forrester consulting: benefits of oracle-verizon cloud-based subscription services
TRANSCRIPT
A Forrester Total Economic
Impact™ Study
Commissioned By
Verizon
Project Director:
Liz Witherspoon
August 2014
Total Cost Of Ownership
Of Verizon And Oracle
Database And Oracle
WebLogic Server
Subscription Services Cost Savings And Business Benefits Enabled By Verizon’s Pay-As-You-Go Model For Oracle Software
Table Of Contents
Executive Summary .................................................................................... 3
Disclosures .................................................................................................. 8
TEI Framework And Methodology .......................................................... 10
Analysis ...................................................................................................... 11
Verizon And Oracle Database And Oracle WebLogic Server
Subscription Services: Overview ............................................................ 19
Appendix A: Total Economic Impact™ Overview ................................. 21
Appendix B: Supplemental Material ....................................................... 22
Appendix C: Endnotes .............................................................................. 22
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Executive Summary
Verizon commissioned Forrester Consulting to conduct a
cost-based analysis, utilizing the Total Economic Impact™
(TEI) methodology, and examine the potential cost savings
and reduction in total cost of ownership (TCO) that enterprises
may realize by accessing Oracle software through the Verizon
Terremark Enterprise Cloud. The purpose of this study is to
provide readers with a framework to evaluate the potential
financial impact of accessing Oracle software on a
subscription basis for their organizations. While the financial
analysis of this study focuses on the cost savings around
licensing and infrastructure, customers stated clearly that cost
was not the primary driver for taking advantage of the
subscription services. They cited significant business benefits
that drove them to choose this licensing model, many of which
are highlighted below.
To better understand the benefits and costs associated with
this licensing model, Forrester interviewed several customers
who opted to use Verizon and Oracle Database subscription services. The pay-as-you-go model is a new offering that
represents an expanded relationship between Verizon and Oracle. It serves as an alternative to purchasing Oracle perpetual
licenses for short-term projects and was used by customers interviewed for this study on a temporary basis to set up testing
and development environments for approximately six months. Most significantly, the subscription approach fits within the
cloud strategy and frameworks established by the interviewed companies, making their purchase decision easy.
Prior to taking advantage of this monthly subscription model, customers had to go through a lengthy and costly process to
establish a development and testing environment for their application development teams. When they had Oracle licenses to
spare, it took time and resources to set up the database and ensure that the current templates were in place. If the licenses
needed to be procured, the acquisition process took weeks to months, involved a lot of red tape, and slowed down the
development teams from getting their jobs done. Typically, the license purchase was over capacity since the testing and
development environment was only used for a few months, leading to more up-front costs than needed and excess capacity.
With Verizon’s subscription services for Oracle software, customers were able to “flip a switch” to activate their subscriptions
and set up a new environment in hours rather than weeks. As a result, they could be more responsive to the business and
aid the development team in delivering customer-facing applications more quickly. Said one senior manager for IT
infrastructure, “We could enable the business in a quick way with minimal investment. Accessing software in this way helps
us to be more nimble and a better partner to the business.” Although cost savings was a clear incentive for these customers
to “rent” their Oracle licenses from Verizon, it wasn’t the primary reason for the switch. Customers interviewed for the study
identified several business benefits of this subscription model:
› Decreased time-to-market for building a customer-facing application. All Verizon customers interviewed were building
customer-facing applications in response to business needs. To be nimble and responsive to their business stakeholders,
they needed to provide their application development teams with a testing and development environment quickly. By
accessing the Oracle software through Verizon, they were able to get started immediately. Said one enterprise
infrastructure architect, “It was time-to-market for us to create an external application — there is an opportunity cost of not
meeting a schedule to develop a customer-facing app. It would have upset other schedules in the program, and we all
need to own customer experience.”
› Increased speed and flexibility when setting up and taking down environments. The Verizon pay-as-you-go model
was appealing to these organizations because they had temporary workloads. They needed to set up the environment and
use it only a few months out of the year. Compared with a perpetual license, this new model enabled them to pay for only
Using Verizon and Oracle Database and Oracle
WebLogic Server Subscription Services,
organizations can be more nimble and responsive
to the business while saving costs. The
subscription services:
Lower total cost of ownership for license
and maintenance of Oracle Database
Enterprise Edition for temporary use of a
database (approximately six months) for
test and development.
Increase speed and flexibility when setting
up and taking down testing and
development environments.
Improve visibility and accounting around
IT costs related to specific projects.
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what they needed. Said one senior manager for IT infrastructure, “We decided that if our development and test systems
associated with large applications are only used part of the time, then it wasn’t very efficient to procure a whole
environment for them.”
› Improved visibility into and allocation around technology costs. The customers interviewed mentioned that the
subscription model enabled them to draw clear lines to costs associated with specific projects. This has been very helpful
when socializing and sharing technology costs with business stakeholders. In the past, the use of the license and
associated labor and hardware costs would be ongoing regardless of what portion of the technology was used for a
particular initiative. Now, IT can communicate easily with the business about what spend is related to a particular initiative.
Said one senior manager, “Before, there were ownership and depreciation issues around a license. It gets us out of the
financial gymnastics we used to do so we can allocate more cleanly who is really using the license.”
