achieving business value with managed services

An IDC InfoBrief, sponsored by Avanade | May 2014

Managed Services Achieving Business Value with

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An IDC InfoBrief, sponsored by Avanade | Document #247693

Achieving Business Value with Managed Services

* IDC utilized its standard ROI methodology for the results shown in this electronic book, which were adapted from the IDC White Paper, Achieving Business Value with Avanade’s Application and Infrastructure Managed Services, by David Tapper and Randy Perry. This methodology is based on gathering data from current users of Avanade’s services as the foundation for the model. For more information, please visit www.avanade.com/managedservices.

IDC’s research and analysis* demonstrates that Avanade’s Application and Infrastructure Managed Services delivered an average payback period of just over four months from going live, and an ROI of 446% through the following benefits:

Business Value Highlights

Payback period just over four months.

ROI: 446%.

Lowering annual operations

cost by $2.2 M while increasing

revenue

Helping IT staff achieve 67% time savings and productivity gains on

application development and 42% on application

management

Mitigating risks by reducing downtime

by 64%

Lowering infrastructure costs by an

average of 13%

IN BENEFITS FOR EVERY $1 INVESTED

RETURNING OVER $5

http://www.avanade.com/managedservices



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As more employees treat business IT like it was theirs – bringing their own mobile devices to work, or leveraging social media to pursue business opportunities, or adopting a cloud service for important business processes – more pressure grows on IT departments to overcome obstacles presented by these technologies and capitalize on the opportunities.

Yet, when asked to use technology to innovate while also maintaining a steady state, IT struggles to respond without the needed resources and skill sets.

IDC research shows that enterprises increasingly turn to managed services to mitigate risk and achieve 5 important business goals.

Transforming the Economics of IT

Business Goal #1: Optimize Financial Management While

Meeting Key Performance Metrics

Business Goal #2: Allocate Talent and Skills to Focus

on Core Competencies

Business Goal #3: Support Need for Greater Business Agility and Operational Excellence

Business Goal #4: Provide Access to Flexible

Sourcing Models

Business Goal #5: Implement Strategic Change

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Most importantly, enterprises are looking to managed services providers to enable and help drive more strategic capabilities and continuous innovation.

Of course, buyers still want providers to help standardize and consolidate their IT environments. But, increasingly, enterprises also want to optimize the value of their existing software assets and move to innovative delivery models such as cloud and software-as-a-service, including access to new intellectual property.

The Ultimate Goal

The ultimate goal is to gain new capabilities from the managed service provider that buyers can use to innovate new products and services in order to grow their business.

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Avanade’s application and infrastructure managed services can help organizations achieve each of the business goals previously listed.

Avanade, a joint venture between Microsoft and Accenture, brings together a set of core competencies and capabilities that combine the best of both companies:

Considering Avanade

Avanade is a Managed Services

specialist for Microsoft

technologies

Microsoft’s comprehensive enterprise platform of technologies and access to

Microsoft’s R&D resources

Accenture’s industry and business acumen, cross-industry solutions, and horizontal solutions accelerators

Source: Avanade, 2014

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IDC conducted interviews with Avanade’s application and infrastructure managed services customers to measure the financial impact to these organizations of their use of Avanade’s services. These organizations are realizing financial benefits from their use of Avanade’s managed services in 5 key areas.

Avanade’s managed services 5 key areas

1. IT Staff Productivity Gains

2. Business Productivity Gains in Operations

3. Business Productivity Gains Resulting in Higher Revenue

4. Risk Mitigation Benefits

5. IT Infrastructure Cost Reduction

IDC Business Value Study Financial Benefits

IT staff productivity

gains

Business productivity

gains – operations

Business productivity

gains – revenue

Risk mitigation benefits

Infrastructure cost

reduction

$51,279

$23,009$6,465

Total: $89,018 per 100 users

$2,807$5,458$100,000

$80,000

$60,000

$40,000

$20,000

$0

Non-Discounted Average Annual Benefits per 100 Users

Source: IDC, 2014

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Because of the talent, skills, and experience that Avanade offers, the IT staff of customer organizations have become much more productive and are realizing significant time savings for completing important tasks. For example, Avanade has helped the IT staff achieve average time savings of 78% for forecasting and configuration management activities and 67% for application development activities.

Study-Finding Spotlight #1: IT Staff Productivity Gains

DIRECT FROM THE CUSTOMER:

“If it’s a situation where we’re in a long-term project, and we need to deliver over time, then our ability to switch out needed skill sets with Avanade could easily save us 50% of the calendar time it would otherwise take.”

IT Staff Activity Time Savings78%

67% 66%

42%

27%

12%

Forecasting/ configuration management

Application development

Help desk and responding to

downtime

Application management

Training Time dealing with vendor

Source: IDC, 2014

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Organizations are realizing five-year average annual business productivity gains of $23,009 per 100 users, or $2.21 million per organization, with Avanade. The most significant driver of these business productivity benefits is improved productivity among non-IT staff, enabled by Avanade.

Study-Finding Spotlight #2:Business Productivity Gains in Operations

Improved user productivity

Faster time to market

Reduced external spend on contractors

$19,565$1,965

$1,479

Total: $23,009 per 100 users

$25,000

$20,000

$15,000

$10,000

$5,000

$0

Average Annual Business Productivity Benefits per 100 Users

Source: IDC, 2014


“With the products and features that Avanade has helped us create, the typical user saves time. Our ability to create these types of features more than doubles with Avanade. These features help to increase revenue because it helps us improve our primary product that we sell to our customers.”

