the business value of managed services: findings from idc research sponsored by ibm

© 2013 IBM Corporation

The business value of managed servicesFindings from IDC research sponsored by IBM

SSP03192-USEN-00

© 2013 IBM Corporation2

IDC evaluated eight global companies to assess business value provided by IBM Integrated Managed Infrastructure services

The research base included:

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

8existing 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.


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

Server environment Average

Physical servers managed

150

Virtual servers managed

176

Size Average

Employees 4,888

Internal IT users 3,181

Network environment Average

Location/sites 85

Number of ports 20,000

Storage environment Average

Storage (terabytes) 38

Annual storage growth 30%

Study demographics



Companies studied gained significant, quantifiable benefits from using managed services

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

pay-back period


Key findings:


Study participants realized financial benefits in four key areas

User productivity

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

IT staff productivity

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

Business productivity

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

Infrastructure cost reduction

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

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

1Based on study group average of 3,181 internal IT users



“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

While reducing costs is the main driver for managed services, increasing user productivity was the leading benefit


Reducing the frequency and

duration of unplanned downtime

Optimize the business processes driven by affected applications

Free up time so people can do more

Deliver a stable IT platform for new

business applications

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

$1.8 million overall

“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+

Business value realized


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)

Server downtime Before After (IBM-managed)

Savings

89%improvement

# 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)

Savings

86%improvement

# of annual outages 2.3* 1.0 1.3

Total hours per user 6.2 hours 0.9 hours 5.3 hours


*Compared to 10–12 incidents per year for an average organization


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

PLUS one organization added resiliency and security

“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



IBM managed services enabled all organizations to grow their application environments, re-focus IT staff on critical areas

Average IT staff productivity key performance indicators (KPIs)

Before After 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 25.25 days 7.25 days 18 days 71%

Increased IT staff productivity by 42% Delivered IT services more quickly Increased the agility of their organizations Reduced overhead costs




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.”– Manufacturer

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




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

Decreasing unplanned downtime and increasing IT productivity delivers bottom-line business benefits

Average business productivity

Category Average

Revenue increase from increased agility

$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

Stable platform supports a more agile business, improves responsiveness to market



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%

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%.



Over three years, the companies will see a net benefit of $747,000 per 100 users

Investment

Benefits

Cumulative cash flow

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$-

$(100,000)

$(200,000)Initial

deploymentYear 1 Year 2 Year 3

$(7,229)

$(124,911) $(124,911) $(124,911)

$(433,434)$(433,151)

$(262,382)

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$-

$(100,000)

$(200,000)Initial

deploymentYear 1 Year 2 Year 3

$(7,229)

$(124,911) $(124,911) $(124,911)

$(433,434)$(433,151)

$(262,382)

$(747,004)

Three-Year Cost Benefit Analysis per 100 users



Selecting a managed services provider: what to look for

Critical requirements identified by managed services buyers

Does the service provider have deep skills? Broad skills? Around-the-clock coverage?

Is all service labor based? What processes are automated?

Skills and resources

Is there a formal governance model incorporating program and project management?

What management tools and dashboards are provided?

Control and support

How will the provider reduce risks and meet service delivery targets related to: Availability? Performance? Provisioning?

Are there contractual SLAs with financial goals?

Quality of service

Can the provider build a business case? Provide actual ROI assessments?

Effective return on investment (ROI)

Are the basics covered (firewalls, intrusion detection)?

How will regulatory requirements be addressed locally? Across multiple geographies?

Robust security capabilities



Your customized solution

Platform Monitoring

Middleware Monitoring

Groupware Monitoring

Call Center Services

Monitoring

Management1

Reporting

BaseServices

Services Management

Database Monitoring

Dashboard

Storage Monitoring

IBM’s approach is to modularly build a solution tailored exactly to individual client requirements

1Management includes monitoring. 2Advanced Pack includes services like Cluster Management, Engineering Services, High Availability, etc.

Advanced Pack

Advanced Pack2

Capacity Reporting &

Management

Platform Management

Advanced Pack

Network Management

Advanced Pack

Backup Management

Advanced Pack

Database Management

Advanced Pack

Middleware Management

Advanced Pack

Groupware Management

Advanced Pack

Security Management

Advanced Pack

Storage Management

Network Monitoring

Base SLA

Incremental SLA

Pick the components you want• Monitoring• Management• Reporting

Pick the level of service you need• Basic• Advanced• Base or incremental SLA



IBM Integrated Managed Infrastructure Services has the scale, scope, tools and expertise to manage client environments

0.77MCalls/web chat/e-mails per month

137,091 Midrange Tivoli Endpoints

631 Mainframes

4.8M Batch jobs per week

2,270,000 Mainframe MIPS

82,089Intel servers

53,657Unix servers

41,000Middleware instances

900Business applications

1,560SAP instances

325Siebel instances

140 Pb Managed Storage

1,104,340Lotus Notes mailboxes

13,095 Oracle

63,191 SQL Oracle

8,964 IBM DB2

2,407 Sybase

87,657Database instances

811,050Microsoft Exchange mailboxes



Next steps

1. Read the full IDC report

2. Visit ibm.com/services/managed

3. Engage with an IBMer to discuss your needs


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.

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the business value of managed services: findings from idc research sponsored by ibm

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