› Freed up internal resources for less operational and more value-added work. The customers interviewed — all
Verizon Enterprise Cloud subscribers — value the expertise that Verizon brings to their organizations as a tier one provider
of cloud services. Each organization followed an IT strategy centered on outsourcing nonstrategic work to a partner within
a portfolio of providers and moving capital expenditure to operating expenditure when possible. The customers used terms
for their IT paradigms including “nimble IT,” “cloud first,” and “disposable infrastructure.” The subscription offering fit
perfectly within the existing framework, enabling them to make the decision to access the licenses in this way a no-brainer.
One customer commented, “If we can’t differentiate ourselves, we don’t have to do it or be the experts.”
› Lower upfront cost and capital expenditure. Moving from a traditional perpetual license purchase to a subscription
model lowers capital expenses. These Verizon customers were already leveraging the Enterprise Cloud for their
infrastructure-as-a-service (IaaS) and categorizing it as operating expenses. They did not have to invest in additional
servers, hardware, or associated labor costs, and they got immediate access and use of the Oracle Database. The pay-as-
you-go model means that they are billed monthly, did not have to invest in capital equipment for their database, and have
lower upfront costs. If they use the Oracle software on a temporary basis (approximately six months per year), they pay
less for license, maintenance, and associated hardware costs.
› Shortened procurement cycle — a switch flip versus a new request. Because the Verizon offering is available within
existing Enterprise Cloud agreements, these customers breathed a collective sigh of relief knowing that they did not have
to go through a traditional procurement process to set up a new Oracle Database. They described the process as lengthy
and frustrating, sometimes taking up to six to eight weeks. Not only did the procurement cycle weigh on them, but they
knew that their infrastructure and operations teams were already overtaxed and would not have time to set up a test/dev
environment quickly given their other priorities. Through the Verizon subscription service, they could bypass the wait and
get their teams working immediately.
› Reduced over-provisioning and increased efficiency of technology used. Customers cited the subscription model as
a means to reduce overprovisioning, in addition to shortening the procurement cycle. Enterprise architects, needing to plan
for future capacity when making new infrastructure purchases, typically overbuy to plan for growth. But the infrastructure
managers interviewed wanted to get rid of excess capacity and give it back when they’re finished with it. Now they can.
Said one enterprise infrastructure manager, “Previously, when we went back and forth with the architecture team, they’d
define an environment over spec to allow for growth; it was defined to exceed the requirements, and by definition, cost
more than we expect to pay . . . now you do what you need for the load; once it’s taken care of you can get rid of the
excess capacity.”
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VERIZON PAY-AS-YOU-GO MODEL FOR ORACLE LICENSES GENERATES COST SAVINGS
Our interviews with three existing customers and subsequent financial analysis found that a composite organization based
on these interviewed organizations experienced the cost savings shown in Figure 1.
FIGURE 1
Financial Summary Showing Cost Savings For A Temporary Workload (Six Months)
TCO savings over one year:
$84,378
Total cost for pay-as-you go licenses:
$30,282
Total cost buying Oracle licenses:
$114,660
Source: Forrester Research, Inc.
› Savings — subscribing to the Oracle Database subscription service through Verizon. The composite organization
experienced the following savings when accessing Oracle Database Enterprise Edition on a subscription basis:
• Reduced license and maintenance costs. When Verizon customers used the Verizon and Oracle Database and
Oracle WebLogic Server Subscription Services for a temporary workload — approximately six months or less —
they realized immediate savings on license and maintenance costs. Maintenance is included in the subscription
price.
• Lower hardware and software costs associated with acquiring a database. Because the subscription service is
offered as part of Verizon’s infrastructure-as-a-service, customers do not have to purchase hardware and software
to support a database on their own infrastructure.
• Reduced labor costs. Because the subscription services are accessible immediately and directly from Verizon’s
Enterprise Cloud, customers do not have to use internal infrastructure and operations resources to get started.
Furthermore, they do not have to go through a lengthy procurement process, which also ties up resources.
• Faster time-to-deploy a new testing and development environment. Without the subscription services,
development teams may have waited weeks or months to get access to an environment to develop and test code.
Through Verizon’s offering, they can get started in days, keeping their critical, client-facing projects on schedule.
› Costs — subscribing to the Oracle Database subscription service through Verizon. The composite organization
experienced the following risk-adjusted costs when accessing Oracle Database Enterprise Edition on a subscription basis:
• Software licensing fees of $4,719 per month. These are monthly recurring costs for subscribing to the Oracle
Database Enterprise Edition service (four virtual processors). The subscription cost includes maintenance for that
license.
• Monthly maintenance. The ongoing maintenance costs for the license are included in the cost of the monthly
subscription cost.
• Monthly Verizon Enterprise Cloud infrastructure fees of $328 per month. This is a monthly recurring fee paid to
Verizon for the Enterprise Cloud infrastructure on which the Verizon and Oracle Database and Oracle WebLogic
Server Subscription Services run.
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• Database provisioning and maintenance at a rate of $72 per hour. These labor costs involve about 40 hours of
database administration time to install the DBMS software, configure it, install a database, and tune, optimize, and
deploy it. The data administrator would then spend time weekly maintaining the database. Note: Because DBA and
data administration work needs to be performed in both the hosted and on-premises scenarios, this labor cost was
excluded from the calculation. However, there is a slight time savings for an organization to access Verizon’s
preconfigured environment to be noted.
