Achieving Measurable TCO Reductions ... - hp-user … · • HP-UX 11i/ Integrity Superdome, rx7620, rx4640 and HP ProLiant DL380/DL580

Copyright © 2006 HP corporate presentation. All rights reserved.

IT-Symposium 2007

1

19.04.2007

www.hp-user-society.de

© 2006 Hewlett-Packard Dev elopment Company , L.P.The inf ormation contained herein is subject to change without notice © 2006 Hewlett-Packard Dev elopment Company , L.P.The inf ormation contained herein is subject to change without notice

Achieving Measurable TCO

Reductions with Integrity Servers

Jürgen Probst

IDC Certified Value Expert™

2 18 April 2007

Agenda

• Customer pain points

• Challenges

• What is in an Economic Value Analysis?

• Tool details

• TCO examples

• References and Next Steps


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Customer pain points

• IT environment is too expensive to manage and maintain

• Too many applications, too much customization and too many underutilized servers

• Struggle to meet service level agreements and fast response times for critical workloads

• Can’t implement new projects fast enough

• Need to reduce headcount every year, but the work never seems to go away

• Compliance demands are evolving and not sure how to react

• Infrastructure is at risk to security breaches and viruses

IT budgets have little left for innovation

Maintenance & Operations

71%

Only 9% or less of budget is left for

innovation

Innovation

Performance Enhancement

9%

20%

4 18 April 2007

Challenge #1: Internal labor continues to garner majority of IT budgets

Labor and equivalents consumes over 56% of current IT budgets

Alinean - 2006

Average Total Cost of Ownership - 2006

Data Center, Servers andClient Computers

15%

Purchased Software18%

Purchased Services16%

Data and VoiceCommunication 7%

Application and Software

Development 19%

Facilities and Overhead 4%

Operations and Administration

21%


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Adaptive enterprise cuts people TCO

• One of the largest food companies in the world

• Running the world’s largest SAP instance

• a single vendor for its IT systems worldwide: HP

• HP-UX 11i/ Integrity Superdome, rx7620, rx4640 and HP ProLiant DL380/DL580

• “As numerous TCO studies have shown, people are the big cost. And when you compare the total number of people —staff, consultants, outsourcing, contractors— we rely on far fewer people than other companies our size.”

Vandy Johnson, senior director of I.S. Operations

• The reason is that its standardized infrastructure requires fewer people to manage it.

6 18 April 2007

Challenge #2: IT is Consumed with Keeping Lights on versus Innovation

Majority of spending keeping the lights on

Only 14% is left for innovation

Alinean – 2006

M igration and

Upgrade s

25%

Innovation

and New

Functions

14%

Operations -

M anagem ent

and

M aintenance

61%


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Challenge #3: IT Projects Remain Risky without Proven ROI

Almost half of all IT projects fail or fail to meet schedule, budget or feature requirements

Less than 1 in 4 are successful anddeliver on expected financial goals

Successful,

but not to

ROI

standards

28%

Successful

and Meeting

ROI Goals

22%

Cancelled

17%

Issues with

Budget,

Schedule and

Functionality

33%

Alinean - 2006

8 18 April 2007

The need for an Economic Value Analysis

Over 90% require business value analysis for some/all of Investments

Over 85% say demand for business value analysis has increased or remained the same

Over 82% of projects $50,000 and higher require business value analysis

65% of buyers indicate that they do not have the knowledge or tools needed to do ROI and Business Value calculations

75% have no formal processes or budgets in place for measuring the value of IT projects

68% do not measure ROI and value derivation on IT projects 6 months after the work is completed

Demand for Business Value Analysis (past 12 months)

Increased

41%

Decreased

8%

Same

48%

Don't Know

3%

Sourcse: IDC | Alinean, 2006


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Tim Donar

Acxiom Corporation

The tool was able to show some areas that we had not looked at before and how our company compares to others in our industry segment.

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What is in an Economic Value Analysis?

