ROI

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ROI

  1. 1. WHITE P APER JBoss Operations Network: Measuring Business Impact and ROI Sponsored by: Red Hat Tim Grieser Randy Perry July 2010 INTRODUCTION Linux-based applications have become essential to many organizations for delivering and supporting ecommerce, Web, and mission-critical business applications and databases. As Linux grows in importance and value to the business, IT must deliver high service quality for availability, security, and performance in order to supportGlobal Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com business success. Red Hat Inc. distributes and supports the Red Hat Enterprise Linux operating environment and JBoss Enterprise Middleware for development, deployment, and production operation of Java and Web-based applications. Red Hat provides the JBoss Operations Network (JBoss ON) management platform for centralized systems management (server-agent) of JBoss Enterprise Middleware. JBoss ON provides management functions for the JBoss SOA Platform, the JBoss Enterprise Application Platform, the JBoss Enterprise Web Server, and other JBoss components. JBoss ON management functions include discovery and inventory, configuration management, application deployment, availability management, performance management, and content management. This ROI study focuses on the quantitative benefits gained from using the JBoss ON management platform. EXECUTIVE SUMMARY IDC conducted a series of in-depth interviews with staff members of IT organizations that have deployed JBoss Operations Network to manage their JBoss Enterprise Middleware environments. A structured set of questions was used to assess and quantify the internal and external costs of performing certain administrative, operational, and support functions and how costs changed as a result of implementing JBoss Operations Network. Table 1 shows the key results of this study. T ABLE 1 Three-Year ROI Analysis Category Value Benefit $347,878 Investment $47,378 Net present value (NPV) $300,500 ROI = NPV/Investment 634% Payback = Investment/NPV 5.32 months Source: IDC, 2010
  2. 2. The study was based on standard IDC ROI methodology used to calculate averagecost savings resulting from higher availability, including changes in downtime,improved IT efficiency, and increased user productivity resulting from using JBossOperations Network. Data from the survey was used as the basis for the IDC ROIanalysis. IDCs ROI analysis methodology is described in the Appendix.KEY FINDINGS IDCs JBoss ON ROI analysis yielded an average 634% ROI —Based on data from interviews with IT managers from organizations using JBoss more than six timesOperations Network, IDCs JBoss ON ROI analysis yielded an average 634% ROI — the initial investment — and an averagemore than six times the initial investment — and an average payback period for the payback period for theinitial investment of a short 5.3 months for the IT organizations in this study, as shown initial investment of a short 5.3 months.in Table 1.A key metric was the improvement in the number of JBoss Middleware environments The number of Linux servers running JBossmanaged per system administrator. The number of Linux servers running JBoss Middleware managed perMiddleware managed per system administrator more than doubled, increasing from system administrator more than doubled,an average of 38 Linux servers per administrator before deploying JBoss ON to 84 increasing from anLinux servers per administrator after deploying JBoss ON. The IT organizations average of 38 Linuxreported a substantial savings in staff hours expended on managing JBoss Enterprise servers per administrator before JBoss ON to 84Middleware by using JBoss Operations Network, resulting in annual IT productivity Linux servers perincreases. IT managers also claimed improved end-user productivity, while downtime administrator after deploying JBoss ON.hours per month were reduced. Participants also identified other annual savingsthrough improvements in IT efficiency, absolute software/hardware savings, and otherindirect cost savings. These results are illustrated in Figure 1 in terms of averageannual savings per 100 users.FIGURE 1Average Annual Benefits of JBoss Operations Network per 100UsersSource: IDC, 20102 #224332 ©2010 IDC