› Costs — purchasing Oracle Database Enterprise Edition License for on-premises installation and use. The
composite organization experienced the following risk-adjusted costs when purchasing perpetual Oracle licenses to use
on-premises with its infrastructure:
• Software license purchase price for Oracle Database Enterprise Edition of $76,000. This is a one-time
purchase price for a perpetual Oracle Database Enterprise Edition license (four processors). It assumes two things:
First, that the processor it runs on — in this scenario, an Intel processor — qualifies for a “core processor” discount
of 0.5 the license price. Second, it includes a discount rate of 20% for the license price (Oracle license discounts
range widely depending on the type of partnership and terms of the customer relationship, so a conservative
estimate was used). Depending on the accounting approach of the organization and rules governing the country, an
organization may choose to depreciate the license cost over three to five years or write it off as an expense in the
first year.
• Annual maintenance fee of $16,720. The annual maintenance fee for the perpetual license is calculated at a
standard rate of 22% of the net license fee and recurs annually, likely with an annual price increase of about 4%.
• Database provisioning and maintenance at a rate of $72 per hour. These labor costs involve about 40 hours of
database administration time to install the DBMS software, configure it, install a database, and tune, optimize, and
deploy it. The data administrator would then spend time weekly maintaining the database. Note: Because DBA and
data administration work needs to be performed in both the hosted and on-premises scenarios, this labor cost was
excluded from the calculation. However, there is a slight time savings for an organization to access Verizon’s
preconfigured environment to be noted.
• Server cost of $5,000. This is the cost of the server hardware on which the database will run. Its cost is depreciated
over three years.
• Server maintenance costs of $1,000 annually. This is the annual server maintenance cost that is estimated at
20% of the acquisition cost.
• Operating system license cost of $1,000 annually. This operating system license cost, most likely Red Hat
Enterprise Linux Server, is a recurring subscription license cost.
• Storage cost of $8,000 annually. This is the cost of plugging into an existing tier two storage infrastructure that the
composite organization is likely to have in place.
• Data center overhead facilities cost of $4,620 annually. This is the cost to provide power, cooling, fire
suppression, and security in a data center and the labor to oversee the facilities.
• IT labor to maintain the server, storage, and network at $5,654 annually. This is the server/local area network,
storage, and wide area network admin staff cost.
CUSTOMERS’ VIEW ON THE COST SAVINGS
The customers interviewed for this research and the composite organization chose the pay-as-you-go model instead of
purchasing perpetual licenses because they needed to set up a testing and development environment on a temporary basis.
Depending on the need — whether it be rapid prototyping, testing out a cluster, or quickly starting a new development project
— they planned to use a nonproduction environment for as little as one month and for as many as six months. For the
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purposes of this cost analysis, the time horizon modeled for using the subscription license for the composite organization is
six months. The assumption is that after this point, the environment is no longer needed and can be taken down. The cost
savings are shown for one year only because the customers “use and dispose” of the environment within that time.
The cost comparison between the licensing options can be approached in two ways. Some organizations may already be
Verizon Enterprise Cloud customers and wish to add the Oracle Database on top of the existing agreement. Others may be
considering the TCO of moving to the cloud as an alternative to their using their existing infrastructure and internal
resources.
License-To-License Comparison Of Costs
Because customers need to be existing Enterprise Cloud Verizon customers prior to accessing the Oracle Database, many
who opt to use this service are already paying monthly, recurring fees to Verizon for their infrastructure. They might view the
option to invest in the Oracle Database as simply an add-on to their existing monthly bill and would compare the monthly
license fee from Verizon with the cost of a perpetual license from Oracle. Furthermore, because Verizon offers a “bring your
own license” arrangement with Oracle, the customer may have already been leveraging the Verizon infrastructure to host
their licenses in the past. For these customers, the license-to-license cost comparison may suffice.
TABLE 1
Cost Savings — Verizon Subscription Price Compared With Oracle Purchase License And Maintenance Fees
Ref. Cost Category Calculation Cost
Year 1
(Oracle License
Cost Depreciated
Over Three Years)
Year 1
(Oracle License Cost
Accounted for
Entirely In The First
Year)
A1 Verizon subscription price
@ six months utilization $4,719 per month $28,314 $28,314
A2
Purchase price — Oracle
Database Enterprise Edition
license cost
$76,000 (license fee =
$190,000*“core
multiplier” rate 0.5*20%
license discount)
$25,333 $76,000
A3
Purchase price — Oracle
Database Enterprise Edition
support and maintenance
$16,720 (maintenance
fee — 22% of net
license fee)
$16,720 $16,720
Art Total cost savings (A2+A3)-A1 $13,739 $64,406
Source: Forrester Research, Inc.
Total Cost Of Ownership Of The License, Including The Associated Hardware, Software, And Labor Costs
The composite organization developed for this study procured Oracle Database from Verizon on a monthly subscription
basis, in part to avoid a lengthy and costly procurement process. Furthermore, having the development and testing
environment on-premises would have required relying on infrastructure labor and assets that were already taxed. They
viewed the cost savings as a significant reduction in capital expenditure and labor against the alternative option. The cost
comparison is an “apples-to-apples” TCO comparison between accessing Oracle Database via Enterprise Cloud on a
monthly subscription basis and purchasing perpetual Oracle Database licenses for on-premises use. The associated
infrastructure and labor costs for both options are included in the calculation. Note: The database administration and
maintenance costs are roughly the same in both scenarios, so they are excluded from calculation.