~75%

~25%

Lower costs through:

Virtualization; optimized asset utilization, availability & control lowers cost & risk of unplanned downtime

Security; prevent, detect, and contain

Availability; clustering, disaster tolerance & recovery, dynamic tunables

Management; seamless single asset view & control

Direct one-timeCosts• Hardware – 7%• Software – 9%• Support – 9%

+ On-going Costs• Communications – 3%• IT Operations &

Administration – 25%• Facilities – 2%• Changes – 4%• Availability – 21%• Security – 12%• Application

Development – 8%


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Andre VerschuerenCentea, Belgium

• Our TCO reduction project was completed spot on target.

• Today, we see the same high availability and excellent support service quality at significantly lower costs.

• The cost calculations outlined in HP’s TCO reduction plan proved to be accurate.

• We are very pleased with the results of our server consolidation project.

12 18 April 2007

Cost and benefits….


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Alinean ROI tools leader

• Original pioneers of ROI, TCO and value measurement tools since 1994

• Predecessor company created Gartner TCO Manager family of tools

• Exclusive partnership with IDC

• Proprietary research methodologies to quantify cost-benefits of IT projects

• Proprietary database of financial and IT performance for 20,000worldwide companies

The Alinean Value Products

• Value Finder

− Prospect discovery

− Find high value accounts

• Peer to Peer Comparison

− Develop a strategic conversation

− Consult with customer about benchmark opportunities

• ROIAnlayst− Strategic business case plan

− Project implementation plan

− Project TCO vs. alternatives

− Project ROI to move from old to new systems.


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Typical ROIT

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TCO comparison for an Enterprise SAP customer


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Two possible new solutions

• Decentralized Solution

− 10 x HP DL580 G3, 2.83 GHz, 4 CPUs – Red Hat Linux


− 135 x HP Integrity rx6600, 1.6GHz, 2 CPUs – HP-UX 11i

− 4 x HP Integrity SD, 1.6GHz, 32 CPUs – HP-UX

• Centralized VSE Solution



− 9 x HP Integrity SD, 1.6GHz, 64 CPUs – HP-UX 11i

18 18 April 2007

Total IT Costs (direct)

TCO Comparison (cumulative 5 -year)

Solution A: Decentralized

Solution

Solution B: Centralized

Solution

Difference

(A - B)

Difference

(A - B)%

Server Hardware $23,619,895 $30,401,754 ($6,781,859) -28.7%

Server Software $22,624,006 $11,360,848 $11,263,158 49.8%

IT Operations $6,742,149 $4,791,343 $1,950,806 28.9%

IT Administration $690,991 $497,800 $193,191 28.0%

Facilities $1,239,460 $925,685 $313,775 25.3%

Change Costs $11,204,048 $11,163,646 $40,402 0.4%

Total IT Costs $66,120,549 $59,141,076 $6,979,473 10.6%

IT Operations include: Service desk, Performance and availability management, User admin, OS support, Break-fix management, Software deployment, Application management (provisioning and scheduling), Systems management, Disk and file management, Storage management, Security management, Database management and administration


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ROI Analysis

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ROI Analysis with 286%ROI Analysis (Solution B) Initial Year 1 Year 2 Year 3 Year 4 Year 5

Benefits (to Solution B from Current (AS IS))

$0 $15,824,032 $46,771,657 $46,955,585 $47,356,870 $47,355,805

Cumulative Benefits $15,824,032 $62,595,689 $109,551,274 $156,908,144 $204,263,949

Costs (Solution B) $19,015,581 $15,324,710 $6,102,765 $4,161,064 $4,161,064 $4,161,064

Cumulative Costs $19,015,581 $34,340,291 $40,443,056 $44,604,120 $48,765,184 $52,926,248

Cash Flow ($19,015,581) $499,323 $40,668,892 $42,794,521 $43,195,806 $43,194,741

Cumulative Cash Flow ($19,015,581) ($18,516,258) $22,152,633 $64,947,154 $108,142,960 $151,337,701