  3. 3. Deployment of JBoss ON achieved a very impressive average annual benefit of$147,212 per 100 JBoss users. Revenue increase accounted for 40.5% of this benefit,while improvements in IT staff efficiency constituted 23.7% of the total. Other majorbenefits came from cost reduction (19.2%) and improved user productivity (16.6%).STUDY DEMOGRAPHICSTo assess the benefits of Red Hat Systems Management, IDC conducted in-depthtelephone interviews with staff members from IT organizations located in companiesheadquartered in North America; South America; Europe, the Middle East, and Africa(EMEA); and Asia/Pacific that have deployed JBoss ON. The industries of thecompanies supported by the IT organizations include financial services, media, andbusiness services. Table 2 shows the survey demographic averages across the ITorganizations. T ABLE 2 JBoss ON Survey Demographics Demographic Average Employees 10,545 IT staff 710 IT operations management staff before JBoss ON 5 IT operations management staff after JBoss ON 4 Servers managed per system administrator before JBoss ON 38 Servers managed per system administrator after JBoss ON 84 Regions Asia/Pacific, EMEA, North America, South America Source: IDC, 2010RE ASONS FOR IMPLEMENTING JBOSSOPERATIONS NETWORKSurvey respondents were asked about the reasons their organizations decided toimplement JBoss Operations Network for managing JBoss Enterprise Middleware. Asshown in Figure 2, all of the respondents cited "reduce costs" as a major reason forimplementing JBoss Operations Network. Two-thirds of the respondents cited"increase efficiency" and "integrate processes," while one-third pointed to"competitive advantage" as a factor influencing their organizations decision.©2010 IDC #224332 3
  4. 4. FIGURE 2Reasons for Implementing JBoss ONSource: IDC, 2010BENEFITS OF JBOSS OPERATIONSNETWORKCost ReductionCompanies in this study were able to reduce costs with JBoss Operations Network bymoving away from other more expensive or less efficient tools by avoiding increasedstaffing or new hires and by reducing costs for new hardware. One customer said, "Interms of JBoss Operations Network … the centralized administration tool it isdisplacing would have a licensing fee close to $200,000 per year, and we arespending about $16,000 in licensing fees for JBoss ON."JBoss Operations Network helps IT organizations manage critical hardwareresources. A senior middleware architect commented, "With JBoss ON we can do abetter job of resource planning for our hardware; we can use the information fromJBoss ON to determine if we need more hardware, memory, etc."JBoss Operations Network enables customers to contain costs by leveraging IT staff. "The IT budget going toward keeping theAs one senior engineer of middleware services said, "The IT budget going toward lights on definitelykeeping the lights on definitely changed after implementing JBoss ON … without it we changed after implementing JBosswould need an extra 3–4 people per department, or 12 across our entire IT group, to do ON … without it wethe same work." Another example of leveraging IT staff with JBoss ON came from a would need an extrasenior manager of IT operations. "Two administrators time was mostly spent managing 3–4 people per department, or 12the 85 servers, and now they can manage our entire infrastructure of 255 servers." across our entire IT group, to do the same work."On average, the companies surveyed in this study were able to reduce annual costsby $28,311 per 100 users with JBoss ON.4 #224332 ©2010 IDC
  5. 5. IT Staff EfficiencyIT staff efficiency is based on the amount of staff time needed to perform specificmanagement tasks and the ability to achieve higher scalability in IT operations. OneJBoss customer commented, "In the past we had to get into each console to doadministration; now we have one central console that we use to manage all 76, so itsa huge time savings."Scalability achieved through the use of management software helps IT operations tokeep up with rapidly growing infrastructure demands. For example, one respondentobserved, "While the FTEs have remained the same [just me], I am now able to dothe work that would have required 3–4 people [to manage our current environment]."JBoss ON customers are seeing significant efficiency benefits related to help deskoperations. According to one user, "Before JBoss ON, our T1/T2 help desk wasfielding 50 calls a day; now its down to 10 calls per day. For T3 calls ... it now takesme about a half hour on average, and before JBoss ON, it used to take me about 1hour on average per call."Another comment related to staff efficiency in a wider set of operations: "We also getgreater efficiencies in our IT staff across our entire operation. I would guess of the 20people in our IT organization who touch JBoss ON [besides myself], they are maybe10% more efficient overall. Those 20 people consist of system administrators and DBAs."User ProductivityUser productivity is influenced by such factors as slowdowns, downtime, and loss ofapplication availability. JBoss ON helps IT operations prevent incidents and respondmore quickly to analyze and repair problems when they do occur. One key metric isthe mean time to repair (MTTR). In terms of the