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TABLE 2
TCO Cost Savings — Subscription Price (With Associated Costs) Compared With TCO Of On-Premises Purchase Price (With Associated Costs)
Ref. Cost Category Calculation Cost
Year 1
(Oracle License
Cost Depreciated
Over 3 Years)
Year 1
(Oracle License
Cost Accounted for
Entirely in the First
Year)
Verizon subscription cost
B1 Verizon subscription price
@ six months utilization
$4,719 per month
(license)
$28,314 $28,314
B2
Verizon Enterprise Cloud
associated infrastructure costs
@ six months
$328 per month $1,968 $1,968
Purchase price — Oracle Database Enterprise Edition
B3
Purchase price — Oracle
Database Enterprise Edition
license cost
$76,000 (license fee =
$190,000*“core
multiplier” rate
0.5*20% license
discount)
$25,333 $76,000
B4
Purchase price — Oracle
Database Enterprise Edition
support and maintenance
$16,720
(maintenance fee —
22% of net license
fee)
$16,720 $16,720
B5
Oracle Database Enterprise
Edition associated hardware,
software, and labor costs
$21,940 (associated
hardware, software,
and labor costs) *See
Costs section for
more detail
$21,940 $21,940
Brt Total cost savings (B3+B4+B5)
-(B1+B2) $33,711 $84,378
Source: Forrester Research, Inc.
Disclosures
The reader should be aware of the following:
› The study is commissioned by Verizon and delivered by Forrester Consulting. It is not meant to be used as a competitive
analysis.
› Forrester makes no assumptions as to the potential cost savings that other organizations will receive. Forrester strongly
advises that readers use their own estimates within the framework provided in the report to determine the appropriateness
of an investment in Verizon’s subscription services for Oracle licenses.
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› Verizon reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its
findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
› Verizon provided the customer names for the interviews but did not participate in the interviews.
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TEI Framework And Methodology
INTRODUCTION
From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for
those organizations considering purchasing Verizon’s Subscription Services for Oracle Database. The objective of the
framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision.
APPROACH AND METHODOLOGY
Forrester took a multistep approach to evaluate the impact that Verizon’s Subscription Services for Oracle Database can
have on an organization (see Figure 2). Specifically, we:
› Interviewed Verizon and Oracle marketing, sales, and product management personnel, along with Forrester analysts, to
gather data relative to Verizon’s Subscription Services for Oracle Database.
› Interviewed three organizations currently using Verizon’s Subscription Services for Oracle Database to obtain data with
respect to costs, benefits, and risks.
› Designed a composite organization based on characteristics of the interviewed organizations (see Analysis section).
› Constructed a financial model representative of the interviews using the TEI methodology. The financial model is
populated with the cost data obtained from the interviews as applied to the composite organization, as well as Forrester
projections based on industry standards.
› Risk-adjusted the financial model based on issues and concerns the interviewed organizations highlighted in interviews.
Risk adjustment is a key part of the TEI methodology. While the interviewed organizations provided some of the cost
estimates, some categories included a broad range of responses or had a number of outside forces that might have
affected the results.
Forrester employed four fundamental elements of TEI in modeling Verizon’s Subscription Services for Oracle Database:
costs, benefits, flexibility, and risks.
Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI
methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix
[A] for additional information on the TEI methodology.
FIGURE 2
TEI Approach
Source: Forrester Research, Inc.
Perform due diligence
Conduct customer interviews
Design composite
organization
Construct financial
model using TEI framework
Write case study
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Analysis
COMPOSITE ORGANIZATION
For this study, Forrester conducted a total of three interviews with representatives from the following companies, which are
Verizon customers based in the United States and the United Kingdom:
› Lexmark International is a global provider of printing and imaging products, software, solutions, and services
headquartered in Lexington, Kentucky, with about $3.8 billion in revenue. Lexmark has a long history of research and
development focused on connecting unstructured print and digital information across the enterprise with the processes,
applications, and people that need it most.
› JetBlue Airways is a New York-based airline with $6 billion in revenue that operates in 86 cities and 17 countries. JetBlue
has 16,000 crew members and carries more than 30 million customers a year to 85 cities in the US, Caribbean, and Latin
America, with an average of 850 daily flights.
› datb, a privately-held, UK-based custom application development company, offers an alternative to off-the-shelf packages
to develop large-scale, web-based enterprise applications. datb has developed applications for the utilities, government,
and investment management industries.
Based on the interviews, Forrester constructed a TEI framework, a
composite company, and an associated cost analysis that
illustrates the areas financially affected. The composite
organization that Forrester synthesized from these results
represents an organization with the following characteristics:
› A global, Fortune 1000-sized enterprise with a strategic
imperative within IT to move functions to the cloud and outsource
areas of IT where it can save the company time and money. The
organization partnered with Verizon as a tier one cloud provider
because of its global presence, reliability, powerful network, and
strong brand. The organization views Verizon as a partner and
extension of its team and relies on Verizon’s infrastructure and
expertise for mission-critical applications.
› This organization supports internal business units’ application development projects and seeks the best method for
supporting development projects. These new applications, ultimately, generate revenue for the organization through
partners or directly. The organization seeks a more flexible and less expensive means to create testing and development
environments for its teams for short-term use.
› The organization selected Verizon for its breadth of offering, reliability, and expansive network of data centers in multiple
global locations. The organization is already a customer of Verizon’s enterprise cloud and relies on Verizon for cloud
services in advance of using the subscription services offering for Oracle Database.
› The organization has access to existing Oracle Database licenses but seeks an alternative for specific use cases in
support of business needs, for example, rapid prototyping and a development environment for a new application where the
database is only used for a period of time and then taken down. The organization seeks to better quantify the usage and
costs of business technology to attribute those costs to the business units.