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Your downtime could be costing you $480k/hour. Organizations are reducing the incidences of downtime and average time to recover from downtime. Organizations are also leveraging their use of Avanade’s managed services to increase their revenue by a five-year annual average of $6,465 per 100 users, or $620K per organization.

Study-Finding Spotlight #3: Business Productivity Gains Resulting in Higher Revenues Business Productivity Enhancements — Revenue

Annual Value Value per 100 Users

Revenue impact — reduced downtime

Reduced downtime — hours per year 21

Lost revenue per hour of downtime $480,000

Lost revenue recognized in study 25%

Revenue impact — additional revenue $2,523,951 $26,287 from reduced downtime

Revenue impact — improved operations

Additional revenue from $575,000 $5,988 improved operations

Additional revenue related to Avanade 12%

Sum of additional revenue $3,098,951 $32,276

Realized revenue benefit 20%

Net revenue benefit $619,790 $6,465

Source: IDC, 2014

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Organizations report that their help desk operations have become more efficient since moving to Avanade’s managed services. They have reduced the time it takes on average for their help desks to handle a call by 67% with Avanade.

Study-Finding Spotlight #4:Risk Mitigation Benefits

Reliability KPIs Advantage Without With with Avanade Avanade Benefit Avanade (%)

Downtime

Downtime incidents per year 10.30 6.14 4.16 40

Downtime hours per incident 3.34 2.18 1.16 35

Annual downtime hours per user 18.37 6.65 11.73 64

Service desk

Level 2/3 calls per week 123.50 24.70 98.80 80

Minutes per call 26.25 8.75 17.50 67

Annual hours per user 1.39 0.46 0.93 67Source: IDC, 2014


An Avanade customer noted that its help desk operations were “a more personalized service” with Avanade that “get the user back up and running faster — 15 minutes versus 5 minutes.”

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Organizations are avoiding costs that they would otherwise bear to develop comparable internal solutions or to use another service provider and reducing spending on server hardware. On average, organizations are avoiding an average of $5,458 in costs per 100 users per year over five years, or $520K per organization.

Study-Finding Spotlight #5:IT Infrastructure Cost Reduction

Average Annual IT Infrastructure Cost Reductions per 100 Users

Source: IDC, 2014

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0

Initial solution versus alternativesServer hardwareAggregate bandwidthStorage and networkingManagement software tools

$3,368

$1,436

$260$248$146

$5,458

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IDC’s research and analysis demonstrates that Avanade’s Application and Infrastructure Managed Services delivered an average payback period of just over 4 months from going live, and an ROI of 446% through the following benefits:

• Returning over $5 in benefits for every $1 invested

• Lowering annual operations cost by $2.2 M while increasing revenue

• Helping IT staff achieve 67% time savings and productivity gains on application development and 42% on application management

• Mitigating risks by reducing downtime by 64%

• Lowering infrastructure costs by an average of 13%

Business Value Highlights

5 YEAR AGGREGATE

BENEFIT

IN DISCOUNTED BENEFITS PER

100 USERS OVER 5 YEARS

$28.6M

$297,835

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The five-year ROI analysis shows that on average, the organizations in this study will spend $54,592 per 100 users ($5.24 million per organization) on Avanade’s managed services and achieve $297,835 in discounted benefits per 100 users over 5 years ($28.60 million per organization). This results in an net present value (NPV) of $243,244 in discounted benefits per 100 users over 5 years ($23.53 million per organization) for their use of Avanade.

Overall ROI

InvestmentBenefitsCumulative net benefit

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0

-$50,000

$28,265$0

$100,179 $101,027 $101,974

$367,031 in non-discounted

cumulative net benefits over 5 years

$(30,461)

Initial Year 1 Year 2 Year 3 Year 4 Year 5

$(8,513)$(8,513)$(8,513)$(8,513)

$99,420

$(8,513)

Cost Benefit Analysis Per 100 Users

Source: IDC, 2014

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According to the company, Avanade’s portfolio of services provides enterprises with a full lifecycle of options to support their needs across the entire IT environment for both business applications and infrastructure.

Inside Avanade

Avanade Lifecycle of Application and Infrastructure Managed Services

Pricing

Service Level Agreements

Business Outcome Oriented

Pay for Use

On Premise

Migration Velocity

Transactional

Hybrid

Velocity of Changes

Monthly Fixed/Variable

Hosted

Custom

Mobile

Availability

Custom

Public Cloud

Support Response & Resolution

Multi-Year

Private Cloud

Application Managed Services Infrastructure Managed Services

Platform

• Custom Application • Microsoft Dynamics • Collaboration • Analytics

• Private Cloud • Workplace • Unified Communications & Collaboration

Source: Avanade, 2014

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Inside AvanadeSpecializing in Microsoft technologies, this portfolio includes consultative services, which range from strategy, design, architecting, development, deployment, systems integration, and migration of IT and application technologies to 24 x 7, ongoing, proactive management and support.

According to Avanade, the key for its customers is that all these service elements form part of the company’s managed services portfolio. As a result, Avanade is able to offer a menu of managed services that, for example, effectively include systems integration and application development delivered as a managed service.

Additional information can be found at www.avanade.com/managedservices

Avanade is able to deliver against its commitment to provide continuous improvement and innovation as part of its application and infrastructure managed services agreement.

http://www.avanade.com/managedservices

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