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The business value of managed services: Findings from IDC research sponsored by IBM.

IBM Services
IBM Services
IBM ServicesGlobal Channel Enablement at IBM Services

This presentation highlights the key findings from a recent study by IDC that determined the financial benefits, IT operational benefits, and positive return on investment realized by IBM managed services clients. To get the full report to to: http://bit.ly/BusinessValueMgdSvc

The business value of managed services: Findings from IDC research sponsored by IBM.

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The business value of
managed services

Findings from IDC research sponsored by IBM

SSP03192-USEN-00
© 2013 IBM Corporation
The business value of managed services: Findings from IDC research sponsored by IBM

IDC evaluated eight global companies to assess business value
provided by IBM Integrated Managed Infrastructure services
The research base included:

8

existing medium and large IBM clients from 5 countries: Canada, France, India, Italy, UK

6

companies were transitioning to IBM from managing their IT assets in-house

2

companies were transitioning to IBM from local service providers
IDC: A key element in enhancing business productivity
is driving down costs, which can help free up the funds
needed to make strategic investments. Businesses
also need a means to more effectively orchestrate
how IT interacts with business processes and critical
application environments.

The solution lies in using managed services.
2

© 2013 IBM Corporation
The business value of managed services: Findings from IDC research sponsored by IBM

All eight are using IBM to manage servers; five are using IBM to
manage server, storage and network infrastructure
Study demographics
Size

Average

Storage environment

Employees

4,888

Storage (terabytes)

Internal IT users

3,181

Annual storage growth

Server environment

Average

Physical servers
managed
Virtual servers
managed

3

150

Network environment
Location/sites

Average
38
30%

Average
85

176

Number of ports

20,000

© 2013 IBM Corporation
The business value of managed services: Findings from IDC research sponsored by IBM

Companies studied gained significant, quantifiable benefits from
using managed services
Key findings:

88%
24%
42%
$229,511
224%
5.5 month

reduction in unplanned downtime from server and network failures

reduction in IT infrastructure cost

increase in IT staff productivity
annual business productivity benefit

three-year return on investment

4

pay-back period
© 2013 IBM Corporation
The business value of managed services: Findings from IDC research sponsored by IBM

Study participants realized financial benefits in four key areas
Average annual benefit

$376,323 per 100 users / $11,970,834 overall1

User productivity

Business productivity

$203,111 per 100 users /
$6,460,961 overall

$6,256 per 100 users /
$199,003 overall

IT staff productivity

Infrastructure cost reduction

$20,155 per 100 users /
$641,131 overall

$146,801 per 100 users /
$4,669,740 overall

Based on study group average of 3,181 internal IT users

1

5

© 2013 IBM Corporation
The business value of managed services: Findings from IDC research sponsored by IBM

While reducing costs is the main driver for managed services,
increasing user productivity was the leading benefit
Business value realized
Optimize the business
processes driven by
affected applications
Reducing the
frequency and
duration of
unplanned
downtime

Free up time so people
can do more

Deliver a stable IT
platform for new
business applications

+
6

Eliminate the annual
cost of lost productivity:
$56,100 per 100 users /
$1.8 million overall

“We have more applications.
Our employees are more
productive because of their
ability to use the systems
more. If I were to estimate,
I’d say 30 percent.”
– Manufacturer

“Around 50 people would
be more productive—I’d say
20–25% more. We’ve also
grown rapidly [35% per
year]…you could say that
this has helped to avoid
additional hiring costs.”
– Bank

© 2013 IBM Corporation
Ad

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The business value of managed services: Findings from IDC research sponsored by IBM.