› The organization has a need to support a global customer base and must have reliable and fast network speed with a
partner that is global.
“When I think of Verizon, I
think of partnership. We look
to Verizon as an extension of
our operations; they play an
integral role in every part.”
~Eash Sundaram, CIO, JetBlue Airways
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INTERVIEW HIGHLIGHTS — LEXMARK INTERNATIONAL — QUICKLY DEVELOP A RESELLER PARTNER
APPLICATION
Situation
Lexmark has a network of reseller partners called “Lexmark Fleet Managers” who resell managed print services. Lexmark
wanted to create a software-as-a-service (SaaS)-based application for its reseller partners to use with their end customers to
manage print services in the same way that Lexmark does. Previously, the application had been on-premise and hosted by
the partners, but the customers were demanding that they Web-
enable it. The Oracle Database was part of the underlying
architecture of the reseller application, so the timing was perfect for
the development team to build the SaaS version on Verizon’s
Enterprise Cloud infrastructure. Although it is initially intended for
temporary use, Lexmark would consider using it as a production
environment.
Solution
The senior manager of infrastructure, along with his cloud alliance
manager, decided that the Verizon pay-as-you-go model would be
ideal for developing this partner reseller application. They could
begin development quickly, and it fit well within their “nimble IT”
approach to technology investment. Their team has spent years
building out Lexmark’s global cloud business infrastructure and
looked for opportunities to take applications outside of their four
walls and to the cloud. As much as possible, they try to move
capital expenses to operating expenses. “It’s more about pay-as-
you-go and not architecting for five years out in time. We’re going to
procure an environment as we need it,” said the senior
infrastructure manager. They also recognized that developing and
testing an application would only use the environment part of the time and that it would be more efficient to tap into the
Verizon service offering.
Results
The interview revealed that Verizon’s subscription services for Oracle licensing:
› Enabled the IT organization to be a better partner with the business. Ultimately, Lexmark’s infrastructure team wanted
to deliver value quickly to the development teams that are developing customer-facing applications in response to
business needs. Procuring on-premises licenses to set up an environment would have hindered its progress and led to
unnecessary capital expenditures. The process of ordering, receiving, and standing up the equipment adds time to the
application delivery process, all before the build of the actual application. With Verizon’s subscription services, the team
was able to give the business what it needed — an environment to develop the application — in less than a business day
› Helped it maintain competitiveness within the market. Lexmark believes that to remain competitive, it needs to move
service offerings to the cloud, including the partner reseller application. With a global customer base, it knows that a tier
one cloud partner like Verizon is instrumental to providing the SaaS applications that perform to scale and that customers
want to buy. A public model for cloud applications is key to its strategy because software hosting is not a core competency,
and past efforts to host on-site did not provide the speed and performance demanded by its global customer and
employee base.
“Lexmark doesn’t need to be in
the data center or
infrastructure business; we
have plenty of opportunity to
procure from someone who is
an expert. If we can’t
differentiate ourselves, we
don’t do it.”
~Michael Busseni, senior manager of IT
Infrastructure Alliance and Support, Lexmark
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› Improved its ability to allocate ownership costs of licenses to the business. The monthly operating expense model
Verizon offers provides Lexmark with a cleaner, easier way to demonstrate the IT costs that relate to a particular business
initiative. It can now bill back to the business when needed with a clear sight of the costs incurred. Said the senior
infrastructure manager, “This offering takes our expense model and allows us to bill in different ways. Before there were
ownership and depreciation issues around a license. It gets us out of the financial gymnastics we used to do so we can
allocate more cleanly to who is really using the license.
› Allowed it to flex with the changing business environment.
The Lexmark IT team has been on the road to “nimble IT” for a
long time — over 13 years. It refers to its current location on that
path (tongue-in-cheek) as “Outsourcing 4.0.” Through this, it has
seen times that it needs to scale back and times to scale up
depending on the business cycle. Said the senior infrastructure
manager, “The benefit of pay-as-we-go is that we can turn up
and down the service as the business needs it instead of building
something we will need in five years that depreciates. It helps
align IT with the business better. In a good year we can build out,
and in a lean year we can get smaller.” It helps align IT with the
business better. In a good year we can build out, and in a lean
year we can get smaller.”
“The benefit of pay-as-we-go is
that we can turn up and down
the service as the business
needs it instead of building
something we will need in five
years that depreciates. It helps
align IT with the business
better. In a good year we can
build out, and in a lean year
we can get smaller.”
~ Michael Busseni, senior manager of IT
Infrastructure Alliance and Support, Lexmark
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INTERVIEW HIGHLIGHTS — JETBLUE AIRLINES — BUILD A TESTING AND DEVELOPMENT ENVIRONMENT
QUICKLY FOR A NEW CUSTOMER-FACING APPLICATION
Situation
JetBlue has a customer service focus and views technology as a
critical differentiator. Said CIO Eash Sundaram recently in an
interview with Verizon, “We’re a customer experience business that
just happens to fly airplanes. Embracing cloud is critical for the next
generation of our infrastructure. The cloud offering from Verizon
gives us a superior platform for us to grow our business in the next
couple of years.” JetBlue’s IT strategy is based around the concept
of following a “disposable infrastructure model.” When possible, the
infrastructure team has the goal of creating an environment and
deleting it when finished. Verizon’s Enterprise Cloud platform
enables JetBlue to use what it needs, when it needs it, for IT
operations. In the case of a new customer-facing application that
needed to be developed, the enterprise infrastructure manager
viewed the pay-as-you-go model for JetBlue’s Oracle Database
software as the ideal way to provide an environment to test out
clustering for about a month and then delete it.