study respondents, the averageMTTR was reduced from 1 hour before JBoss ON to 15 minutes after JBoss ON —an impressive 75% reduction.Downtime has a direct impact on user productivity: Fewer hours "in the dark" meansusers have more time to complete tasks. One user noted that with JBoss ON, "wehave seen reduced downtime, as well as rapid relief in terms of things like patches …for example, if we have a problem or need a particular update to our environment, wecan go to Red Hat and they will do a one-off patch." Another user commented,"Before its implementation, we had probably 3 downtime incidents per month, andeach incident probably averaged 2–3 hours of downtime. We even had some timeswe were down a whole day. Now with JBoss ON, in the past year, we had only oneissue with downtime, and it lasted only an hour." On average, downtime hours peryear were reduced by 83% with JBoss ON for the study respondents.User productivity is impacted by incidents requiring help desk support. JBoss ONcustomers have been able to reduce the number of support calls to the help desk andalso shorten the amount of time spent on each support call. The average number ofsupport calls per week was reduced by 73%, from 268.8 to 73.2, while the averageamount of time spent per support call was reduced by 66%, from 25.8 minutes to 8.3minutes. On average, in this study, customers experienced an equivalent of $24,392per 100 users in annual user productivity increase.©2010 IDC #224332 5
  6. 6. Revenue IncreaseRevenue increase is driven by such factors as reduction in downtime and limitationsin accessing key business applications. One respondent explained that before JBossON, "our call center reps couldnt access their systems for long periods of the day,and that gave us a lot of problems. If a customer called the insurance company withan insurance proposal in hand, and we told them, We cant help you, it woulddefinitely affect our business."For the survey population as a whole, the average yearly revenue loss from downtimewas reduced from $5.7 million to $966,000 with the use of JBoss — an 83% improvement.Benefit and Cash FlowThe annual benefit, investment, and cumulative cash flow over three years are shown inFigure 3. Benefits tend to increase over time as the solution gains greater traction in theorganization. Investments are highest in the year JBoss Operations Network ispurchased. Once the initial cost is accounted for, investment in the following yearsdeclines and levels off over time. Ongoing investment includes annual subscription fees,standard hardware turnover, IT time required to maintain the solution, and staff training.FIGURE 3Benefit, Investment, and Cash FlowSource: IDC, 20106 #224332 ©2010 IDC
  7. 7. Return on InvestmentThe three-year IDC ROI analysis on JBoss Operations Network is based on initial andannual investments compared with the benefit over the three years. Based on thedata gathered from the customers in this study, this solution offers an ROI of 634%and payback occurs at 5.3 months. Table 1 displays the ROI results (details on howthese figures are calculated are available in the Appendix).NEED TO MANAGE OPEN SOURCEMIDDLEW AREThis ROI analysis is presented in the context of the growing need to manage opensource middleware. Linux has rapidly grown in importance as an operatingenvironment and is being used to deploy an increasing number of applications anddatabases — often replacing higher-cost Unix systems. Many applications aredependent on JBoss Enterprise Middleware for SOA, Web servers, and applicationservers. With increasing business value, Linux-based applications must be managedto achieve high-availability, security, and performance standards. Managementsoftware is needed to ensure service quality and to support such functions asprovisioning, configuration management, and change and patch management.MAN AGEMENT BENEFITSLinux management software provides key benefits for managing Linux-based servers,middleware, and applications. These benefits include the following: Better service quality. Management software can improve availability and performance with fewer slowdowns and reduced downtime. Downtime has direct costs to the business that come from loss of business opportunity as well as decreased employee and end-user productivity. Leveraging of staff resources. Management software can help increase the amount of staff time that can be used for productive work. Automation. Management software can be used to automate routine or repetitive tasks, such as server provisioning or applying patches. Agility. Management software can facilitate and greatly reduce the time needed to implement system and application changes. Cost savings and improved ROI. Management software drives cost savings including reduced hardware and software costs, reduced IT operational costs, and reduced IT management costs. Benefits also come from increased end-user productivity and enhanced availability of business applications.©2010 IDC #224332 7