  • 1. The business value of managed services Findings from IDC research sponsored by IBM SSP03192-USEN-00 © 2013 IBM Corporation
  • 2. The business value of managed services: Findings from IDC research sponsored by IBM IDC evaluated eight global companies to assess business value provided by IBM Integrated Managed Infrastructure services The research base included: 8 existing medium and large IBM clients from 5 countries: Canada, France, India, Italy, UK 6 companies were transitioning to IBM from managing their IT assets in-house 2 companies were transitioning to IBM from local service providers IDC: A key element in enhancing business productivity is driving down costs, which can help free up the funds needed to make strategic investments. Businesses also need a means to more effectively orchestrate how IT interacts with business processes and critical application environments. The solution lies in using managed services. 2 © 2013 IBM Corporation
  • 3. The business value of managed services: Findings from IDC research sponsored by IBM All eight are using IBM to manage servers; five are using IBM to manage server, storage and network infrastructure Study demographics Size Average Storage environment Employees 4,888 Storage (terabytes) Internal IT users 3,181 Annual storage growth Server environment Average Physical servers managed Virtual servers managed 3 150 Network environment Location/sites Average 38 30% Average 85 176 Number of ports 20,000 © 2013 IBM Corporation
  • 4. The business value of managed services: Findings from IDC research sponsored by IBM Companies studied gained significant, quantifiable benefits from using managed services Key findings: 88% 24% 42% $229,511 224% 5.5 month reduction in unplanned downtime from server and network failures reduction in IT infrastructure cost increase in IT staff productivity annual business productivity benefit three-year return on investment 4 pay-back period © 2013 IBM Corporation
  • 5. The business value of managed services: Findings from IDC research sponsored by IBM Study participants realized financial benefits in four key areas Average annual benefit $376,323 per 100 users / $11,970,834 overall1 User productivity Business productivity $203,111 per 100 users / $6,460,961 overall $6,256 per 100 users / $199,003 overall IT staff productivity Infrastructure cost reduction $20,155 per 100 users / $641,131 overall $146,801 per 100 users / $4,669,740 overall Based on study group average of 3,181 internal IT users 1 5 © 2013 IBM Corporation
  • 6. The business value of managed services: Findings from IDC research sponsored by IBM While reducing costs is the main driver for managed services, increasing user productivity was the leading benefit Business value realized Optimize the business processes driven by affected applications Reducing the frequency and duration of unplanned downtime Free up time so people can do more Deliver a stable IT platform for new business applications + 6 Eliminate the annual cost of lost productivity: $56,100 per 100 users / $1.8 million overall “We have more applications. Our employees are more productive because of their ability to use the systems more. If I were to estimate, I’d say 30 percent.” – Manufacturer “Around 50 people would be more productive—I’d say 20–25% more. We’ve also grown rapidly [35% per year]…you could say that this has helped to avoid additional hiring costs.” – Bank © 2013 IBM Corporation
  • 7. The business value of managed services: Findings from IDC research sponsored by IBM Delivering better, higher quality IT services proves to be the real benefit as annual downtime is reduced by 16 hours per user Average user productivity key performance indicators (KPIs) Before After (IBM-managed) # of annual outages 2.7* 1.1 1.6 Total hours per user 12.4 hours 1.3 hours 11.1 hours Network downtime Before After (IBM-managed) # of annual outages 2.3* 1.0 1.3 Total hours per user 6.2 hours 0.9 hours 5.3 hours Server downtime 7 *Compared to 10–12 incidents per year for an average organization Savings Savings 89% improvement 86% improvement © 2013 IBM Corporation
  • 8. The business value of managed services: Findings from IDC research sponsored by IBM All organizations reduced infrastructure total cost of ownership (TCO)—a primary objective for managed services Six organizations moving from in-house to IBM:  25% reduction in IT infrastucture cost including the costs of both the infrastructure itself and IT support  PLUS savings from consolidating data center operations: – Space savings (actual footprint, construction costs and other annual costs) – Reduced software license costs by an average $250,000 annually – Eliminated use of third-party consultants – Saved on costs and time needed to train in-house staff Two organizations moving to IBM from local providers:  20% reduction in IT infrastucture cost “The big benefits probably come from having a storage expert, a network expert, and a server expert. If we did that (in-house), it probably would be one more person added, but you wouldn’t have that breadth of skill. You’d have one guy that knows a little bit of network, but is he an expert? Probably not.” – Transportation company  PLUS one organization added resiliency and security 8 © 2013 IBM Corporation
  • 9. The business value of managed services: Findings from IDC research sponsored by IBM IBM managed services enabled all organizations to grow their application environments, re-focus IT staff on critical areas Business value realized  Increased IT staff productivity by 42%  Delivered IT services more quickly  Increased the agility of their organizations  Reduced overhead costs Average IT staff productivity key performance indicators (KPIs) Before Savings Improvement Time to provision a virtual server 40 hours 13.67 hours 26.33 hours 66% Time to launch a new application 3.75 weeks 2.5 weeks 1.25 weeks 34% Time to provision additional storage 9 After 25.25 days 7.25 days 18 days 71% © 2013 IBM Corporation
  • 10. The business value of managed services: Findings from IDC research sponsored by IBM Organizations cite additional IBM value in addressing the growing cost of compliance “We have more and more audits. What I would say is that we have more audits because we are making much more money than we used to. But thanks to IBM services, we are able to respond to the audits much faster, and also in a more consistent fashion, with more regularity.” Business value realized 200-500 person-hours per year savings in the auditing process, due to:  Improved internal regulations  Fewer sites to be audited  Faster response to audit requests – Manufacturer 10 © 2013 IBM Corporation