Solution
The enterprise infrastructure manager came to his role with
application development challenges in mind. Previously, he
managed that team and recognized the frustration and lost
productivity when an environment wasn’t available for developing
and testing a new application. Since customer experience is a top
priority for JetBlue and technology underlies that (90% of JetBlue business is done online), he recognized the value of
delivering this application more quickly. So, it was an easy, fast decision to access Oracle software through Verizon’s
Enterprise Cloud.
Results
The interview revealed that Verizon’s subscription services for Oracle licensing:
› Decreased time-to-market for a new application. The primary goal of using Verizon’s monthly subscription for Oracle
licenses was to enable the development team to get a customer-facing application out quickly. In this sense, the purchase
was a no-brainer because it allowed the project team to immediately leverage the subscription. The enterprise
infrastructure manager realized that there would be an opportunity cost of not meeting the schedule. With Verizon’s
subscription offering, the development team could continue building the application instead of having to stop and wait for
the infrastructure team to procure Oracle licenses, stand up the hardware, and go through the data warehouse vendor.
Said the enterprise infrastructure manager, “It cut away the red tape that slows projects down.”
› Scaled out an environment rapidly and temporarily. In keeping with JetBlue’s “disposable infrastructure model,” the
Verizon subscription service for Oracle software enabled the team to set up a new environment quickly for its development
and QA teams and delete it when it is done. The team can give back the extra capacity that is not needed. It solves the
“It was time-to-market for us
to create an external
application — the opportunity
cost of not meeting a schedule
to develop a customer-facing
app. It would have upset other
schedules in the program and
we need to own customer
experience.”
~Tyrone Paige, enterprise infrastructure
manager, JetBlue Airways
15
issue of having an infrastructure that is underutilized after meeting a short-term goal. Said the enterprise infrastructure
manager, “In our approach to infrastructure, everything is disposable. Some people compare it to a plastic fork — you use
it temporarily or until it breaks.”
› Eliminated a lengthy procurement process. Because the subscription services require no resources beyond initiating
the license, the typical procurement process could be completely avoided. JetBlue has a strong partnership with Verizon
and relies on Verizon for its IT needs, from managing its data centers to hosting its eCommerce platform. Because JetBlue
is doing business with Verizon, it is easy for the enterprise
infrastructure architect to leverage the subscription model for the
Oracle software.
› Pushed the application development team to think differently
about development. With a reliable and state-of-the art cloud
platform underlying the application development environment, the
enterprise infrastructure manager sees an opportunity for the
development team to design differently. New applications that are
designed for a “disposable infrastructure” rather than a traditional
client/server model yield better uptime and performance. In the
past, if a virtual machine went down, the whole application may
have gone with it. With the cloud infrastructure, applications can be
designed for better uptime because there is likely to be fewer
single points of failure.
“We want to be able to stand
up new environments on a
temporary basis — create a
new development environment
for a month and test out a
clustering and only pay for
one month of licenses.”
~Tyrone Paige, enterprise infrastructure
manager, JetBlue Airways
16
INTERVIEW HIGHLIGHTS — DATB — SCALE INFRASTRUCTURE QUICKLY FOR RAPID PROTOTYPING
Situation
datb develops custom applications for customers in the United
Kingdom, primarily in the utilities, government, and investment
management sectors. One of its key differentiators is that it can
deploy custom software faster than its competitors. It does this
through rapid Web-based prototyping and proof-of-concept
exercises in collaboration with existing and prospective customers.
It wins business and meets clients’ needs by proving that it can turn
around new functionality in days. However, datb is a lean
organization comprised of senior developers dedicated to high-
value client work. The Verizon subscription services offering was
the perfect solution for datb to provide an infrastructure with the
reliability and scalability it needed to grow the business without
having to invest heavily in resources upfront.
Solution
The founder of datb was looking for a solution that would enable his
developers to create rapid prototypes during the sales process for
existing and prospective customers. Prior to investing in the
Verizon subscription offering, it had to direct high-value
development resources toward infrastructure work — not a core competency for the business. Furthermore, keeping up with
the changing technologies, updates, templates, and patches was taxing for the small company. By accessing Oracle on the
Verizon Cloud, it can now quickly deploy bits of infrastructure — in most cases, they’re only deployed for about a month.
Said the founder, “We can put up the prototype, demonstrate it, and take it back down. In the past this would have
necessitated multiple, concurrent Oracle licenses. Now we can deploy a server quickly and get it running with very good
confidence that it’s correctly installed and patched.”
Results
The interview revealed that Verizon’s subscription services for Oracle software:
› Improved turnaround time to develop custom software for clients. datb’s development work is highly iterative and
done in close contact with the expert users of its applications. Being able to build prototypes rapidly through the Verizon
cloud has improved its turnaround time and responsiveness, which leads to more business. Furthermore, the organization
works on-site with the clients to configure individual software to meet the customer’s unique needs. Being able to test the
functionality on the Web through mobile devices while on-site is a temporary — but critical — step in the process. Having
an Oracle Database ready for the developers with the reliability and scalability of the Verizon network helps them
turnaround software faster.