  8. 8. RED HAT LINUX MAN AGEMENTRed Hat Inc. develops, distributes, and supports the Red Hat Enterprise Linuxoperating environment, based on the open source Linux kernel, and JBoss EnterpriseMiddleware, which includes the JBoss SOA Platform, the JBoss EnterpriseApplication Platform, the JBoss Enterprise Web Server, and other middlewarecomponents. One of the key requirements for Red Hat is to provide managementsupport for systems and applications deployed on Red Hat Enterprise Linux serversand JBoss Enterprise Middleware.Red Hat Network and JBoss OperationsNetworkRed Hat Network (RHN) is a solution that provides system management servicesspecifically for Red Hat technologies and for the distributed software that makes upthe Red Hat Enterprise Linux operating environment, as well as for applicationsdeployed on Red Hat Enterprise Linux. JBoss Operations Network is a managementsoftware platform for centralized systems management (server-agent) of JBossEnterprise Middleware. JBoss ON provides management functions for the JBoss SOAPlatform, the JBoss Enterprise Application Platform, the JBoss Enterprise WebServer, and other JBoss components. JBoss ON management functions includediscovery and inventory, configuration management, application deployment,availability management, performance management, and content management.CHALLENGES AND OPPORTUNITIESAs shown by the results of this ROI study, management software for open sourcemiddleware can provide a number of key benefits for IT organizations, includingincreased IT efficiency, operational cost reductions, and service improvements suchas reduction in downtime. These factors contribute to making Linux an increasinglyviable platform for deploying enterprise-class applications and databases.One challenge for Linux management is to extend functional capabilities toencompass the changes occurring in infrastructure technology, such as the rapidlyspreading virtualized infrastructures in the x86 environments. Increasingly, Linuxsystems management will need to address both the Linux virtual images and theimpacts of the virtual infrastructures in which the images are deployed.Another area of high interest is managing Linux in the cloud. As cloud architecturesmature, IT organizations will want to manage Linux-based applications in a variety ofcloud configurations with emphasis on self-service capabilities, including provisioning,patching, and security management. Ensuring service quality including performanceand availability will be an important management concern for Linux-basedapplications deployed in the cloud.8 #224332 ©2010 IDC
  9. 9. These technological advances pose opportunities for Linux management vendors todevelop new and extended functionality for system management software. Otheropportunities exist for increased integration of core Linux management capabilitieswith major application platforms, commercial databases, and enterprise managementsuites. The further development of Linux management software by companies suchas Red Hat can offer IT organizations the opportunity to achieve positive ROI benefitsin expanded areas of their operations.SUMMARY AND CONCLUSIONThis ROI study is based on data gathered from structured in-depth interviews withrepresentatives from IT organizations that are using JBoss Operations Network tomanage JBoss Enterprise Middleware. Based on this study, the IT organizationsexperienced strong positive returns on their investments, yielding an average 634%ROI over a three-year period — over six times the initial investment.In todays economic climate, IT organizations are looking for ways to achieve costsavings in the short term. Based on this study, the IT organizations achieved this goal byrealizing an average payback period for JBoss Operations Network of a short 5.3 months— recovering their initial investments well within the first half-year of deployment.Another key metric that demonstrates the positive effects of using JBoss OperationsNetwork is the impact on the number of Linux servers running JBoss EnterpriseMiddleware that can be managed by a single system administrator. Beforedeployment, the surveyed IT organizations averaged 38 Linux servers running JBossEnterprise Middleware per administrator. After successful deployment, theorganizations averaged 84 Linux servers running JBoss Enterprise Middleware peradministrator, more than doubling the administrators server management capabilities.In summary, the IT organizations that were interviewed for this study received positiveROI results, with short payback periods, from deploying JBoss Operations Network tomanage their JBoss Enterprise Middleware environments.©2010 IDC #224332 9
