysis
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Real Example of ROI Analysis – Cont’d
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Reduce IT
Unified Resource
Management
Cloud service
Increase Productivity
Optimize Collection
Usage
Minimize Admin
Extend Services
Decrease Complexity
& Silos
Alma Delivers Reduced TCO and Accelerated ROI
Optimized workflows &
sharable data
User-driven collection
development
100%
>30%
>50%
>10% >10%
Collaborative & Open platform
Ease of use and
integration
>40%
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When to use
Commitment Required
Engagement Approach
Ex Libris Offers Three Approachesto the ROI Conversation
You want examples and benchmark data
None
Leverage ROI Benchmarks and customer cases to highlight value
1 Low Calorie
Library Value Discussion
3
You want a customized ROI analysis for your institution, your project
Committed (multiple discussions with various stakeholders)
Walk-through ROI methodology
Direct engagement with account team
5-Course Meal
Detailed ROI Analysis
You need to provide a high level ROI back to the management / administration
Minimal (1-2 discussions)
Account team assists with ROI Analysis Tool (utilizing tool’s assumptions)
2 Light Lunch
ROI Analysis Tool
2121
THANK YOU!