› Enabled datb to scale quickly for customers while preserving a lean team. datb needs to be ready to scale to meet
customer needs at any time. Whether it is creating new applications, developing add-on functionality to existing customer
applications, or rapidly prototyping for a prospective customer, it need servers and databases to scale at the flip of the
switch. As a small company, it has little economy of scale around infrastructure investments, but with Verizon it can benefit
“We have the confidence that
we can scale when we need to,
but with almost no notice.
That means we can remain a
fairly lean company in terms
of staff and infrastructure.”
~Mark Bushman, founding and managing
director, datb
17
from the extensive network in place. Said the managing director, “Being a small company we found ourselves in the
situation of having to spend $20,000 just in case we suddenly get three clients at the same time. Now, we have the
confidence that we can scale when we need to, but with almost no notice. That means we can remain a fairly lean
company in terms of staff and infrastructure.”
› Allowed it to keep prices low for its custom applications. Unlike larger organizations that make capital-heavy
investments and distribute those costs across thousands of customers, datb wanted to avoid front-loading costs on every
project and keep prices low. The flexibility of the Verizon licensing option meant that it would not have to pass off capital-
heavy costs to the customer for what the customer only need to use for a brief period of time. “If we didn’t have that ability,
then we’d have to have that technology and people available to support it upfront. That would have an impact on the cost
to the customer.”
› Ensured it was using the most current technology updates and patches. Prior to using Verizon’s subscription
services, the datb team had to spend a lot of time configuring a virtual machine, ensuring that it had the proper templates
and patches and keeping everything up-to-date. Because datb is a technology-based company, it wants to make sure it is
using the most current, innovative technology to power its applications. It appreciates the expertise and “industrial scale”
that Verizon offers. “We and hundreds of others get to use the templates. We have a higher level of confidence that it’s
properly configured and it’s got the right patches.”
› Maintained focus of development resources on client-facing work. As a custom or application development company,
datb has a technology staff that is senior and expert in collecting business requirements. Because it is paid for that
expertise, it’s important that it stays focused on revenue-generating activities so that the business model works. By
accessing the Oracle Database through the Verizon Cloud, those resources can focus on what they’re paid to do. Said the
founding manager, “We’re eliciting business requirements and turning them into an application. There’s no junior
development work to be done. If we manage our own hardware that means taking them off of client work, which would be
disruptive.”
› Received support from Verizon that enabled its success. As
an early adopter of the Verizon subscription services offering,
datb relied on assistance from the Verizon team to get up and
running. It received “free and extremely helpful support” and
cited the phone and email support from Verizon as the key to its
success configuring the Oracle Database for immediate use.
“We can do a proof of concept
to show a prospect that we can
do this as quickly and as
effectively as we say. When we
tell them it will take a week
and then turn it around in two
days without having the
infrastructural costs and set
ups, it makes an impact.”
~ Mark Bushman, founding and managing
director, datb
18
FLEXIBILITY
Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business
benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future
initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement
Verizon and Oracle Database and Oracle WebLogic Server Subscription Services and later realize additional uses and
business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more
detail in Appendix [A]).
Organizations may benefit in the future from the subscription services in two ways:
1. Verizon plans to offer management services for the Oracle Database. In other words, it could outsource the DBA
and data administration workload that typically falls within an organization. This model would be considered
managed database-as-a-service and the associated workload setting up, fine-tuning, and managing the database
would be performed by Verizon.
2. Customers that use the subscription services for Oracle software must be existing customers of Verizon’s Enterprise
Cloud. The Enterprise Cloud offers solutions far beyond Oracle software on its infrastructure-as-a-service platform.
Many organizations rely on Verizon to manage their data centers, eCommerce websites, etc. The Oracle Database
and Oracle WebLogic Server Subscription Services may be the first point of entry for customers, providing them the
baseline infrastructure on which they may layer additional services. These services may provide future benefits in
terms of cost reduction and productivity gains.
RISKS
Forrester defines two types of risk associated with this analysis: “implementation risk” and “impact risk.” Implementation risk
is the risk that a proposed investment in Verizon and Oracle Database and Oracle WebLogic Server Subscription Services
may deviate from the original or expected requirements, resulting in higher costs than anticipated. Impact risk refers to the
risk that the business or technology needs of the organization may not be met by the investment in Verizon and Oracle
Database and Oracle WebLogic Server Subscription Services, resulting in lower overall total benefits. The greater the
uncertainty, the wider the potential range of outcomes for cost and benefit estimates. The primary implementation risk is that
the organization uses the subscription services for longer than six to eight months for a temporary workload. If the
organization continues to pay monthly for the Oracle subscription services beyond the time horizon of most testing and
development use cases, the cost savings would diminish. This includes using the subscription services for the production
environment. In some case, the “rental” price would then exceed the “buy” price for the Oracle software. However, there are
situations where the organization would offset that cost by passing it along to customers, especially if the database is
supporting a customer-facing application.
19
Verizon And Oracle Database And Oracle WebLogic Server Subscription Services: Overview
The following information is provided by Verizon. Forrester has not validated any claims and does not endorse Verizon or its
offerings.