  • 11. The business value of managed services: Findings from IDC research sponsored by IBM Decreasing unplanned downtime and increasing IT productivity delivers bottom-line business benefits Stable platform supports a more agile business, improves responsiveness to market Average business productivity Category Revenue increase from increased agility Average $173,333 Reduction in lost revenue + $974,220 Total annual revenue increase = $1,147,553 Operating margin (assumed) x 20% Annual business productivity benefit $229,511 11 What is the value of agility? “The information system is more stable ... We constantly have new applications in the business ... The value for all these changes depends on the magnitude of the change and is cumulative. So, if you look at all the changes we are implementing on all the platforms over the next 10 years, the value of being able to react more quickly would be worth millions of euros.” – European-based company © 2013 IBM Corporation
  • 12. The business value of managed services: Findings from IDC research sponsored by IBM IDC’s analysis shows that IBM Managed Infrastructure Services delivered payback in under six months and ROI of 224% Three-year ROI analysis per 100 users Benefits (discounted) $888,085 Investment (discounted) $274,326 Net present value (NPV) $613,759 ROI = NPV / investment 224% Payback 5.5 months Discount factor 12% 12 The three-year ROI analysis illustrated in the table shows that, on average, the organizations in this study spent $274,326 (discounted) per 100 users and received $888,085 per 100 users in benefits (discounted) for a net present value of $613,759. The companies saw payback in 5.5 months and an ROI of 224%. © 2013 IBM Corporation
  • 13. The business value of managed services: Findings from IDC research sponsored by IBM Over three years, the companies will see a net benefit of $747,000 per 100 users Three-Year Cost Benefit Analysis per 100 users $800,000 $(747,004) $700,000 Investment Benefits $600,000 $500,000 $(433,151) $(433,434) Cumulative cash flow $400,000 $(262,382) $300,000 $200,000 $100,000 $$(100,000) $(7,229) $(124,911) $(200,000) Initial deployment 13 Year 1 $(124,911) Year 2 $(124,911) Year 3 © 2013 IBM Corporation
  • 14. The business value of managed services: Findings from IDC research sponsored by IBM Selecting a managed services provider: what to look for Critical requirements identified by managed services buyers Robust security capabilities  Are the basics covered (firewalls, intrusion detection)?  How will regulatory requirements be addressed locally? Across multiple geographies? Effective return on investment (ROI)  Can the provider build a business case? Provide actual ROI assessments? Quality of service  How will the provider reduce risks and meet service delivery targets related to: Availability? Performance? Provisioning?  Are there contractual SLAs with financial goals? Control and support  Is there a formal governance model incorporating program and project management?  What management tools and dashboards are provided? Skills and resources  Does the service provider have deep skills? Broad skills? Around-the-clock coverage?  Is all service labor based? What processes are automated? 14 © 2013 IBM Corporation
  • 15. The business value of managed services: Findings from IDC research sponsored by IBM IBM’s approach is to modularly build a solution tailored exactly to individual client requirements Your customized solution Pick the components you want • Monitoring • Management • Reporting Management 1 Platform Monitoring Middleware Monitoring Base Services Network Monitoring Storage Monitoring Monitoring Pick the level of service you need • Basic • Advanced • Base or incremental SLA Advanced Pack2 Platform Management Advanced Pack Middleware Management Groupware Monitoring Advanced Pack Groupware Management Database Monitoring Advanced Pack Security Management Services Management Dashboard Advanced Pack Network Management Reporting 15 1 Call Center Services Advanced Pack Backup Management Advanced Pack Database Management Advanced Pack Storage Management Advanced Pack Capacity Reporting & Management Management includes monitoring. 2Advanced Pack includes services like Cluster Management, Engineering Services, High Availability, etc. Base SLA Incremental SLA © 2013 IBM Corporation
  • 16. The business value of managed services: Findings from IDC research sponsored by IBM IBM Integrated Managed Infrastructure Services has the scale, scope, tools and expertise to manage client environments 137,091 2,270,000 41,000 Midrange Tivoli Endpoints Mainframe MIPS 631 82,089 Intel servers Middleware instances 4.8M Batch jobs per week 0.77M Calls/web chat/ e-mails per month 900 Oracle Business applications 1,560 63,191 SQL Oracle Unix servers SAP instances 8,964 140 Pb 325 2,407 Managed Storage Siebel instances 811,050 Microsoft Exchange mailboxes 16 Database instances 13,095 Mainframes 53,657 87,657 IBM DB2 Sybase 1,104,340 Lotus Notes mailboxes © 2013 IBM Corporation
  • 17. Next steps 1. Read the full IDC report 2. Visit ibm.com/services/managed 3. Engage with an IBMer to discuss your needs 17 © 2013 IBM Corporation
  • 18. Trademarks and notes © IBM Corporation 2013  IBM, the IBM logo, ibm.com, XIV, Global Technology Services, System x, AIX, DB2, Lotus Notes and Tivoli are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “ Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml.  IT Infrastructure Library is a registered trademark of the Central Computer and Telecommunications Agency which is now part of the Office of Government Commerce.  ITIL is a registered trademark, and a registered community trademark of The Minister for the Cabinet Office, and is registered in the U.S. Patent and Trademark Office.  Linux is a registered trademark of Linus Torvalds in the United States, other countries, or both.  Microsoft is a trademark of Microsoft Corporation in the United States, other countries, or both.  UNIX is a registered trademark of The Open Group in the United States and other countries.  This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.  THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.  The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation. 18 © 2013 IBM Corporation