ROI 286%

Risk Adjusted ROI 204%

NPV Savings $91,224,118

IRR 103%

Payback period (including deployment period)

17 month(s)

Risk Adjusted Discount Rate 13.5% Calculated with 9.5% discount rateand 4% project risk = 13.5% hurdle rate


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Payback with an overall deployment schedule of 9 months

22 18 April 2007

TCO Analysis Consolidation and VSE on HP-UX


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Solution A: HP Integrity (non-VSE)

• 26 x rx6600 1.6GHz 24MB 8 cores with HP-UX 11i

24 18 April 2007

Solution B: HP Integrity (VSE)• 2 x rx6600 1.6GHz 24MB 8 cores with HP-UX 11i

• 4 x rx8640 1.6GHz 24MB 32 cores (16 iCAP) with HP-UX 11i


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Total IT Costs (direct)

TCO Comparison (cumulative 3 - year)

Solution A SAP on HP Integrity HP-UX 11i (non

VSE)

Solution B SAP on HP

Integrity HP-UX 11i (VSE)

Difference (A - B) Difference (A - B)%

Server Hardware $1,406,044 $2,258,344 ($852,300) -60.6%

Server Software $4,953,937 $3,110,550 $1,843,387 37.2%

IT Operations $839,316 $234,987 $604,329 72.0%

IT Administration $111,408 $28,800 $82,608 74.1%

Facilities $99,519 $90,084 $9,435 9.5%

Change Costs $1,276,394 $1,219,613 $56,781 4.4%

Total IT Costs $8,686,618 $6,942,378 $1,744,240 20.1%

26 18 April 2007

Total TCO Comparison

TCO Comparison (cumulative 3 - year)

Solution A SAP on HP Integrity

HP-UX 11i (non VSE)

Solution B SAP on HP

Integrity HP-UX 11i (VSE)

Difference(A - B)

Difference (A -B)%

Total IT Costs (direct costs) $8,686,618 $6,942,378 $1,744,240 20.1%

Total Business Operating Costs (indirect costs)

$208,143 $200,463 $7,680 3.7%

Total Business Strategic Costs (indirect costs)

$8,181,940 $7,910,869 $271,071 3.3%

Total $17,076,701 $15,053,710 $2,022,991 11.8%


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References and Next step

28 18 April 2007

Prior to migration Following migration Benefits

• Ten HP N class servers running HP-UX

• Oracle Financials and other business critical applications

• O/S patch and upgrade installation requires two days

• Two HP rp8400 servers running HP-UX using virtualization

• Same application suite

• O/S patch and upgrade installation completed in four hours

• 25 percent reduction in direct TCO – including operational and facility-related costssuch as floor space, power, cooling

• Greater performance, enhanced flexibility, easier management

• Reduced downtime, maintenance costs reduced by orders of magnitude

Centea: TCO reduction spot on target

HP differentiators

• Comprehensive TCO reduction proposal

• TCO reduction plan implemented without compromising availability or critical system support services

Centea, a member of the KBC banking group, provides complete financial services to customer across Belgium.


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Business Value Assessment Workshophttp://www.hp.com/go/enterpriseroi

DAY ONE

(1/2 day - 9am to 1pm)

Introduction Review Expectations Present Objectives of Day one and Day two

Presentation Financial Business Value

Assessment of Customers IT EnvironmentPresent the different tool possibilities, reports Go through the assessment questionnaire

Review Day one

DAY TWO

(1/2 day - 9am to 12pm)

Present Analysis results and commentsWalkthrough financial analysis reportsOpen discussion on results

Next ActionsSummarize Areas for improvement and provide suggestions

Wrap up

Comment: Day one afternoon for the ROI

team to analyze and prepare reports based on the information provided by the

customer during the “Assessment of Customers IT Environment”.

30 18 April 2007

Thank you


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Documents

Achieving Measurable TCO Reductions ... - hp-user … · • HP-UX 11i/ Integrity Superdome, rx7620, rx4640 and HP ProLiant DL380/DL580