Deploying Oracle software has traditionally required an upfront investment. As with any software being sold through a
perpetual license model, organizations often end up with software licenses that are not fully utilized. This is particularly true
when the software is being used only intermittently. Oracle and Verizon are changing that by partnering to provide flexible,
pay-as-you-go access to Oracle software. Now, customers can bring existing licenses with them, or get pay-as-you-go
access to the Oracle software when needed. This compelling new operational model enables customers to use Oracle
Database and Oracle WebLogic Server software on Verizon Terremark Enterprise Cloud and Managed Hosting and pay for
access on a monthly basis. Pay-as-you-go monthly subscriptions are also available on physical cores with the Managed
Services offering for a limited time.
It’s now easier to access Oracle Databases for development and testing of applications with more flexible options:
• Rent licenses and access capacity quickly. Use elastic services to stand up and shut down environments quickly.
• Control costs by reducing the amount of underused in-house resources and offering an alternative to perpetual
licenses for short-term projects.
• Accelerate time-to-market by bridging multiple Oracle environments for each phase of development.
• Extend the value of licenses purchased prior to moving to the cloud.
• Easily expand processing capacity to handle temporary, variable, or cyclical workloads.
• Accelerate all stages of development cycles across multiple Oracle environments.
• Make more accurate budget decisions, paying for what is needed, with no upfront fees or lengthy commitments.
• Lower risk. Verizon delivers secure connectivity and publishes best practices for auditors.
AVAILABLE APPLICATIONS AND PLATFORMS
All editions of Oracle Database 11g and their associated options will be available across Verizon cloud platforms. Under
Verizon Terremark Enterprise Cloud and Managed Hosting, customers will be billed on a monthly basis. Hourly subscriptions
will be offered in the second half of 2014. Oracle WebLogic Server will be available in the second half of 2014. Database-as-
a-service (DBaaS), support for Oracle Database 12c, and additional licenses will also be released later in 2014.
For a limited time, you can leverage Oracle software licenses on dedicated physical servers under its Managed Hosting
service.
Verizon offers three levels of service:
For Enterprise Cloud:
• Subscription License only. No database monitoring or other managed hosting services.
For Managed Hosting:
• Subscription License plus Incident Management. Database monitoring, quarterly app patching, and tier one incident
response.
• Subscription License plus Fully Managed Hosting. Database monitoring, quarterly app patching, tier one to three
problem resolution, and change management.
20
FRAMEWORK ASSUMPTIONS
Table 3 provides the model assumptions that Forrester used in this analysis.
The time horizon used for the financial modeling is one year. The depreciation rate for the Oracle Database licenses is three
years, although some organizations may choose to depreciate over a longer time period. Readers are urged to consult with
their respective company’s finance department to determine the most appropriate depreciation rates to use within their own
organizations.
TABLE 3
Model Assumptions — Oracle Database Purchase For On-Premises Use
Ref. Metric Value
C1 Oracle Database Enterprise Edition License
purchase price — perpetual
$190,000 for four processors ($47,500 per processor), before
discounting
C2 Maintenance costs for perpetual license $41,800 before discounting
C3 Oracle — Oracle Processor Core Multiplier
Rate 0.5 for Intel processor
1
C4 Oracle — discount rate — software license;
software maintenance 20%
C5 Average cost for a database server $5,000
C6 Annual server maintenance cost 20% annually of the acquisition cost
C7 Network infrastructure cost Already in place; no additional cost
C8 Storage cost $8,000 per year to plug into the existing tier two storage
infrastructure2
C9 Operating system license cost Average of $1,000 per year
C10 Data center overhead facilities cost $4,620 per year3
C11 IT labor needed to maintain the server,
storage, and network $5,654
4
C12
Database provisioning and maintenance —
labor
40 hours @ $72 per hour
Source: Forrester Research, Inc.
21
Appendix A: Total Economic Impact™ Overview
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-
making processes and assists vendors in communicating the value proposition of their products and services to clients. The
TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior
management and other key business stakeholders.
The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks.
BENEFITS
Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or
project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze
the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal
weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on
the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand
the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established
between the measurement and justification of benefit estimates after the project has been completed. This ensures that
benefit estimates tie back directly to the bottom line.
COSTS
Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units
may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and
expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs
over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are
created.
FLEXIBILITY
Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be
the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an
investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the
initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can
potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration
feature may translate to greater worker productivity if activated. The collaboration can only be used with additional
investment in training at some future point. However, having the ability to capture that benefit has a PV that can be
estimated. The flexibility component of TEI captures that value.
RISKS
Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two
ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the
estimates will be measured and tracked over time. TEI risk factors are based on a probability density function known as
“triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the risk factor around
each cost and benefit.
22
Appendix B: Supplemental Material
Related Forrester Research
“Calculate The ROI Of Data Center Investments,” Forrester Research, Inc., August 26, 2013
“The Steadily Growing Database Market Is Increasing Enterprises’ Choices,” Forrester Research, Inc., June 7, 2013
“Understand The True Cost Of Cloud Services,” Forrester Research, Inc., June 20, 2012
“Take Advantage Of New Ways To Save Money On Database Costs,” Forrester Research, Inc., February 23, 2010
“The IT Infrastructure Playbook,” Forrester Research, Inc.
Appendix C: Endnotes
1 Source: Oracle Processor Core Factor Table (http://www.oracle.com/us/corporate/contracts/processor-core-factor-table-
070634.pdf).
2 Source: “Understand The True Cost Of Cloud Services,” Forrester Research, Inc., June 20, 2012.
3 Source: “Calculate The ROI Of Data Center Investments,” Forrester Research, Inc., August 26, 2013.
4 Source: “Understand The True Cost Of Cloud Services,” Forrester Research, Inc., June 20, 2012.