  10. 10. APPENDIXIDCS ROI MethodologyIDCs ROI methodology measures the efficiency of management software productsand processes and uses the findings to calculate ROI for the deployed managementsoftware. The method does this in four steps:1. Evaluates the internal and external costs of administering the systems, networks, and applications before deploying the management software tools.2. Ascertains the investment in the purchase, implementation, and deployment of the management software tools. It is important to estimate not only the initial purchase cost of software but also the required implementation, integration, and training costs. To measure the total deployment investment required, IDC is careful to include questions not only about the cost of purchasing and setup of the software but also about the integration and the annual software maintenance fees.3. Measures the cost savings and gains in productivity, availability, and efficiency achieved using the management software tools. Portions of the interviews are dedicated to the discovery of cost savings including both "hard" IT costs, such as savings in software rental and maintenance fees, and "soft" costs, such as IT staff productivity, IT management efficiency, and application availability. IT staff productivity. To measure changes in IT productivity, IDC asks about the use of staff time in such deployment and operational areas as setting up servers, deploying and updating software, tracking hardware and software assets, and dealing with user problems. Staff time for these tasks before and after implementation is recorded, together with the fully burdened (i.e., after fringe benefits and overhead) hourly staff salary rate. IT management efficiency. IT management efficiency pertains to efficiencies achieved in user administration and support by obtaining better management scalability. Some questions asked relate to the ability to centrally manage remote locations to achieve reductions in travel costs, while others relate to the additional staff that would be required to support expected growth in the user or server population, with and without the tools. Application availability and user productivity. To measure the effects of application availability, IDC concentrates on determining the effect on user productivity and business revenue caused by downtime by asking questions about systems, network, and application unavailability patterns before and after implementation. The fully burdened hourly salary rates of the user base are also required, and an estimate is sought of the loss of business that would be associated with an hour of downtime.4. Calculates the payback period and ROI for the deployed enterprise management software. Based on the interview data, IDC calculates the average payback period and rate of return based on the overall cost savings resulting from the investments in JBoss Operations Network software. To normalize the data, IDC presents the results in terms of per 100 users.10 #224332 ©2010 IDC
  11. 11. ROI and Payback Period CalculationAssumptionsIDC bases the payback period and ROI calculations on a number of assumptions,which are summarized below: Time values are multiplied by burdened salary (salary + 28% 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 end-user productivity and lost revenue. 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 (NPV) 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. This accounts for both the assumed cost of money and the assumed rate of return.Because every hour of downtime does not equate to a lost hour of productivity orrevenue generation, IDC attributes only a fraction of the result to savings. As part ofour assessment, we asked each company what fraction of downtime hours to use incalculating productivity savings and the reduction in lost revenue. IDC then taxes therevenue at that rate.Further, because IT solutions require a deployment period, the full benefits of thesolution are not available during deployment. To capture this reality, IDC prorates thebenefits on a monthly basis and then subtracts the deployment time from the first-year savings.Copyright NoticeExternal Publication of IDC Information and Data — Any IDC information that is to beused in advertising, press releases, or promotional materials requires prior writtenapproval from the appropriate IDC Vice President or Country Manager. A draft of theproposed document should accompany any such request. IDC reserves the right todeny approval of external usage for any reason.Copyright 2010 IDC. Reproduction without written permission is completely forbidden.©2010 IDC #224332 11

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